Since the 1980s, the U.S. averaged around eight major weather events per year that caused at least $1 billion in damage. In the past five years, that shot up to 18—and 2023 has seen 23 of them already. That means the housing market has a $23 billion problem, at least, and it's only set to grow as the climate continues to change. (Remember: this summer was the hottest daily temperature in at least 100,000 years, scientists estimate.)
But federal and local governments, as well as private companies, are working on ways to mitigate those risks and their financial impacts. Climate change can come across as abstract and over-politicized, causing many homeowners to tune out and ignore climate concerns, says John Rogers, chief innovation officer at CoreLogic, an information, analytics, and data-enabled services provider. And he agrees that it is just going to get worse. “The severity and frequency of major weather events, unfortunately, is likely to go up,” says Rogers.
Homeowners end up paying the price—in more ways than one. In fact, insurers are already fleeing what they call “challenging” markets. There are no better examples than Florida and California, where insurance companies are either pulling out of the states completely or reducing their presence, as Fortune previously reported.
There are several factors at play, but the increasing frequency and intensity of hurricanes is a big one in Florida, Rogers says. California’s not too far off, with some insurance companies putting a cap on new policies or no longer writing new policies in the state.
That’s exacerbating housing-related crises in the states, both of which saw their home prices rise substantially in the pandemic-driven housing boom, pricing out many buyers. In fact, buyers’ concerns over insurance availability and costs are somewhat slowing new home sales in Florida and California.
Still, Rogers says what he's seeing in terms of investment by federal and local governments, along with private companies is "really encouraging," particularly when given a financial metric to encompass the real impact of climate change on the housing market. At the time of our interview, Rogers had just come back from a conference in New York. He says things have changed, and there's movement from "talking about climate change to real action across the supply chain of building homes, and also making homes more resilient."
How insurance can come back to Florida and California
The changes afoot include, for example, a new ordinance requires homeowners in certain areas of Florida to build a five-foot seawall to protect the home, for one. “Incentives from the government and investment from the government will help change the dynamics of this market and bring insurance back into Florida,” Rogers says.
In California, where wildfires are a major concern, there are 12 prerequisites to reduce premiums—everything from taking brush out from underneath a deck, to having a fence 12 feet away from the house, Rogers notes.
Nevertheless, the issues extend far beyond California and Florida. Think about winter storms across the country, Roger says. Their frequency might be fairly low, but their impact is definitely becoming more severe.
The case of Texas
And they’re affecting regions that weren’t built to be resilient in the face of catastrophic storms. Take Texas. In February 2021, the state faced record-low temperatures, roads were impossible to travel along because of snow and ice, and the state’s electric grid operator lost control of the power supply, resulting in blackouts that lasted days. Countless homes were damaged, causing an estimated $80 billion to $130 billion in damage. “From a homeowner’s perspective, we need to be aware and understand that we need to protect our home,” says Rogers.
That’s where the government and private companies come in. The U.S. government and federal agencies are already taking steps to reduce carbon emissions and improve the resiliency of homes—think the Inflation Reduction Act and the Federal Emergency Management Agency’s (FEMA) recently announced $3 billion mitigation project.
Making homes resilient
Businesses like CoreLogic are also jumping on board. CoreLogic developed a climate risk analytics model which helps companies measure, model, and mitigate the financial impacts of climate change on every single property in the United States. Providing a simple financial metric can help provide a focus for private companies and federal agencies, while changing the behavior and mindset surrounding climate change, to shape policy, he says. Rogers hopes it helps spur companies with an ear for anything involving lost money to step up.
“As soon as you can financially measure something, it’s amazing how the industry leans in,” he says, stressing his goal of protecting homeownership and the financial stability of the asset class. CoreLogic’s climate risk analytics is already supporting the Federal Reserve Board in assessing the climate risks facing the top six banks in the country.
Every $1 invested in making a home more resilient is the equivalent of a $6 disaster recovery investment after a weather event, says Rogers. Economically, it makes sense to invest in making homes more resilient. That can mean verifying your home is built in compliance with local building safety codes, checking with your local building safety department before beginning home repairs or improvement projects, elevating and anchoring utilities (like electrical panels), or reducing basement flooding risks by installing a water alarm or a working pump, according to FEMA.
Aside from physically making your home resilient, you can, and likely should, get flood insurance whether you’re in a high-risk flood zone or not.
Doing so has never been more critical. Seven of the top 10 counties in the country that are most vulnerable to climate risk are appreciating in value, according to CoreLogic's calculations. Miami-Dade County is one of the hottest housing markets, and it’s also the riskiest, due to hurricanes and floods. Residents need solutions, and that could start with funding—from the government, private companies, and even venture capitalists—to ensure homes are built to withstand natural disasters.
“It’s the biggest investment for most people, it’s the biggest investment of their lives,” says Rogers. “As a homeowner, I would like to know what I can do to protect my biggest asset.”
