The five essential criteria for buying a climate-durable home
Climate change makes home-buying much riskier, but if you know what to look for you can distinguish homes that will grow in value from those that will decline
I’ve been refining my home durability assessment product over the past few weeks, and part of the process has been figuring out what the key factors are that determine whether and to what degree a home’s value will rise or fall in the face of climate realities. The resulting set of five factors, which I share below, answers this question:
In the climate change era, what are the qualities of homes, and the places they’re in, that determine whether their market value will rise or fall in the future?
One important element of context before I share the five climate durability factors. The prioritization of federal- and state-funded infrastructure upgrades, and the capacity of communities to self-finance, matters a lot because the scale and magnitude of the infrastructure upgrades we need is so vast it exceeds the level of resources available in any plausible scenario. We simply won’t be able to save every place we’d like to (Rainelle, WV, for example). But the more resources a state invests in building infrastructure that accounts for and is resilient to climate change, the more communities it can save and the more homes will retain and grow their value. This has a range of implications, one of which is that homes in blue states will tend to be a better investment than homes in red states, all else equal.
Here are the five factors that most significantly influence the climate durability of a home in a particular place, and therefore whether its value will rise or fall.1
Vulnerability to climate impacts
Population density
Wealth density
Willingness to raise taxes
Social capital strength
Vulnerability to climate impacts is how exposed a given home and a given region are to extreme weather and other effects of climate change. Vulnerability will be high in most of Miami, western wildfire country, the hottest parts of the southwest, and in and near floodplains. It will be lower in the Great Lakes region and parts of the non-coastal northeast. Within any region, certain areas will be less vulnerable, and others more vulnerable. Notably, climate vulnerability is the one factor on this list that’s relevant for an individual home in addition to the community the home is in. The other four factors are features of places and communities.
Population density is degree of urban-ness, with dense cities on one end of the spectrum and remote rural areas on the other. The importance of density flows from the need to ruggedize our infrastructure against climate impacts. In densely populated areas, climate infrastructure projects deliver more bang for the buck since they will be used by, and therefore benefit, more people. Prioritizing city infrastructure also comes with more voters, and thus political support. Governors will, for both democratically appropriate and purely political reasons, prefer to build infrastructure that benefits 500,000 people in a city over infrastructure of similar cost that benefits 20,000 people in a rural area.2 Finally, in addition to being home to large numbers of people, cities are centers of economic activity and key to economic growth. For all these reasons, cities3 and dense suburbs will be top priorities for climate ruggedization investments.
Wealth density is wealth per person times the number of people in a given area. The area with the greatest wealth density in the country is undoubtedly Manhattan, where people are very rich and the population is very dense. The places with the least wealth density are, by definition, sparsely populated (rural) and poor. The wealth density factor looms large for two reasons. First, wealth gives a town or county the economic capacity to ruggedize against climate change on its own, leveraging a strong credit rating to borrow money at relatively low rates to invest in new and upgraded infrastructure. Second, wealth density correlates with political power, which means when states and/or the federal government are allocating infrastructure funding to specific projects, wealthy places will be able to influence the processes to their advantage. This is profoundly unjust, and also undoubtedly true.
Willingness to raise taxes is significant because it unlocks the capacity to ruggedize against climate change. As we know, our infrastructure was built based on projected extreme weather scenarios that are out of date, creating the imperative for new infrastructure. The revenue for infrastructure investments can only come from higher taxes,4 which makes willingness to raise taxes an essential ingredient in effective climate adaptation.5 Put another way, wealth provides the financial ability to ruggedize, but in order for that ability to matter, places also need to have the willingness to sacrifice financially in the form of higher taxes. Money that communities have but collectively refuse to invest won’t help them in the face of worsening climate impacts.
Social capital, according to Wikipedia, is “‘the networks of relationships among people who live and work in a particular society, enabling that society to function effectively’. It involves the effective functioning of social groups through interpersonal relationships, a shared sense of identity, a shared understanding, shared norms, shared values, trust, cooperation, and reciprocity.”6 Places with high levels of social capital, where people are firmly rooted and feel connected to their neighbors, will be more willing and able to pull together, coordinate, work hard, and make the necessary changes and investments than places with lower levels of social capital.
Putting it all together, the homes that make the best investments in the climate change era are:
In places and on specific properties that are less vulnerable to climate impacts.
Located in or near dense cities rather than in exurban and rural areas.
Embedded in wealthier and denser cities/towns and neighborhoods.
In places that are amenable to raising taxes to invest in climate ruggedization.
Situated in communities with high levels of social capital.
The ideal climate era home, then, is a climate durable property in a climate durable area, located in a well-off neighborhood with high levels of social capital, in a reasonably dense city or inner suburb, in a blue or blue-ish state that’s open to raising taxes to fund climate ruggedization.
That’s the ideal home from a value appreciation perspective. But most homes aren’t ideal, and for various reasons ideal homes aren’t an option for lots of people. The goal is to find a home with the best odds of future appreciation in the face of growing climate impacts that also fits a buyer’s other criteria (e.g., price, location, space, diversity, community, proximity to work, good schools, etc. etc.). It means optimizing for these five factors within the other constraints of your home search.
In other words, these five criteria are a powerful tool that allows home buyers to identify the most climate durable homes in their universe of potential homes. And, just as importantly, allows them to avoid buying a climate vulnerable home in a climate vulnerable place that can easily become a financial catastrophe that ruins them economically.
That may sound exaggerated, but it’s guaranteed to happen to a set of homeowners in the years and decades ahead. When it comes to searching for homes in the climate change era, it’s very much buyer beware.
Afterword
If you know anyone currently looking for a home, I’m happy to speak with them and provide whatever kind of help they most need (even if that’s just sharing this post).
For my home durability assessments, I’ve developed good ways to measure factors 1-4, including data sources, but I haven’t yet come up with a meaningful, workable data proxy for factor 5, social capital strength. If you have any ideas, please reply to this email and let me know. Thanks!
Notes
https://en.wikipedia.org/wiki/Social_capital
As you go through the list, remember it isn’t normative, it’s analytical. It’s not describing the world I want, it’s describing the world I see. I hope growing recognition of how much inequality will worsen as a result of climate change will help start to build political support to counteract it.
A $100 million urban infrastructure project that benefits 500,000 people represents an investment of $200 per person. The same infrastructure project that benefits 20,000 people in a rural area represents an investment of $5,000 per person. Absent extraordinary circumstances, in a world of limited infrastructure funding (that is, the real world), this will not be a difficult choice.
A relevant question is where cities begin and end for the purposes of this analysis. The answer will vary by place, of course, but the logic is that suburbs important to the health and economic vitality of cities will also be ruggedization high priorities. Another piece of the answer is suburbs that rely on the same infrastructure as cities will, to some degree, automatically benefit from the prioritization of cities.
In theory revenue for infrastructure could come from cutting spending, but the politics of trying to make budget cuts large enough to matter would be impossible.
I wrote about this factor last week in Red states are a bad climate bet, making three points. First, climate adaptation will require building infrastructure, and that will cost money. Second, the money will need to come from higher taxes. Third, the Republican Party is skeptical of climate change and is not just opposed to higher taxes, but to a large degree defined by that opposition. (You needn’t take my word for this, Republicans have explicitly advertised themselves as the low-tax party since at least the 1970s, and arguably the 1870s). To sum-up, climate adaptation demands that we build, building costs money, money comes from taxes, and Republicans oppose higher taxes. You do the math.
There can be high levels of social capital among all kinds of groups, but as the references to trust, shared identity, and shared values suggests, homogeneous communities may have an easier time building and sustaining social capital than racially, religiously, or politically diverse communities.