In A Resiliency State of Mind

Resiliency is top of mind for homeowners in the face of intensifying wildfires, super storms, flooding, drought, and extreme temperatures.

When it comes to resilience, younger generations in particular are acutely aware of the impact that climate events have on their homes. Given the state of the home insurance industry, it’s an important topic to study.

In a Resiliency State of Mind

Green Builder Media is about to launch our annual State of the Industry report, which tracks trade and consumer perceptions, sentiment, and purchase drivers, along with key sustainability trends that are transforming the building sector. The report will drop in the November/December issue of Green Builder magazine, and I will present the findings in a webinar on December 6 ( click here to register.)

As I was analyzing the trends, a few interesting data points stood out.

For the past few years, we’ve seen resiliency rise in importance to Millennials and Gen Zs, namely because their homes are being impacted directly by hurricanes, tornadoes, extreme temperatures, wildfires, drought and flooding.

61% of Gen Zs and 58% of Millennials report that they have considered moving due to climate change (compared to 46% of Xers and 34% of Boomers,) and 62% of Gen Zs and 61% of Millennials indicate that they are concerned about the climate change impacting the value of their homes (compared to 53% of Xers and 42% of Boomers).  

85% of Gen Zs and 75% of Millennials claim that they are willing to pay more upfront for resiliency upgrades if they would lower their total cost of homeownership over time.  The numbers were 50% for Gen Xers, 53% for Boomers.   

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Perhaps the acute interest in resiliency is due to the fact that 77% of Gen Zs and 66% of Millennials report that climate events have impacted their ability to get insurance for their homes—a dramatic difference from Gen Xers and Boomers, who were at 22% and 16% respectively.

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When asked what “Resilient Home” means, respondents of all generations selected “a home that doesn’t get damaged by a storm” as their top response, followed by “energy independence (solar + storage)” and then “food independence (onsite food production and storage).”  Living in a location less susceptible to weather events was more important to younger generations, and, not surprisingly, aging in place was more important to Boomers.

Resiliency Isn’t Just for Homeowners

It’s not just Gen Z and Millennial homeowners that have a high level of awareness about resiliency.  73% of younger building professionals advertise their homes as resilient or otherwise tout safety issues regarding climate related events, compared to 50% of Gen Xers and 30% of Boomers.  

Perhaps that’s because 56% of younger professionals report that climate events have impacted their ability to get insurance for their projects, whereas only 25% of Xers and 29% of Boomers cite similar challenges.  

Insurance Conundrum

It’s no wonder that resiliency is top of mind for homeowners and building professionals alike.  Natural disasters now lead to approximately $100 billion in insured losses each year (up from only $4.6 billion in 2000), and climate change is systematically destabilizing the insurance market.  

As extreme weather intensifies and claims pile up, homeowners in disaster prone locations have seen their premiums increase by a staggering 20 percent or more in the last few years—that is, if their insurance company hasn’t backed out of the market entirely.  

Some of the states that are most prone to disasters, like California, Texas and Florida, also happen to have the most active housing markets, along with astronomical insurance rates.  Due to soaring costs, more homeowners are being forced to forgo coverage, leaving them vulnerable and ill-equipped to handle a disaster should—or, realistically, when—one occurs.

While premiums are soaring in some markets, a recent report from First Street Foundation estimates that 39 million homes throughout the nation are covered at artificially low prices that don’t reflect the true risk of their location.  T

hese prices are kept down due to state regulations that cap premiums and government-backed insurance programs that, much like water pricing structures, don’t actually account for full cost and real-life externalities. It’s estimated that approximately 66% of homes in the U.S. are currently underinsured.

As the insurance market hardens, homeowners run the risk of stranded assets, where premiums spike so high that property values plummet, obliterating homeowner equity.  It’s a real challenge that needs to be addressed, most likely by a combination of the housing and insurance sectors along with local and state governments.

Yet There is Good News

Fortunately, many of the other trends in our upcoming State of the Industry report aren’t quite so bleak. In fact, several of the other topics that we’ll cover, like decarbonization, ESG, and net zero carbon homes, are downright encouraging.  

Keep an eye open for the report in the November/December issue of Green Builder magazine, and please join me for the webinar on December 6.