Will your next home be a climate lemon?
Efforts to suppress disclosure of grave climate risks in brittle areas cheat buyers and sabotage communities.
Climate chaos is going to strip a lot of value away from many communities. Some of that loss we can still defend against. Some we can help alleviate. But much is already both inevitable and irrecoverable. We collectively can neither prevent those losses nor make them whole. For most of us, the best we can do is try not to be in the most brittle places when the worst impacts storm in.
This requires, of course, the ability to spot the worsening brittleness we seek to avoid.
Zillow, the largest real estate website in the U.S., recently made this a bit harder by quietly removing climate risk ratings from its listings because, according to reporting in the New York Times, “real estate agents complained they hurt sales. Some homeowners protested the scores…”
To state the obvious, revealing serious risks facing the home they’re about to sink their life savings into is a very good thing for prospective homebuyers.
If risk accountability means that current property sellers get less money for the homes they sell, that is good. Those homes are worth less money than they used to be. Suppressing disclosure of these risks doesn’t make the property worth more, it just dumps the losses on the next buyer. Climate denial is not victimless.
Acknowledgment of risk is, in an individual transaction, a zero-sum game. Anytime property owners successfully suppress warnings about the risks to a property in order to keep home prices higher, they are taking money directly from the homebuyer that the homebuyer likely wouldn’t spend if they had a full understanding of the risks involved. It feels like fraud.
(Redfin, pointedly, has kept its climate risk ratings, with its chief economist saying, “homebuyers find climate risk scores valuable when making one of the most important financial decisions of their lives.”)
Even if current measurements of risk are not as conclusive as we might hope, they at very least give homebuyers some guidance about what to avoid. And while the risk ratings Zillow used before are still easily accessible on the First Street website, this removal fits a broad and growing pattern of attempts to stifle discussions of discontinuity and danger in real estate, insurance, finance, infrastructure development and public health. These muffled realities, though, demand your attention.
Denialism costs society as a whole, not just homebuyers. When owners of brittle assets refuse to acknowledge risks, and badger those who identify risks into silence — as has been going on for years — they sabotage the ability of our governments to plan rationally to ruggedize against those risks.
Consider the fate of Oregon’s state wildfire hazard map, in which property owners angry about revealed risks whipped up conspiracy theories and derailed a whole state’s wildfire planning efforts:
A year after Oregon endures its most destructive fire season on record in 2020, state lawmakers order a map estimating the wildfire risk for every property in the state. …Around the same time, insurance companies start dropping Oregon homeowners’ policies and raising premiums to limit future losses, much as they have done in other disaster-prone states. Insurers have their own sophisticated risk maps to guide them, but some brokers instead tell homeowners the blame lies with the map the state produced.
The anger quickly spreads. Not only is Oregon’s map seen as at fault for higher insurance premiums, one conservative talk radio host calls it an attempt to “depopulate rural areas.”… By the time the state pulls back the map and starts over, the myths about it have gained so much momentum there’s no stopping them. Oregon’s hotter, drier climate isn’t the problem; the map is.
Do we think Oregonians as a whole were better served by a state government with no hazard map? That efforts to map and address other risks (hazardous wildfire smoke, say, or heat waves) will be made easier now? That the best scientists and experts will be more likely to choose public service? No, of course not.
This intentional sabotage harms the public, delaying needed risk-reducing policies and investments. Making discussion of climate risk, ecological destabilization and inevitable economic change politically toxic limits the quality of governance we get, on some of the most consequential challenges of our time. Attacking those who discuss climate risk is, in short, predatory delay.
Ultimately, climate risk information should be a public service. Prolonged lack of readily-available strongly-evidenced climate risk data. models and future scenarios is a failure of governance (again, connected to climate denialism). But a historical failure is not a justification for one owner stiffing the next owner, now that such risks can be forecast through more granular (if still imperfect) models.
Not that risk disclosure is a silver bullet. Some newer owners didn’t have much choice about the risk they were taking on. In areas where NIMBYs have successfully blocked the building of more homes in safer areas, folks are faced with the choice of buying into climate risk or not owning at all. I wrote about this here:
We should, of course, ask whose fault it is that owners are experiencing these losses. None of this would be happening if the owners of high-carbon industries had not fought a five-decade battle to muffle scientific warnings, attack climate messengers, undermine climate legislation, sabotage technological progress and turn environmental issues into a culture war conflict. That predatory delay kept the smokestacks billowing and tailpipes hot — and the profits pouring in — but it’s also why people today are losing a lot of the value of their largest investments. That’s where current owners’ anger ought to be directed.
So if you are looking to buy a home (or anything else) in the U.S., what should you be doing to protect yourself in a dishonest market?
Above all, remember that the revaluations we’re seeing stem not from whatever anyone’s doing to account for risks, but from the decades of inaction that have created such unprecedented risks in the first place.
For instance, the deep insurance repricing we face now is far less about insurance rates — about the cost of insurance — than about insurability itself.
Escalating risks make insurance more expensive, in part because they make more uncertain the business of insuring insurers themselves (what’s known as reinsurance). Risk costs. Rising risks cost more. The kind of multiple, escalating, interconnected risks many brittle communities now face will mean nonlinear rises in costs for insurance, but also municipal bonds, consumer credit, local investment and so on. Behind it all lies the basic problem that we are in an unprecedented planetary crisis.
Other than dramatically lowering the risks places face, while demonstrating reasons for confidence in future prosperity (ruggedizing them) — which is so expensive as to be effectively impossible in the most brittle places — there is little anyone can do to stop this overvaluation bubble from deflating. Unless you can derisk threatened places, you can’t preserve the housing markets and local economies there. Escalating risk is a future-killer.
A recent paper from the National Bureau of Economic Research, Property Insurance and Disaster Risk: New Evidence from Mortgage Escrow Data, drove home the point that rising rates from a “reinsurance shock” are already lowering home prices in high-risk locations:
Premium increases are capitalized into home values, reducing home price growth by over $40,000 in the most exposed zip codes. The premium and home price effects are larger in areas facing rising climate risk.
The New York Times covered this paper and its conclusions, in a fine piece:
“Changes in an under-the-radar part of the insurance market, known as reinsurance, have helped to drive this trend. Insurance companies purchase reinsurance to help limit their exposure when a catastrophe hits. Over the past several years, global reinsurance companies have had what the researchers call a ‘climate epiphany’ and have roughly doubled the rates they charge home insurance providers.”
Their story includes some great on-the-ground reporting about how the realities of collapsing insurability makes home ownership more precarious, home buying much harder and is already driving down home values.
“Cristal Holmes saw her insurance premium more than quadruple in 2022, to $500 per month, on top of her $700 monthly mortgage.
Ms. Holmes, a single mother who was working 56 hours a week at a warehouse, struggled to keep up with the higher bills. She fell behind on mortgage payments after her work hours were reduced to 35 per week. She worried she couldn’t stay in her home.
Similar stories are playing out all over town. Ms. Holmes’s real estate agent, Charlotte Johnson, said her office was getting phone calls every day from people who said they could no longer afford their rising insurance premiums.
For many, dropping insurance is not an option, because banks refuse to offer or maintain mortgages for people without coverage. That means owners are being forced to choose between accepting home insurance policies they can’t afford or risking foreclosure.
Buyers face their own obstacles. High insurance prices and interest rates are making it harder than ever for first-time buyers to purchase homes, said Nancy Galofaro-Cruse, a senior loan officer with CMG Home Loans who works with many of Ms. Johnson’s clients. She estimated that more than a third of would-be buyers in the area backed out of the market this year after insurance and interest rates pushed their total monthly housing costs out of reach.”
In a real sense, though, none of this is news.
We’ve been talking about it for decades. The unsustainable has always been a bubble. Brittleness was always going to rise as we destabilized the climate and undermined local ecosystems. Parts of the world were always going to become uninsurable if we failed to act. This didn’t sneak up on us. We watched it approach, year after year after year, and it’s going to keep arriving, for the rest of our lives.1
This makes me profoundly skeptical that the scale of collective response needed to deliver best-case, orderly and equitable outcomes remains possible. We didn’t act when acting was cheaper, easier and less full of zero-sum conflicts. There’s effectively no chance over this next critical decade that we’ll make decarbonization, ruggedization and supported mass-relocation the focal points of our national power — and nothing less will do.2
National failure pushes the need to act down onto smaller governments — states and provinces, regions and cities — in a process I think of as involuntary devolution. Smaller governments, of course, lack the resources, legal authority and expertise to take on many necessary responses, meaning those responses will be at best partially achieved. Where involuntary devolution collides with the brittleness bubble, problems will pile up more rapidly than local governments can manage.
That’s why, as climate adaptation professor Jesse Keenan says, “You’re on your own.”
Being on your own, you have to work differently. The “rules” of middle-class prosperity in wealthy countries have broken down, especially when it comes to climate destruction and discontinuity.3
You have to spot risk yourself, despite a lack of critical tools. The fundamental task of personal climate strategies is avoiding concentrated brittleness and seeking relative safety. No one is here to do that for you, unfortunately, though you can use various tools together to increase your odds of making a good bet. Above all, try not to anchor yourself financially to extreme risk — don’t buy a climate lemon.
You have to ask tougher questions about the governance you can expect. Relative safety is necessary but insufficient for personal ruggedization. How broken is the local debate about risks and responses? How good are local plans and policies? Is there reason to believe accelerated progress is possible here? On this topic, too, you’ll find a lack of good tools. Looking at some key basics (Does this place have any meaningful climate response plans? What are the local bond ratings like?) can at least give you some sense of where not to be.
You have to be a critical consumer of information about climate and the future. It helps to understand that the climate debate is deeply compromised: years of predatory delay, culture-war denial and profession triangulation have left us saddled with a cultural debate that simultaneously downplays discontinuity and pushes the false message that all hope is lost. Look for good sources of climate foresight.
Remember that there is no one right answer. The best choices for each of us will vary dramatically depending on who we are, our timeline of concern, our tolerance for different risks, the shapes of our families and community ties, our resources and our values. Speed matters, but so do the people and purposes we care about.
Good luck out there.
Alex
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When it comes to climate losses, we haven’t seen anything yet.
We can now worry that this out-of-control Brittleness Bubble is not in the range of a trillion dollars in the U.S., but in the tens of trillions. The Brittleness Bubble isn’t the Subprime Crisis: it’s likely both bigger, and something we’ll never recover from. It will permanently alter the fortunes of entire regions.
Of course, we will respond in some way to these risks. Defenses will be built. People will move out of harm’s way. Systems will be ruggedized. Not all potential losses will be allowed to become actual losses. Frantic adaptation is an industry with a future.
But the scale of the danger now means that a huge number of those losses will materialize. As I wrote last year about Hurricane Helene, “Even in the best scenarios—where humanity cuts emissions rapidly and mobilizes national-scale responses—we’ll start to see more and more places that no longer have it in them to recover and rebuild.”
There’s no evidence that we’re even close to the bottom.
Frankly, I don’t see any country stepping up at the necessary scale — though strong societal cohesion, good public planning and safety nets make many countries more prepared to handle the fallout of failure.
I’m setting aside housing costs, health care, AI job destruction, national debt and attacks on democratic systems and the rule of law, but they all play in, too, obviously.