There is a new dimension to finding the perfect property for your family or business, climate change. Climate change quickly triggers debate, but regardless of your views on what is causing it, the climate is still changing. The US Global Research Change Research Program, which recently produced the Fourth National Climate Assessment, estimates the likelihood that climate change is caused by human activity at 95-100%. Such scientific analysis creates an understanding of the cause, the effects, and the cure. To mitigate and adapt, we will have to change how we use and invest in resources – especially land!
We are seeing more and more land dedicated to wind and solar power. Such land use is a form of climate mitigation that reduces greenhouse gas emissions. However, even if we found a way to completely stop carbon emissions today, there is enough carbon in the atmosphere to create a 2° F increase in global average temperature. Given existing practice, we are on track for a 9° F increase in global average temperature by 2100.
With increased temperature comes warmer oceans, shrinking coastlines, less ice mass, melting of permafrost, shifting seasons and hardiness zones, and new weather patterns including more severe storms. Many other effects have been hypothesized and we are continuously learning how land use interacts with changing ocean and air temperatures. The presence of uncertainty should not be used to ignore the threats, however. The largest investment firm, BlackRock, recently highlighted the importance of minimizing climate risk in investment portfolios.
So, while it might be wise to avoid climate change when talking with colleagues at the water cooler, it isn’t wise to ignore climate change when investing in property. The London School of Economics estimates a median loss of global income due to unabated climate change to be $2.5 trillion by 2100. Much of that loss will come from damage to real property. First Street Foundation looked at coastal properties across eight states and estimated a loss of $14.1 billion in property value since 2005 due to tidal flooding linked to sea level rise. Bloomberg (10/17/18) highlights that before hurricanes Harvey and Irma, Texas and Florida ranked 20th and 22nd in unpaid mortgages. After the storms, they ranked 3rd and 5th. In these cases, foreclosure resulted because severe weather leaves homeowners with a mortgage but little equity. The increased frequency of wildfires in the West has also been attributed to climate change. These fires have had devastating consequences for homeowners who live in the wildland-urban interface.
Luckily, there is a large amount of information available from state and federal agencies and universities to help understand threats from climate change. Further, many municipalities are developing climate resiliency plans to minimize risks from climate change. Such climate adaptation planning can increase property values. Similarly, if a property is expected to be resilient in the face of climate change then such information could be used to enhance marketing and potentially the price.
OK, the topic can certainly feel overwhelming. While Brokers cannot be expected to be experts on climate change they should be able to direct their clients to good data sources. I developed a Continuing Education course for Brokers about the interaction between climate change and the real estate market. It has been accepted by five state commissions, TX, GA, NY, NJ, and PA. It can also be taken online by anyone. If you are hiring a Broker and they are unsure about how threats from climate change may affect your return on investment, encourage them to take the course. It is their job is to look out for your financial best interest.