Building Climate Resilience in the Real Estate Sector

The Environmental and Energy Study Institute (EESI) and Citizens Climate Lobby (CCL) held a briefing to explore the climate risks facing the U.S. real estate sector, as well as policy solutions and innovations to help protect this crucial piece of the American economy. The turbulent 2017 hurricane season has sparked a national dialogue on how future extreme weather events may impact the security of homes, businesses, and other built infrastructure. Given the economic activity and investment tied to the buildings sector, its long-term health will depend on the capacity of public officials, insurance agencies, and property managers to adapt to climate change risks.

The speakers discussed ways the public and private sectors can collaborate to develop the policy tools necessary to safeguard America's buildings and homes from future natural disasters.

 

Rep. Charlie Crist, U.S. Representative (D-FL 13th)

• Charlie Crist started off the briefing by stressing the importance of resilience, calling it a hot topic. We have seen constantly increasing evidence of climate change, including intensified hurricanes each year.
• Rep. Crist believes it is inevitable that severe weather will continue, and the briefing is a chance for everyone to learn more about how to deal with the issue.

 

Rep. Lee Zeldin, U.S. Representative (R-NY 1st)

• Lee Zeldin took a moment to thank EESI and the Citizens Climate Lobby for their unique approach on climate change.
• He stressed that dialogue “across the aisle” between the Democratic and Republican parties is a great step in finding common ground between the parties and furthering progress.
• Rep. Zeldin emphasized the importance of coastal resiliency for homes, businesses, and local governments, and the need to rebuild coastal communities to a stronger standard.
• Rep. Zeldin recently co-sponsored the National Flood Insurance Program (NFIP) Policyholder Protection Act with Carolyn Maloney (D NY-12) that was introduced in July 2017. The bill would provide rate reductions to policyholders who implement specific mitigation methods.

 

Brandi Gabbard, Realtor, Smith & Associates Real Estate; Council Member, City of St. Petersburg, FL

• Brandi Gabbard stated that resiliency is a tool to make things better and more equitable for communities. It is the ability to prepare and plan for, absorb and recover from, and more successfully adapt to adverse events.
• Across the country, realtors and communities are working together to decide if real estate is still a good investment in a world where environmental impacts are evolving and there is a chance that what is affordable and sustainable now may not be in the future. However, available risk information and resources often are limited.
• Gabbard mentioned several way Congress can help:
  • Congress must quantify and understand the cost of doing nothing – can we afford not to plan ahead?
  • Congress could incentivize companies to provide homeowners with access to mitigation financing funds.
  • To foresee future risk, it could invest in more reliable risk mapping technology.
  • We must reinvest in aging infrastructure and build to a higher, more appropriate standard.
• In St. Petersburg, 3.2 million residents, over 50 percent of the population, lives less than 10 ft above sea level. There are about 60 miles of coast, with the city being surrounded by water on three sides.
  • A large number of local jobs are in the hospitality and service industry, which have a very hard time recovering post-disaster.
  • Small business recovery is especially vulnerable due to the high number of renters in the community. Most renters don’t return to an area after a major disaster.
  • The region is one of the most susceptible to flooding and rising sea levels.
  • Data from NOAA shows a projected sea level rise of 1-7 feet from 1990 to 2100.
  • Mayor Rick Kriseman and the city council are working to protect the city and residents. In 2015, an executive order created the Office of Sustainability and Resiliency, which works to develop innovative environmental solutions that foster equity, a vibrant community, and shared prosperity
  • In 2016, FEMA lowered St. Petersburg’s National Flood Insurance Program Community Rating to category 5, saving property owners over $1.7 million [the voluntary rating program “recognizes and encourages community floodplain management activities that exceed the minimum NFIP requirements,” with lower numbers being better]. A recent integrated water resources study will help further lower the rating to a category 4, which will provide an additional 5 percent discount on flood insurance premiums in the city.
• Mitigation assistance is costly and often inaccessible. This needs to be fixed if we are to become a more resilient nation.
• Gabbard stressed the importance of creating a climate of resiliency and a more robust program where more homeowners can protect themselves.
• We need accurate maps that reflect risk properly. Instead of mapping entire communities as a whole, we should map for individual properties which all have different flood insurance needs.
• Gabbard explained that extending the National Flood Insurance Program for at least 5 years is essential to ensure a more robust private market.
• Finally, the federal government must get out of the way of private insurance carriers, who want to offer flood insurance but are impeded by federal regulations.

 

Ryan Colker, Vice President, National Institute of Building Sciences (NIBS)

• Ryan Colker started by addressing the fact that 2017 saw 16 disasters each costing a $1 billion or more in damages in the United States. The trend for these disasters is increasing, and 2017 took the lead in most costly disasters.
• In 2005, Congress directed the National Institute of Building Sciences to do a study on why we should invest up front in resilience instead of waiting for disaster. The study found that a dollar invested in mitigation by FEMA provides $4 in future benefits. However, the study still left many questions unanswered. What are the impacts of private sector activity addressing hazard risk? What benefits do building codes provide? What impact does mitigation in transportation and utility infrastructure have?
• An expansion to the 2005 study was done, with the first set of results released in January 2018. The study further demonstrates the value of investing in resilience.
  • The study looked at federal agency investment in mitigation. Every $1 invested by the Economic Development Administration and the Department of Housing and Urban Development translated to $6 of benefits in the future.
  • Private sector investment resulted in a benefit of $4 for every dollar spent.
  • The study also looked at benefit-cost ratios for various individual risks, such as hurricane surges and earthquakes.
• We are still not able to capture all the benefits that mitigation provides. Educational, cultural, and ecological impacts of natural disasters should be investigated in terms of how mitigation can alleviate them.
• Additional mitigation measures being investigated are: adoption of current building codes; retrofit of existing facilities; business continuity planning; utility and transportation lifeline mitigation; and public sector direct mitigation efforts.
• To secure investment in mitigation, we need more than a good benefit-cost ratio. We need to think of strategies across the government, private sector, and financial institutions that could result in mitigation investments.
• Furthermore, focusing on buildings alone will not ensure community resilience. Even if properties are resilient, but the surrounding communities are not, people will still be impacted. A broad community aspect of resilience is essential.
• To prepare for long term risk in design and construction, building codes based on past events should be updated to be based on future risks.
• A statement by the building industry identifies goals and pathways in increasing resilience. Recommendations for increasing resilience include:
  • Investing in mitigation to reduce future federal obligations.
  • Encouraging state and local governments to adopt and enforce the latest building codes.
  • Supporting research into incorporating climate risk into design and construction guidance.
  • Encouraging innovative federal programs to enhance private-sector investment in mitigation.
• Colker concluded by emphasizing that all federal investments should recognize current and future risks to ensure assets are protected.

 

John Miller, Legislative Chair, New Jersey Association of Floodplain Management

• John Miller has a unique perspective to offer – most of New Jersey was affected in some way by Hurricane Sandy in 2012.
• After the disaster, the Obama Administration responded with the Climate Action Plan, Hurricane Sandy Rebuilding Task Force, and a State, Local, and Tribal leaders Task Force on Climate Preparedness and Resilience.
• Executive Order 13690 contained the Federal Flood Risk Management Standard, which was a standard looking into future risks. It proposed three options to mitigation.
  • First, it discusses using science and projections of climate change.
  • The second approach is using a two or three foot elevation for buildings, depending on their criticality.
  • Finally, it recommended preparing for a 500-year, or a 0.2% annual chance, flood.
• EO 13690 was rescinded by President Trump just weeks before Hurricane Harvey, but the Administration has since improved the standards in HUD guidance for 2017 hurricane season supplemental disaster appropriations.
• The National Flood Insurance Program, initiated in 1968, is still based on the same standards now and is billions of dollars in debt. But states and communities have taken it into their own hands and are making higher standards on their own.
• Front–end mitigation is key. We should not wait until everything is destroyed after a disaster – acting ahead of time is cheaper, and, furthermore, is not inhibited by other issues in recovering after an event.
• The issue of risk exposure will be impacting the way municipalities are credit-rated, so these towns will have to address sea level rise and flood risk.
• Long Beach Island, New Jersey, will have sizable land areas inundated with 3 feet of sea level rise expected by the end of the century.
• Hoboken, New Jersey, has been hit by Hurricane Sandy and has been doing a lot to prepare for the future – planning codes, emergency activities, and dealing with future risk.
• Resilient Building Design Guidelines look at what homeowners can do in terms of retrofitting their homes, both for minor and large damages.
• 22 states have adopted higher mitigation and resilience standards, affecting 41 percent of the U.S. population.
• Higher standards will be used in multiple ways – they serve as a method of rating communities in addition to protecting communities.

While there is no "one-size fits all" solution to the threat posed by extreme weather and other climate-driven risks, communities can prepare by developing, adopting, and exchanging their own best practices for improved resilience. More than half of local governments in the United States are engaged in some form of adaptation planning. The steady integration of climate change factors into risk assessment models used by the insurance and re-insurance industries introduces a significant financial incentive for the real estate sector to "build smarter" in order to keep premiums down and avert costly damages.