Homes are perhaps the most important item in the investment portfolio of people. Yet it is under severe risk by the effects of climate change. According to Economist magazine, about ten percent of the homes by their value are under risk of either floods or rise in the sea levels. Many of the endangered cities are actually the crown jewels of their country just think about London, New York and Shanghai.
According to one estimate, climate change and the costs to prevent the damages can wipe out more than $25 trillion. That is almost the complete annual gross domestic product of the United States.
The risks are not still reflecting into the price of the homes. For example Miami is subject to much worrying due to rising sea levels. However, the prices of homes kept rising in recent years. In fact in this city the average price of homes has risen close to 80 percent, that is much more than the United State Average. People are not taking this risk into their calculations. This can be dangerous. Given the dwelling is one of the most basic needs of human beings, an unexpected shock is not easily bearable.Â
For now, it seems like the home owners are not bearing the risks and this risk is transferring to the taxpayers. Since 2017, in the wildfire-prone region of California and Hurricane-prone region of Florida, the amount of state-backed insurers has increased from $160 billion to $633 billion dollars. This means the risks are transferring to the taxpayers. This does not look fair and right. For one thing the home owners are not the same as the taxpayers. Many endangered dwellings are among expensive areas in which top income and top wealthy people live. This is like the government is transferring from the poor to the rich. Besides, all this state back insurers would discourage the homeowners to take precautionary actions against the climate change risks.
Source: Economist
