How will climate change affect housing in Canada?

Amid growing concerns about the cost that climate change will impose on Canadian housing, a study supported by RE/MAX Canada indicates that more than $5 billion per year is needed to protect homes from flooding, extreme weather and forest fires.

According to a new poll, more than half of Canadians say climate change is affecting where they decide to buy a home.

The survey, conducted by Leger, was part of a larger RE/MAX Canada report released Tuesday, July 5, examining how the housing market will respond to various climate change shocks, including flooding, wildfires and violent storms.

Over the next five years, 57% of Canadians said that potential weather-related events are a key factor in their choice to buy a home. The Leger poll also found that just under half of respondents were concerned about the impact that floods, wildfires and other weather-related events would have on their home or neighborhood over the next few months. coming years.

Yet 61% of respondents think buying a home is the best long-term investment they can make by 2027.

To protect these homes, the report concludes that Canada needs to increase its investment in green, gray and brown infrastructure to the tune of billions of dollars annually.

“We have been depleting and destroying our natural infrastructure for decades in the interest of urban development,” Kathryn Bakos, director of climate finance and science at the Intact Center on Climate Adaptation, says in the report.

“…we must now reverse and correct this damage to ironically protect much of what we have built.”

Restoring Canada’s wetlands and marshes, its forest areas and grasslands, as well as upgrading the country’s sewage systems, will all require an immediate injection of $5.3 billion per year, said Mike Moffatt, senior director of policy and innovation at the Institute for Smart Prosperity, who co-authored the report.

But wait too long, and the next few decades of extreme temperatures and flooding would add billions of dollars to the annual bill.

According to Statistics Canada, almost 85% of the total value of infrastructure in Canada is in private homes.

Flooding Canada’s Costliest Climate Disaster

Between 6 and 10 percent of Canadian homes are already uninsurable for flood risk, the report notes. And as Canadians continue to build on the floodplains, that number will only increase, Bakos said.

Bakos and Moffatt say public and private investment should focus on the buffering effects of natural defenses – green areas that clean water, reduce flood peaks and extreme temperatures, and provide a number of other benefits. cascading to the people and ecosystems around them. .

Drawing on data from the Insurance Bureau of Canada, the report says the overall costs of insured catastrophic losses jumped to $2.5 billion in 2021 from $1 billion in 2005.

When it comes to climate impacts on housing, flooding is now the costliest climate disaster in Canada, resulting in average repairs of around $40,000.

Selling a house is inevitably more difficult too. According to an Intact Center study, between 2009 and 2020, Canadian communities affected by catastrophic flooding experienced significant market impacts over the following six months, including an 8.2% reduction in the average sale price of houses and a 44.3% drop in advertisements. Homes in these communities also spent 19.8% longer on the market than in other communities.

This makes sewer upgrades – such as splitting stormwater and sewage into two pipes to prevent overflows – especially important. Prevent disaster in the first place and save individuals thousands of dollars in the long run, it is believed.

In British Columbia, upgrading dikes is not enough

The latest RE/MAX report also highlighted infrastructure upgrades to guard against coastal flooding, particularly in British Columbia, where 96% of the region’s levees are deemed too low.

“While maintaining them is important, it should not be the only action taken. Managing vulnerable areas through land use planning and moving individuals out of high-risk areas is more effective in the long term.” , says the report.

The Canadian federal government is developing its first National Adaptation Strategy, a blueprint for society to deal with the impacts of climate change. It should be released later this year.

Part of that plan, Moffat says in the report, must include a government “safety net” for homeowners who don’t qualify for insurance but live in chronic flood-prone areas. This could take the form of government-backed premiums (according to a federal task force currently examining the viability of a low-cost national flood insurance program) or residential property buyouts to convert floodplains to their natural state.

Disclosing the real risk of flooding for hundreds of thousands of Canadian homes will inevitably have an impact on their value. Indeed, national flood hazard maps — which Canada is currently updating and are used to underwrite insurance, inform homebuyers and help plan new infrastructure — have been outdated for 20 to 25 years, according to the Insurance Bureau of Canada.

This means that at least half a million buildings at risk of flooding are not identified on current government flood maps, and “virtually none of them show how climate change may affect future risk. flooding,” revealed a landmark study published last year by the Canadian Institute for Climate Choices (CICC).

A 2016 IBC survey showed that about 45% of Canadian homeowners have insurance that will pay for flood damage, when in fact only 10-15% are covered.

This risk is not shared equally across the country.

Flood insurance premiums set to increase 7x without new federal aid

In British Columbia, the number of homes at risk of storm surge is expected to climb 44% by the end of the century to nearly 70,000. That’s more than any other province in the country. And in Metro Vancouver, an estimated $30 billion worth of homes and buildings are within one meter of current sea level. Many municipalities in the region are also facing the dual pressures of rising seas and a network of massive rivers.

Between 2070 and 2100, annual flood damage in Metro Vancouver is projected to climb to $820 million per year, or 27 times today’s value, under a high emissions scenario.

All of this should filter down to individual owners. In fifty years, the average individual property damage is expected to reach $4,400 per year in Metro Vancouver, more than seven times the current cost, according to the 2021 study.

“In hot real estate markets like Vancouver and Toronto, that means property buyers – from individual homeowners to commercial real estate investors – are likely paying too much for homes and buildings that will drop in value when their flood risk becomes apparent. “, warns last annual report of the CICC.

But flood maps could also offer an opportunity, RE/MAX Canada executive vice president Elton Ash said in the real estate company’s latest report.

“In principle,” Ash said, adding climate risk to the list of what a landlord should disclose makes “very good sense.”

“This would help residents across Canada identify areas and neighborhoods of resilience, which could lead to additional investment, better quality of life, lower insurance premiums and a more resilient housing market in those areas. .”

He also added a caveat: for this to work, the information must follow the changing climate.

Investments to help people and infrastructure adapt and cope with climate change “must progress in parallel”.

RE/MAX Canada’s first five-year housing report, released in May, looked at how the country’s housing market could react to different economic scenarios, such as interest rate hikes, annual immigration and taxation. .

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