Commentary from the Harvard Business Review says the growing threat of fires, floods, droughts, and climate change could change how homes are built in the very near future.
A study by the National Bureau of Economic Research found that mortgage written on homes in “exposed locations” are being shed by banks and absorbed by Fannie Mae and Freddie Mac.
“This implies that homeowners and investors have been making location decisions without properly pricing the cost of potential peril, and that the government has been enabling the oversight,” the Harvard Business Review states. “Some are even warning that this market failure could lead to a repeat of the 2008 financial crisis, which was also triggered by bad mortgages.”
The report continues by saying no private insurance companies retain residential flood risk in Florida, Virginia, and other coastal markets due to sea levels, and programs such as the National Flood Insurance Program keeps residents insured.
There is also a lack of restrictions on where one can build and what cane be built.
“A society that prides itself on free will and self-determination is loath to say what a property owner can and cannot build on their own land as long as it meets rudimentary building and zoning codes: So more and more people move into harm’s way in flood plains, low-lying coastal areas, and tinder dry western landscapes,” the report states.
There is also a growing concern around climate change, as survey from ValuePenguin found that nearly 81% of people say they worry about climate change, and two-thirds of people don’t think enough is being done to combat its effects.
While more than half of the respondents who worry about climate change are homeowners, up to 47% of all homeowners in the survey weren’t confident they have enough insurance to protect their property from a climate-induced natural disaster.
Also, almost 42% of homeowners wouldn’t pay more to insure their homes due to climate change. Just 18% would pay an $500 or more annually to insure their homes against natural disasters.