Enormous Stakes: Impact of Climate Change on Property Valuations
The repercussions of the swiftly shifting climate are being increasingly felt across landscapes worldwide. The effects are evident through more frequent floods, rising sea levels, severe weather events, prolonged droughts, and rampant wildfires.
A recent investigation by scholars from the University of Utah emphasizes the growing threat to property values in regions projected to face heightened risks. Spearheaded by William Anderegg, a biology professor, the study’s objective was to initially assess the economic value of U.S. properties situated in forested areas susceptible to intensified dangers from wildfires and tree mortality caused by climatic stress and beetle outbreaks.
Anderegg, who leads the Wilkes Center for Climate Science & Policy at the university, stated, “As a society, we have the ability to handle and reduce, adapt to and alleviate risks. We possess insurance policies, safety features like seat belts and airbags in cars. These measures all aim to mitigate the risk of accidents or having one’s house burned down. However, these risk mitigation tools fundamentally rely on understanding the risks and anticipating how they might change.”
A Clear Message from Maui
Anderegg characterizes climate change as a “game changer” since it promises to escalate threats, yet the specifics of where, when, and to what extent remain uncertain.
“This is a case where we need advanced science and tools to inform us about the risks and how they might alter due to climate change in this century,” explained Anderegg, who specializes in forest ecology. “Climate change will elevate wildfire and disturbance risks; in fact, it’s already doing so. The fact that insurers are pulling out of states like California underscores this.”
To pinpoint climate-related risks to property values, Anderegg collaborated with experts from the College of Social and Behavioral Sciences, including geographer Tim Collins and sociologist Sara Grineski, along with researchers from beyond Utah. Their study, published on August 17 in the Environmental Research Letters journal, determined that more and more U.S. properties will be exposed to the effects of climate change as it intensifies within forested areas.
“We find that property values exposed to these climate-sensitive disturbances increase sharply in future climate scenarios, particularly in existing high-risk regions of the western U.S.,” the study concluded, “and that novel exposure risks emerge in some currently lower-risk regions, such as the southeast and Great Lakes regions.”
A group of conifer trees killed by bark beetles in southwest Colorado. Credit: William Anderegg, University of Utah
While the study deliberately refrained from pinpointing specific vulnerable areas, a cursory look at real estate in the Western region offers insight into trouble spots. Valuable residential properties in Northern Utah, such as those in Emigration Canyon and Summit Park, are located in picturesque settings but face significant wildfire hazards.
The research examined three distinct factors affecting property values: wildfires; tree mortality due to drought and other climate-related stressors; and tree mortality caused by insect infestations.
A Tale of Two Responses to the Climate Crisis
The study projected potential outcomes over two 30-year periods: the mid-21st century and the end of the century, under contrasting scenarios. The team found that effective strategies to reduce carbon emissions could significantly mitigate exposure.
“We examined two separate climate scenarios—one in which we take no substantial action to reduce emissions driving warming, resulting in more drastic negative outcomes, and one in which we aggressively implement mitigation,” explained Collins, who co-directs the University of Utah’s Center for Natural and Technological Hazards alongside Grineski. “The results show that under the scenario where we actively work to mitigate emissions and reduce the impacts of climate change, the future risk to property values is substantially lower.”
Looking exclusively at privately owned parcels of land larger than 1 acre, the study estimated that about $4 billion (in 2017 dollars) worth of property in the contiguous United States is currently exposed to wildfire annually.
This figure is projected to rise to $22 billion and $45 billion by 2049 and 2099, respectively, if no significant action is taken. The study, however, found that the value of exposed property would peak at around $11 billion if aggressive climate action is undertaken.
Wooded areas often appeal to potential residents, but if trees die or burn, these properties lose their allure, and their market value diminishes accordingly.
“What’s intriguing is that people are drawn to these environments due to the benefits linked with forest resources,” Collins noted. “This is evident in high-value lands like California, where wildland-urban interface areas are witnessing rapid residential development.”
These findings are conservative as they don’t account for the anticipated growth in these high-risk landscapes.
“Under climate change, in the hot arid West, more individuals will be attracted to mountainous environments as temperatures rise,” Collins explained. “We’re assuming constant current development levels and analyzing how climate change and increased forest disturbances will impact current property values in the future. This doesn’t even consider the fact that more and more people are being drawn to forest landscapes due to the amenities they offer.”
Reference: “Climate change greatly escalates forest disturbance risks to US property values” by William R L Anderegg, Timothy Collins, Sara Grineski, Sarah Nicholls, and Christoph Nolte, 17 August 2023, Environmental Research Letters. DOI: 10.1088/1748-9326/ace639
The project received funding from grants provided by the David and Lucille Packard Foundation and the National Science Foundation. Collaborators included Christophe Nolte from Boston University and Sarah Nicholls from Swansea University in Wales.
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Frequently Asked Questions (FAQs) about Property Valuations
What is the main focus of the study?
The study’s primary focus is to examine the potential impacts of climate change on property values, specifically in areas vulnerable to intensified risks such as wildfires and tree mortality.
Who conducted the study?
The study was conducted by scientists from the University of Utah, led by biology professor William Anderegg.
What are the key findings of the study?
The study found that property values exposed to climate-sensitive disturbances, including wildfires and tree mortality, will increase sharply in future climate scenarios, particularly in high-risk regions of the western U.S. Novel exposure risks are also emerging in currently lower-risk regions.
How does the study consider climate change scenarios?
The study projected outcomes for two 30-year windows, the mid-21st century and the end of the century, under scenarios of different climate action levels. It shows that effective mitigation strategies to reduce carbon emissions can significantly decrease the future risk to property values.
How does climate change impact property values?
Climate change, through factors like intensified wildfire risks and tree mortality, can erode property values in affected areas. People are drawn to forested environments due to amenities, but climate-related challenges can diminish property appeal.
What role do forest landscapes play in this study?
Wooded areas are often desirable for residents, but if trees die or burn due to climate impacts, properties lose their appeal and market value. The study indicates that these forested areas face escalated risks in terms of property value.
How does the study account for potential growth in high-risk areas?
The study’s findings are conservative, as they do not consider the expected growth in at-risk landscapes. With increasing temperatures, more individuals are likely to be drawn to forested areas, further exacerbating the challenges.
What are the implications for regions like California?
Regions like California, where high-value lands intersect with public woodlands, are particularly affected. Soaring property values meet declining forest health and heightened fire risks, creating significant challenges for residents and insurers.
What’s the source of funding for this research?
The research project was funded through grants from the David and Lucille Packard Foundation and the National Science Foundation. It involved collaboration with researchers from various institutions.
More about Property Valuations
- University of Utah’s Wilkes Center for Climate Science & Policy
- Environmental Research Letters Journal
- David and Lucille Packard Foundation
- National Science Foundation
- Boston University
- Swansea University
