Climate Change, Housing, and Homeowners Insurance: Lessons and Opportunities for Policymakers

Alex Briñas/New America

The implications of climate change for housing and insurance are staggering. The sheer magnitude of risk, coupled with its deeply personal nature – for some, redefining the meaning of home – highlight the way in which climate change is shifting from a concerning future to a daunting present day reality. 

These risks make clear why the work of organizations like The Resiliency Company and New America are so important. They seek to understand and answer the question of how to reinforce the most important support beam of the US economy. BeechTree was proud to have partnered with both organizations on multiple efforts on the topic. 

Our contribution came in two phases. The first was a blog co-written with Resiliency Company CEO Abby Ross entitled Adapting to the New Reality of Climate Change and Housing. The article was part of The Rooftop, a blog and multimedia series for bold ideas to improve housing in the United States and globally. In this article we look at how mounting disasters pose a major risk to stable housing. As insurers hike up premiums or pull back from disaster-prone areas, people are left even more exposed when disaster strikes. Without insurance, lenders are less likely to offer mortgages, putting the entire housing market on unstable ground. We also examined solutions for housing in the face of climate change, such as financiers investing directly in businesses that sell the means to adapt or be resilient, and businesses moving ahead of the curve by incorporating climate resilience into their operating model. 

Our second contribution was done in partnership with New America’s Tim Robustelli in support of their work with Bank of America and The Department of Angels to inform  the State of California. We created several issue briefs to inform discussion at a New America event on housing affordability, homeowners insurance, and megafires in California. Specifically, we examined Florida and Hawaii’s response to housing and insurance challenges brought about by climate change, and the lessons California can take from those states as it develops its own housing policies in the context of climate change. 

The two states provided valuable lessons both in their similarities and differences to California (and each other). Florida demonstrated that stabilizing its high-risk insurance market requires aggressive financial and regulatory reforms. The state is limiting lawsuits against insurers, offering state-backed reinsurance to lower costs for private companies, and requiring flood history disclosures in real estate sales. These actions are intended to reduce state liability and move homeowners from the state-run "insurer of last resort" back to the private market. Hawaii showed how a state highly exposed to diverse climate threats is responding by increasing transparency and reinforcing its market backstops. Key steps include mandating that sellers disclose sea-level rise risks during real estate transactions and reactivating the state's Hurricane Relief Fund. This fund provides a critical safety net to stabilize the insurance market, especially for condominium associations facing massive premium hikes.

These articles, all available here, are part of BeechTree’s work to contribute to the ongoing dialogue around climate risk and resilience and help shape a more informed and effective response to the climate crisis. In doing so, we are helping our partners understand how climate change will impact them, and how they can develop the tools and insights to be prepared when those impacts come.