Homeowners face new risks and costs associated with extreme weather conditions


Homeowners are now seeing the real and personal cost of climate change, as some homes risk becoming increasingly expensive to insure, forcing property values ​​to plummet and pushing out interested buyers.

  • Starting this month, new policies from the National Flood Insurance Program Will no longer include the subsidized plans that, for decades, have helped support home values ​​in some of the most dangerous flood zones.
  • Existing policies may start to see changes in premiums in six months.

Why is this important: Housing development and population density patterns will change as parts of the country become virtually uninsurable due to more frequent extreme weather events and sea level rise.

Catch up quickly: Lower-value homes have paid more than their share of the risk than higher-value homes, and the Federal Emergency Management Agency has said it can now “distribute premiums fairly” based on flood risk individual properties and the value of the house.

  • In the past, bonuses were basically based on two numbers: house elevation and centennial flood elevation, which is the height of the water during a flood that has a 1% chance of occur in a given year. .
  • FEMA’s Risk Rating 2.0, announced in April, incorporates more risk variables than previous methodologies, including frequency of flooding, types of flooding, distance to water sources, elevation, and reconstruction costs.

The result: Older homes owned by less well-off people will be more likely to see much higher premiums relative to home values, says Rob Moore, director of the Water and Climate team at the Natural Resources Defense Council.

Yes, but: “You want to send the right market signal with the cost of insurance. You at least want people to understand the risks, [and] that insurance is expensive because the risks are high, ”Moore told Axios.

  • Therefore, “insurance can be part of a bigger solution,” says Max Rudolph, risk consultant, “that will prevent people from growing in areas. [where] the risk is much higher. ”

In New Jersey, for example, the rate of sea level rise is about three times the world average.

  • Despite this, most of the more than 4,500 new homes (larger and more expensive than previous ones) built after Hurricane Sandy were being built at a rate three times faster than those in safer areas.

The big picture: Lenders, insurers and homeowners will need to start assessing long-term risks.

  • Rudolph says buyers should ask themselves why they are interested in buying a property with a 30-year mortgage when there is no certainty of its future value or existence given climate change. “And as the issuing bank of the loan, why am I interested in writing this loan? “
  • “There are a lot of rules of thumb that need to be reviewed.”

What to watch: One in 10 US properties is now at significant risk of flooding, according to a Bloomberg analysis.

  • According to the new risk model, 6 million more properties are now at risk of flooding, concentrated in the eastern half of the United States, particularly in Louisiana, Delaware and New Jersey.
  • This number will increase by a further 11%, or 1.6 million, over the next 30 years as populations increase in these regions, given current warming conditions.

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