Paradox of homebuying in climate-vulnerable areas

As the impacts of climate change become increasingly evident, Americans face a growing dilemma in their homebuying decisions. The allure of relocating to more affordable and desirable areas often clashes with the harsh realities of climate risks and escalating insurance costs.

Four years ago, the rise of remote work transformed the American dream: freed from the constraints of proximity to the office, millions of people realized they could leave places like New Jersey and move to sunnier, more affordable locations, Caliber.Az reports citing the foreign media.

However, many who made this shift found themselves facing a new set of challenges: climate change and the increased risk of natural disasters.

The good news is that rising destruction and soaring insurance costs might finally be prompting Americans to consider climate risks when choosing where to live. The bad news is that, overall, people are still making risky choices—often moving from one danger zone to another.

A recent report by Redfin indicates that the mass migration to high-risk areas has begun to slow. Last year, a net total of 16,144 people moved into US counties with high flood risk, as identified by the climate-research firm First Street Foundation. This marks a significant decline from the 383,656 people who relocated to these areas in 2021 and 2022. Similarly, net migration to high wildfire-risk counties fell to 63,365 in 2023, compared to 446,343 in the previous two years.

Certain disaster-prone regions, such as California's wildfire zones, flood-prone Houston, coastal Louisiana, and increasingly vulnerable Miami, are seeing people leave. However, many of these areas also have high living costs, making it challenging to distinguish climate-related migration from more traditional reasons. For instance, migration around Houston includes areas with similar flooding risks, suggesting that factors beyond climate may influence decisions.

In Florida, despite soaring insurance costs and frequent disasters driving some away, the demand for homes remains strong. A net 68,564 people moved into high-flood-risk counties in the Sunshine State last year, representing over half of the total migration into flood zones nationwide, according to Redfin.

“Homebuyers say they care about climate risks, but when it comes to choosing where to live and buy homes, their priorities often shift,” said Daryl Fairweather, chief economist at Redfin, in an interview. “Affordability tends to take precedence, but factors like warm winters, proximity to family, and local amenities also play significant roles.”

Lee County in Florida, which includes Fort Myers, remained one of the country’s most sought-after destinations in 2023, continuing a trend from previous years with a net influx of 8,374 people. Even after Hurricane Ian devastated Fort Myers in 2022, bargain hunters quickly bought up properties before the floodwaters had fully receded. Many of these homes were once again submerged this week as Tropical Storm Debby passed through, causing heavy rainfall and storm surge along Florida’s west coast. Notably, Debby wasn’t even a hurricane—just a tropical storm—highlighting that even less severe weather can cause significant damage when conditions are right. Ordinary thunderstorms can inflict billions of dollars in damage.

In Texas, 30,156 people moved to counties at high risk of wildfires last year, according to Redfin, making up nearly a third of the total net migration into fire-prone areas nationwide. Many of these new residents were escaping California’s wildfires and high living costs, only to find themselves in a state with only slightly fewer wildfires. Texas is also experiencing its own version of California’s insurance crisis, with homeowner premiums rising 23 per cent last year—the highest increase in the country, according to S&P Global. Unlike California, where premiums are regulated, Texas’s “business-friendly” approach allows insurance companies to set higher rates, resulting in the sixth-highest average annual premiums in the nation, according to Bankrate.com.

Yet, these figures have not been sufficient to shift house hunters’ preferences. Change is necessary. One reason for the increasing frequency of billion-dollar disasters in this country is our persistent subsidization of development in high-risk areas. Policymakers must find ways to align costs with risks in these regions, while also providing support for homeowners who cannot afford to relocate or bear higher expenses. Additionally, consumers need better access to information about climate risks and potential insurance costs for the properties they are considering.

Addressing these challenges won’t be easy. Estimates suggest that between 17 million and 39 million homes in the US are underinsured for flood and fire risks, representing a potential loss of over $1 trillion in property value. Confronting these risks head-on may be economically painful, but failing to do so until natural disasters force the issue would be an even greater disaster.