Will the next housing crisis be climate-related?
Thirty-year mortgages on houses in cyclone, wildfire, flood and drought zones? Systemic risk is building.
Could the next housing crisis be climate-related? Quite possibly.
This summer my partner and I tried to buy a house in the Catskills, New York. It was the end of June when we ran the inspection and no drought was in effect. The report came back that the well was almost dry – something the owners (who didn’t live there full time) claimed was a shock to them. And it could have been. Several other homes in that small town had their wells run dry for the first time this summer.
It may be the sad, first-hand experience of the impact of climate change, but what concerns me most is that the financial institution providing our mortgage said that a dry well wouldn’t affect their decision. They were prepared to issue a 30-year mortgage with only a 10% down-payment on a property that could well be uninhabitable if the water table continues to drop.
I’m not a geologist, climate scientist or a banker, but even I can see that this is a high-risk proposition for both my household and whoever ends up holding our mortgage – and that this looks a little bit like 2006.