This story is part of Disaster economyA Gratulet series exploring the often chaotic and lucrative world of the response to disasters and recovery. It is published with the support of the CO2 Foundation.
Extreme weather disasters – made larger, longer and more intense by climate change – make a heavier impact in possession than many Americans consider their most important asset: the house.
A multitude of major events, dead forest fires in California and Oklahoma in the Tornades in Missouri and Kentucky in the floods in Texas, have already destroyed some 63,000 residential buildings and other structures so far this year and caused more than $ 20 billion in direct damage. This is added to an endless parade of smaller extreme weather events.
These aggravated extremes are not only felt by the owners – they modify the financial calculation which underlies the companies which ensure them.
A report published this week by Realtor.com, a brokerage platform, revealed that a little more than 1 in 4 American houses, which represents nearly 13 billions of dollars, is vulnerable to “severe or extreme climate risk”. The biggest danger is by far the lesions of the wind linked to hurricanes, with some 18% of vulnerable houses, followed by a risk of flooding, 6% of houses and the risk of forest fire, 5.6%. The report used data from a non -profit climate risk assessment group called the First Street Foundation, which integrates the effects of climate change in its modeling to identify the amount of housing in the country in danger.
Images Ronaldo Schemidt / AFP / Getty
The report also analyzed how private insurance companies and the federal government, which ensures most of the country’s floods, change to adapt to the increase in financial protection costs in a world modified by climate change. He found that owners on low -value and high -risk insurance markets – that is to say, places where houses are worth less than the national average but are the most exposed to extremes motivated by the climate – are the most hard affected. In these areas, insurance premiums are increasingly increasing and becoming an increasingly unaffordable part of the costs of possession of a house.
“The monthly mortgage rate is already very high, and in addition to that, you have home insurance, and in addition to that, you can have other flooding and fire insurance,” said Jiayi Xu, economist at Realtor.com and author of the report. The increase in costs at all levels increases a current housing crisis, entering the nation.
A look at the growing crisis of “disaster economics” in cash
This double string effect becomes the most apparent in certain parts of Florida and Louisiana, two states which frequently experience hurricanes. XU used an equation which represents the affordability of the insurance called premium ratio / value of the value, which calculates the cost of insurance compared to the overall value of a house. The ratio is the highest in Miami and New Orleans – 3.7% and 3.6%, respectively. This means that someone who has a house of $ 500,000 in Miami, for example, pays $ 18,500 per year in insurance premiums. At the national level, the average ratio is approximately 0.8%.
In addition, the report called Oklahoma, the heart of Tornado Alley and Texas, also subject to hurricanes and floods. The 10 housing markets where insurance costs are the highest can be found in these four states.
Realtor.com is not the only real estate platform to have started to invest in mapping and risk analysis in recent years. Zillow, Redfin and other similar companies are starting to carry out their own statistical analyzes or include climate risks in real estate lists. This too said that Daniel Aldrich, director of the Northeastern University resilience study program, is a sign of the time.
“By publishing these climate reports, Realtor.com says:” We are the intelligent choice for serious buyers “, while taking ahead of what will likely become compulsory disclosure requirements along the way,” said Aldrich, who was not involved in the report. Although no national standard of exposure to climatic risks exists, more than two dozen states have a kind of disclosure of the risk of flooding on books, and new laws on the disclosure of forest fires in California have taken vigor this summer. Other states are considering similar regulations.
But this is not the only reason why brokerage platforms start to offer these services. “There is real money in this data, and these companies know it,” said Aldrich. “Once you have built the infrastructure to analyze climate risks, you can theoretically sell the same data to banks, investors and government agencies, transforming what has started as a new commercial line marketing report.”
