Under water: Is the real estate industry waking up to ‘climate risk’? 

Perched over a harbour across from the bright lights of Vancouver’s city centre, a massive new residential development is pushing the boundaries of what it means to be climate resilient.

The development, called North Harbour, is being built by developer Concert Properties in North Vancouver to a set of novel standards that will mitigate against sea level rise and storm surge.

The new requirement is for the project to be raised 4.5 metres above sea level, well over a metre above the previous requirement. None of the building’s mechanical equipment will be installed below ground, which is the norm, to prevent damage from flooding.

“I think with this site, we really were on the leading edge of thinking about what the next chapter of planning for sea level rise looked like in British Columbia,” says Michael Epp, the director of planning for the City of North Vancouver.

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Construction image of the first phase of Concert Properties’ North Harbour development in the city of North Vancouver, B.C. Concert Properties

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Final rendering of the first phase of the project in North Vancouver. Concert Properties

The North Harbour project is a prominent example of a paradigm shift in civic planning to make cities and communities more weather-resistant. The storm that barrelled through Atlantic Canada last weekend swallowed homes in its fury, and was just the latest reminder of the power of nature to eat away at coastlines in the blink of an eye.

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Read more: Hurricane Fiona shows how climate change is fuelling severe weather events in Canada, expert says

Because of climate disasters, insurers, municipal governments, developers and ordinary Canadians are waking up to the real cost of inaction.

A report released today by the Canadian Climate Institute concludes that damage from climate change will take a $25 billion bite out of the economy each year. Then there are costs to health, jobs and overall wellbeing, all of which will suffer as “heat-induced productivity losses and premature deaths shrink the workforce,” the report finds.

In other words, climate change takes a toll not just on the economy, but also on our overall health and well-being.

For city planners in North Vancouver, the flooding that washed out much of Calgary in 2013 was their teachable moment. It forced them to rethink how to deal with rising water and to plan ahead for climate scenarios all the way to the end of the century.

But the unfortunate reality, says Jesse Keenan, a professor of real estate at Tulane University in New Orleans, is that it often takes a disaster where you live to make change happen. The other problem is that information that would otherwise help make better decisions is simply lacking.

“One thing we don’t know in Canada very much about is the benefits of investing in flood mitigation,” says Jason Thistlethwaite, an expert in climate adaptation at the University of Waterloo.

His research has found that just six per cent of residents who live in flood-risk areas know they do, and the majority, 81 per cent, have not reviewed their local flood area maps.

“It’s difficult to imagine a property owner who’s desperately seeking a house to prioritize something like flood risk over, let’s say, a granite countertop or various fixtures in their home,” he said.

But the importance of getting a clear climate risk picture is becoming just as obvious as a home inspection or a study of an apartment’s sightlines.

In the United States, at least $108 billion in real estate valuation is at risk of literally going underwater, according to Don Bain, a senior advisor at Climate Central, a non-profit that looks at the impact of climate change on people’s lives.

“By mid-century,” he concludes in a recent report, “more than 648,000 individual tax parcels, totalling as many as 4.4 million acres, are projected to be at least partly below the relevant tidal boundary level.”

The world is starting to appreciate that there is a financial and health cost associated with polluting the atmosphere with reckless abandon.

“We’re at a phase where the capital markets are really beginning to understand this as a risk,” says Spenser Robinson, a professor of finance and real estate at Central Michigan University.

Large regulatory bodies like the U.S. Securities and Exchange Commission, he says, are proposing more stringent disclosure laws so that people understand the dangers associated with a range of financial products, including real estate.

But climate-risk factors, Robinson says, have yet to trickle down to the general investor level, and they need to.

“Right now, this is kind of some opaque black box concept that the average consumer can’t really understand.”

To address that, some real estate firms are starting to flag climate risk much like they do walkability scores.

For example, realtor.com has started putting environmental risk scores on some of its home listings.

 

Then there is artificial intelligence, which is being used to assess climate impacts on real estate valuations.

Parag Khanna, an entrepreneur and author who has written extensively on migration, argues that a warming planet is completely changing the calculus of where people are choosing to live.

His latest venture is a platform – Climate Alpha – powered by artificial intelligence that makes cutting-edge predictions on property valuations based on climate risks and other factors.

Machine learning, Khanna says, can take into account a range of data points, from climate forecasts, to immigration patterns, to the availability of land. These data can then be used to assess property prices in ways that financial data and models simply can’t compete with.

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For example, new AI-powered modelling tools can look at how much property prices have been going up or down in a given property market over a period of time, and calculate where those valuations will go in the coming years based on a variety of climate risk calculations and migratory patterns, Khanna says.

Retirees Joan and Rob Boras recently moved to BC’s Okanagan Valley from Alberta, and decided to build their home in the most environmentally sustainable way possible. But part of their motivation was also to ensure their home was resilient, given the hotter summers and more intense wildfire seasons.

“You can’t bury your head in the sand anymore,” Joan Boras told Global News from Naramata, B.C.

They didn’t need advanced technology or fancy financial models to tell them they needed to look climate change straight in the eye.

“You’ve got to look, and when you look, you’ve got to think, ‘OK, what is this area prone to? What are the things that happen?’ We knew it was fires out here. You know that,” Joan says, emphasizing that, “We’re not super wealthy by any means.”

They did their homework and found a contractor who understood the mission. They deliberately picked a lot that was away from the forest edge, and are using a range of energy-efficient and fire-resistant products and technologies to reduce their home’s impact on the environment and make it more resilient.

Read more: Does your home or office hold the key to solving the climate crisis? Experts say yes

But this kind of forward-thinking innovation by ordinary homebuyers is still more of an exception than the rule. Information, however, is starting to trickle down to the average person, and that means there will be more demand to build differently.

A study led by UBC researcher Markus Baldauf found that flood-prone homes in communities where there is strong acceptance of climate change sell for less than in those communities where climate change is not taken as seriously. In other words, if you know about the climate risk, you’re not going to pay as much for your property.

“The more information we get out there, the greater response we see among buyers and sellers,” Keenan says.

The most forward-thinking municipalities know that as well: getting ahead of climate risk means more investment, not less.

“In the future,” says Jason Thistlethwaite, “we’re going to be looking at municipalities who are recognized for being climate resilient, and their property values are going to go up because people are going to want to live there.”

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