We need to build housing that lasts
The most unaffordable home is the one that needs to be repaired or rebuilt after an extreme weather event
We are already short of homes in Canada, so Mayors, Councillors, and key Ministers all need to ensure the new ones we build over the next few years actually stand up to wind, water, fire and heat. Ultimately, new homes must be resilient to the extreme weather we’re going to see in the decades ahead – anything less would be negligence. Because the most unaffordable home would be one that needs to be constantly repaired, or re-built, after a predictable disaster.
When the Task Force for Housing and Climate considered how to deliver more housing in a hurry for Canadians in a climate smart way, we advocated for many enhanced incentives, as well as regulatory changes to ease the burden on those who plan, finance and build needed new housing. Our group, like most others looking at the housing shortage, said Canada needs to make it far easier to build. However, we also advocated that certain rules need to be tightened to protect long-term value and avoid building low quality housing that comes with exposure to climate-related risks like flooding and fire.
Having insurers at the table meant we were particularly preoccupied with the risks those homes will face in the coming decades, and ensuring that we don’t inadvertently make our overall climate risk worse with shortsighted decisions on location or build quality.
In other words, the business case is strong for building housing that lasts.
This is particularly urgent after a year with $3.1B in insured losses, which is consistent with an exponentially rising trend year over year. To bend this curve back down, or at least moderate its rise, we emphasized two sweeping regulatory themes across our 140 recommendations: first, governments need to urgently require climate-proof structures through adoption of stronger building and safety codes; and second, governments need to immediately stop approving buildings in high risk areas.
To avoid a maladapted housing future, we need to be building homes in a way that minimizes vulnerability to extreme weather impacts. Canada’s building code regime is notoriously slow to update, and for some good reasons as trades need to be trained and supply chains take time to evolve. Nevertheless, the Task Force concluded the whole regime needs to be overhauled in light of the rapidly evolving risk environment. Instead, vexingly, the code is now another interjurisdictional chip in the climate culture war. Accelerated Code adoption is key to emissions and energy issues, but it’s also becoming a consumer protection and public safety issue in light of the weather.
A lot of the focus in climate policy tends to be on emissions — and we had plenty to say on that — but, in parallel, we also need to adapt to the changing weather and its increasing severity. The outcome we’re looking for is resilience in the face of rising risk, both for households and for communities. Housing that is not adapted to realistic risk appraisals, and communities that are not resilient to disasters will be a drag on our economy, a liability for governments left to increasingly pick up the pieces after preventable losses. The Parliamentary Budget Officer has been sounding the alarm on our national fiscal exposure to rising disaster risk since 2016.
Since then, these risk exposures have transitioned from lofty public policy to people’s pocketbooks, on top of already high housing prices and the broader affordability crunch. With recent news of Desjardins declining to finance homes in flood high, we’re seeing the first signs of lenders beginning to pay attention to these risks. This is only the beginning, as Canada’s financial regulator is now requiring financial institutions to disclose their climate-related risks– for banks, this means paying attention to these risks in their lending decisions and disclosing their potential exposure to shareholders. This trend in transparency around these risks is likely to continue and will affect markets and capital flows, a necessary but painful shift for broader economic resilience.
Insurers have been concerned about these risks for years, and in a bracing New York Times podcast, the conditions under which insurance markets could collapse entirely due to climate risks gets soberly unpacked. We’re not there yet, but imagine that: no more safety net. If your home is lost in a wildfire or a flood, you’re on your own.
This additional scrutiny from lenders, along with the difficulty of getting affordable insurance in these high risk areas, means more properties exposed to high risk will have a harder time managing risk and getting financing. Or, more plainly, they will be less insurable and less creditworthy. Practically, that means the value of those homes is at significant risk unless steps are taken to manage those flood or fire risks proactively. Governments are considering public insurance programs to fill that gap, but these come with their own complexities.
Bond rating agencies are also beginning to look at long-term exposure in the communities they lend in and lend to, which will also affect capital flows and creditworthiness at scale. Jurisdictions doubling down on approvals exposed to unmanaged risks could well see significantly higher public borrowing costs over time as a result. These financial headwinds can all be mitigated with smarter decisions about how and where we build.
There are practical regulatory steps toward safety and risk reduction that can be taken at the local level where risk is well understood, for instance in Edmonton’s flood fringe neighborhoods near the river, electrical panels can’t be located in basements where flood waters might reach. And in Langley, BC, their zoning bylaw has long required new homes near their river to use the first floor for parking and storage only as a floodable podium for the homes above. Communities in the Slocan Valley in BC with exposure to wildfire risk have banded together to conduct extensive fuel treatment in the wildland urban interface (WUI) and to Fire Smart homes and yards to reduce risk.
There are also tools out there for homeowners to assess and prioritize measures to increase the resilience of what, for most people, is their primary asset. These resources from the Intact Centre on Climate Adaptation cover flood, fire and heat. Co-operators has a tool where you can see the flood risk for any home or farm in Canada (full disclosure, I work with Co-operators a few days a week as Executive Advisor, Climate Investing and Community Resilience).
Transparency from governments around known risks is also important through mapping and visualization. Requiring disclosure of known flood risks at time of sale is also worth considering from a consumer protection standpoint. In the US, various risk portals like Risk Factor are available that help potential homebuyers to assess their risk prior to making an offer, and it’s only a matter of time before similar services are available for Canadians, so the information is coming out one way or the other.
It’s hard to imagine more disruptive shocks to a household than being displaced from one’s home, facing major damage to contents, or at worst losing one’s home to a disaster. Unfortunately, with more severe weather, heart wrenching losses are likely to continue rising unless we get ahead of these challenges and get smarter about where and how we build.
Cross posted on the Task Force for Housing and Climate website.