Other than the occasional declaration of a national park, housing produces the largest demand for land. Land acquisition and regulation in the public interest for urban development and renewal, on theother is one of the hottest buttons ever legislatively produced and upheld as law. It may be time to rework this established foundation for managing new challenges aimed at sustaining the welfare of the nation and its people.
The impact of climate change on real estate development has stimulated anticipation of a new combination of eminent domain rights and land-use zoning useful in de-stimulating investment by location. This authority, however, will follow, not lead new industry trends focused on climate impacts. New price-mechanism led by mortgage bank lending and insurance company practices are rapidly reshaping the regulatory environment.
The heightened assessment of climate impacts has begun. It will alter state and local protection of the nation’s watershed. The question is will it be in the interest of the general welfare. The wilderness urban interface will be focused on fire and flooding hazards more sharply than ever. The four early indicators examined here are instructive of two possibilities. First is whether an up from the grassroots leadership will emerge with effective, replicable legislative solutions. Second, whether obstructions to an effective national land-use policy will reduce the plausibility of a timely response.
- Recently U.S. Congress introduced legislation to require the Security and Exchange Commission (SEC) to provide rules for finance disclosures examining climate change impacts. (here) and pubic responses (here). Federal legislation lacks consensus as law makers remain willing to “wait it out” leaving the hazard guess work to the industries involved.
- The Federal Housing Finance Agency also has published a Request for Information for public input on this topic and collected numerous responses (pdf here)
- The Climate Disclosure Standards Board (CDSB)(here), is an international consortium of businesses and NGOs, who publish annual guidance on accounting for climate risk in financial statements. The CDSB has yet to establish a “risk-standard” useful for the protection people in flood hazard areas.
- The Federal Emergency Management Agency (FEMA) maintains Flood Insurance Rate Maps (FIRMs) identify Special Flood Hazard Areas (SFHAs). SFHAs are into divided into different flood insurance rate zones based on the magnitude of the flood hazard.
While the legislators seek consensus, federal agencies request public input, and the international community struggles to lead, we find FEMA. It is a post-trauma agency. Their maps often are out of date regarding the ongoing production of single-family housing by an average of five years. Why? The maps establish plans for disaster readiness. They have an indirect influence on local land use and zoning policies. In this regard, FEMA estimates that thirteen million people in the United States (2020) — four percent of the population — live in SFHAs, the high flood-risk areas. On the other hand, The National Insurance Journal research identified 29 million flood risk properties outside the official flood zones (here).
About one million single-unit structures are part of the 1.5 million built in the United States each year (pdf here). The demand for housing still connects directly to flood-hazard areas. A mortgage and insurance may not be available; however, development loans will continue based on off-site collateral. The onus of risk by the occupants has accepted policy. What is becoming a concern is due to the growing number of households willing to be a risk yet require a public response.
David Burt is the founder of Delta Terra Capital, a climate risk intelligence agency aimed at institutional investors. In his testimony submitted to the Senate Special Committee on the Climate Crisis (3.20.21), he wrote:
“the damages to residential real estate will be roughly .85% per year, 58% higher than the amount collected by insurers to cover it.”
The risk assessment shared with large investor clients is vastly different than that shared with Joe Public looking for a house. See the deep end data drill down using Freddie Mac STACR 2020-DNA6 Credit Risk Transfer (CRT) securitization. (here).
The following example of the public response to addressing flood-hazard risk involves six watersheds west of the Hudson River in New York State. Funding combining city, state, and federal sources began in 2011 following the flood impact of Hurricane Sandy and more recent impacts such as the extreme rainfall of Hurricane Ida. The NYS watershed environments provide fresh, forest-cleaned water to over twenty million people without filtration. As a result, Flood-hazard analysis and related climate change impacts have become vital to the retention and resilience of this resource.
The Local Flood Analysis Program (LFA) served fourteen municipal areas preparing mitigation plans. The Stream Management Implementation Program (SMIP) examined design/construction activities, regulating implementation through a Local Flood Hazard Mitigation Implementation Program (LFHMIP). While voluntary, the City-Funded Flood Buyout Program (FBO) provides at-risk property holders with eligibility for a FEMA buy-out as well as assistance for those not eligible. In addition, New York implemented two other programs to engage the public and professionals with long-range planning with public funding. These are the New York Rising Community Reconstruction Program and the Sustainable Communities Planning Program.
Data is requested on Hazard Assessment, Awareness, and Local Examples and the connection to housing affordability: (initial locational sources in NYS (here).