Despite the increasing risk of punishing storms and flooding, Florida leads the nation in development in the most imperiled areas.
From 2019 through 2023, the state has built 77,000 new buildings in high-risk flood areas, more than any other state, according to an analysis by First Street and reported by Wall Street Journal.
But Florida isn’t alone. In that same time period, Texas built 63,000 such properties and California added another 21,000.
In total, nearly 300,000 properties were built in harm’s way across the country during the period studied by First Street. That breaks down to around 20 percent of everything built in those four years.
Looking at population shifts, the states where floods and fires are running rampant also happen to be where people are moving. According to AM Best, during the decade that ended in 2020, the U.S. Population grew by more than 7 percent, while the West and South welcomed the most new residents — growing by more than 9 and 10 percent, respectively
High-risk developments are coinciding with insurers upping premiums and pulling back from markets, leaving many property owners scrambling to provide a safety net for their properties. Given the potential profit for developers eyeing projects in high-risk areas, and the swelling losses for insurers covering such assets, the misaligned incentives are putting real estate, its backers and insurance firms at odds.
“The lenders need to play a role,” Robert Gordon, an executive at the American Property Casualty Insurance Association, told the outlet. Gordon said that while insurers can raise their rates annually, lenders get locked in for decades.
“The lenders…are really in the best position to make sure there’s the right consideration of the long-term risk,” he told the outlet. “A lot of times that’s not happening.”
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Residential
National
Forget prices and interest rates, climate is real estate’s biggest threat
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Damage from hurricanes Helene, Milton could top $200B
Commercial
National
Climate hazards pose $559B risk to REIT-owned properties
Developers as well as lenders say they consider the risk for new projects, and stricter building standards help to minimize damages. However, the storms and other weather events aren’t going away. And the $50 billion in reported damages from Hurricanes Milton and Helene puts a number on how quickly the costs can pile up for insurers.
Andrew Siffert, a meteorologist for the insure BMS Group, assessed the situation candidly. “We build in some of the most silly places, knowing what could happen.”
–– Kate Hinsche