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Climate change will cost trillions in property value, new report finds

Rising insurance costs and changing demand imperil real estate: First Street

Climate Change Could Cause Trillions in Lost Value
(Getty; Illustration by The Real Deal)

Every month appears to bring new scenes of the destruction wrought by climate change. It could cost trillions.

Human-driven climate change could lead to $1.47 trillion in net property value losses across the country, Axios reported. Rising insurance costs and changing consumer demand would be most to blame, according to the report from First Street Foundation.

The report from the climate risk financial modeling company analyzed various peer-reviewed models of climate change’s impact on insurance prices, migration and economics. The company’s report, however, has not been peer-reviewed.

Unrestricted, risk-based insurance pricing could result in a 29.4 percent increase in average insurance premiums across the country by 2055, according to the report. That includes an 18.4 percent correction for “current underpricing.”

Meanwhile, more than 55 million people are expected to voluntarily move within the country to places less exposed to climate risks by 2055. Homeowners have yet to show too much hesitance to snap up coastal properties and other climate-threatened homes, but the barrage of disasters on the news — most recently, the Los Angeles wildfires — could change buyers’ attitudes.

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That’s going to create winners and losers, geographically. The five metro areas likely to see the largest spike in insurance premiums include Miami, Jacksonville and Tampa. The Sun Belt region has seen a huge surge in popularity in recent years, but its exposure to climate risk could send residents flocking elsewhere, such as to northern states like Wisconsin and Montana.

The researchers left room for error. For instance, the report fails to account for adaptations that could mitigate the worst of climate change, including stricter building regulations, which are popping up in places like New York City and Boston.

The report also doesn’t account for how inflation could impact the numbers.

But the devastation of climate change is top of mind for many Americans after wildfires wreaked havoc on Los Angeles last month. The fires, whose causes are still under investigation, caused at least 27 deaths and wiped out more than 18,000 structures. They also caused an estimated $20 billion to $30 billion in insured losses and set off a crisis for local residents in need of insurance.

Holden Walter-Warner

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