Lenders Beginning to Factor Climate Risk

March 21, 2023

New IPCC report just one of a steady stream of indicators that mortgage lenders face greater than ever exposure to climate risks, and those risks are rising.


LIZ GREENE HADN’T ORIGINALLY intended to buy this house. She’d been looking at another one here in the River Haven subdivision, 20 miles northeast of Myrtle Beach, South Carolina. It had the same beige siding, the same slab foundation and still-growing-in yard, but it was in a location she liked better. At the last minute, though, the developer who built the subdivision slid her into this one.

Before she bought the house, Greene said, she asked the builder and the real estate agent if the property tended to flood. “They said, ‘Not a drop.'” Shortly after moving in, she began to get hints that this might not be true. A utility-company worker told Greene, “We wondered who’d get stuck with that lot.”

Soon she understood why. The house sits a good eight feet below the road behind it, and five or six feet lower than the other homes on the block. When it rains, water immediately gathers in the yard. “You get a drizzle, and if the ground is already saturated, it’ll be like a moat around the house,” Greene said. “I sit in water all the time.”

So far, the water hasn’t entered her house. But in 2018, two years before Greene bought the property, Hurricane Florence came through and badly flooded the area; her lot was underwater. She’s terrified it will happen again and inundate every­thing she owns.

In Horry County, flooding experiences like Greene’s are far from rare. The Facebook page of Horry County Rising, a local flood-focused group, is busy with thousands of followers. In between informational messages from the group’s founder, April O’Leary, residents write about their swamped kitchens or soaking yards. Such posts often earn dozens of sympathetic, “I’ve been there” comments.

“Prayers for everyone that is flooding. Our yard has flooded now for the eighth time. We have lost so much stuff,” one resident wrote. Another said, “I have lived here my whole life, and it has gotten far worse. Yes, these areas have always flooded, but never this often. This is insane.”

It’s true that recent hurricanes have been severe; Hurricane Florence led to more than 2,000 flooded homes in the county. The problem, though, isn’t simply storm surges along the coast. It’s the very nature of the low-lying landscape. Several rivers meander through the flat, swampy county and overflow after intense downpours, the kind that are occurring much more frequently as a warmer atmosphere leads to more intense rain events.

This is a deep-red county in a Republican state, and the term climate change rarely comes up. Instead, people attribute the water issues to destroyed marshlands and razed forests. “Places are flooding that have never flooded before due to filling wetlands and removing trees,” reads a common sentiment on the Horry County Rising Facebook page.

The increase in flooding in Horry County parallels another upsurge there: population growth. Over the past decade, the Myrtle Beach area has boomed, particularly during the coronavirus pandemic. Horry County gained almost 100,000 people between 2010 and 2021.

In response, real estate developers have been on a building tear. Lacking much resistance from a historically pro-development county council, housebuilders frequently fill wetlands—which compose almost 40 percent of the county—and reroute stormwater runoff. Sometimes it works. Other times, like in Greene’s case, the efforts to reshape the land result in flooded properties. Often, the houses aren’t in FEMA-­designated flood zones, so their owners haven’t bought flood insurance.

HERE ARE HUNDREDS OF Horry Counties around the United States. Well before COVID hit, many communities began filling with retiring baby boomers and remote workers in search of beautiful landscapes and a reasonable cost of living. Just about all of them are in regions with significant climate vulnerability.

Research from Redfin shows that between 2016 and 2020, the southeastern coast, Texas, Arizona, the interior of California, and the Mountain West all saw big population increases and skyrocketing home values. Those trends increased during the pandemic. At the same time, extreme weather events have been getting worse.

In Phoenix, the median home price surged by 69 percent between 2019 and 2022, according to Zillow, even as the Southwest was experiencing its deepest drought in 1,200 years. Shortly before it was battered by Hurricane Ian last fall, the southwest Florida town of Fort Myers was ranked as one of the fastest-growing cities in the nation. Across the West, some of the most popular communities are also the most fire-prone; in recent years, the acreage burned during a typical wildfire season has been double what it was in the 1990s.

Rather than backing away from climate-risky areas, ordinary home buyers and real estate investors are pouring into them—which is the exact opposite response from what climate change experts (or even common sense) would advise. The real estate frenzy has leveled off somewhat since interest rates began rising in mid-2022, but the overall trends are unlikely to change. The United States is experiencing a shortage of around 6 million housing units, and that will continue to drive demand, push prices up, and propel home buyers into climate-risk-prone areas that are affordable.


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