Adverse impact of climate change on real estate industry

Property Management Blog

Climate change is a topic of hot discussion all over the world. Rising sea levels, severe flooding, fires in forests, and snow fall in unusual places are bothering governments around the globe. In U.S, the flash floods in the Midwest region this year caused damages to the tune of $1.5 billion. In 2018, the country saw real estate damages because of climate change amounting $11 billion. This is an alarming situation for real estate investors. They must contend with damages to not just individual properties but widespread destruction in large housing markets.

Our planet is becoming hotter with each passing year. Last 18 years since 2001 have been confirmed by NASA as the hottest years experienced by earth in its entire history. Therefore, climate change has not remained a concern just for environmentalist and politicians but for the entire population.

Areas losing appeal because of increased numbers of natural disasters

Freak natural disasters have increased in frequency and severity, impacting number of housing markets across the country. Though everyone accepts them as a result of environmental issues they still affect livability as well as real estate prices of various markets across the country. For example, rising pollution levels in some cities around the country have made them lose their appeal not just among tourists but also investors, leading to stagnation or even a decrease in real estate prices.

Rising pollution levels are lowering prices in many areas

Citizens have become so sensitive to pollution that they avoid buying properties in area with significant water pollution levels. This is when water pollution does not have any direct impact on real estate. Polluted water can only have an adverse impact on the quality of ground water, but it has the capacity to affect the real estate market in a geographical area.

Combating the effects of climate change on real estate is a joint responsibility of not just the authorities and companies involved with tackling pollution but also investors, landlords and even common citizens. From drawing up plans to combat climate change and taking up green technologies, governments are also putting regulations in place to reduce emission levels of fossil fuels.

Talking of carbon emission, skyscrapers in New York account for nearly 75% of total carbon emission in the city. Legislation has been passed that makes it mandatory for buildings having an area greater than 25000 sq ft to lower their carbon emission levels. It is expected that because all the sincere efforts made by the authorities and common people, emission levels of NYC in the year 2050 would be 80% lower than what they were in 2005.

Lenders tightening belts to tackle risks posed by climate change

There are many banks that have realized the perils of climate change for the real estate of the country. These banks have added risks to real estate because of climate change as their stress tests which have never happened in the past. Banks are also seen developing guidelines to manage the real estate financial risks posed by climate change. The Federal Reserve Banks of the country have been working hard to identify the real estate risks posed by climate change and also to incorporate these risks into the short term and long-term evaluations of both residential and commercial properties.

In the end, it can be said that climate change has finally been recognized as a factor in deciding the prices in the real estate industry. It is not just brokers and investors but also financial institutions that are going through latest data on climate change when taking decisions about various types of properties. In fact, banks are issuing guidelines for the assessment of real estate risks posed by climate change. Even ordinary buyers are staying away from housing markets badly affected by pollution or climate change.

If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty.

Property Management Service Areas

Palm Coast Property ManagementFlagler Beach Property Management
Ormond Beach Property ManagementSt. Augustine Property Management
Daytona Beach Property ManagementSt. Augustine Beach Property Management
Holly Hill Property ManagementPort Orange Property Management
Blog Home