People are willing to pay many times the cost of climate adaptation measures when purchasing a home. This is a conclusion reached by the Institute for Catastrophic Loss Reduction (ICLR) in a report published for the Alberta Climate Ready Homes project.
Researchers studied existing surveys of home buyers and home closing prices, combined with research on Canadian home listing prices in major city centres.
“Motivated by the large and growing risk that natural disasters pose to Alberta homeowners, the Alberta Climate Ready Homes project seeks ways to help homeowners invest in climate adaptation. This memo asks whether adaptation, particularly hail-resistant roofing in Calgary, represents an investment that more than pays for itself at resale,” they write.
The report, Climate adaptation has a market value that greatly exceeds its cost, also looks at resale values for homes with hurricane shutters in coastal Texas, tornado shelters in Oklahoma City, seismic retrofits in California and hurricane retrofits in Alabama. In Canada, the report looks at real estate sales prices and how much Calgary homes with hail-resilient features sold for, compared to those without similar features. The selling price of homes with flood resilient features in Edmonton and Toronto are also examined in the report.
“The findings support three possible strategies: First, cities can remind homeowners and real estate agents that hail resilience (or other climate adaptation features) appears to be a good investment. Second, cities can remind buyers about climate risk to increase demand for climate-ready homes. And third, the market value of resilience might weaken objections to mandates,” they write.
The report points out that total insured losses from natural disasters in Canada has risen nine per cent per year, with Alberta leading the nation in natural disaster risk, suffering 63 natural disasters totalling $21-billion in insured losses since 2008. It also estimates that Albertans lose one per cent of their income by building to minimum standards and failing to retrofit buildings to resist well understood natural disasters.
“People say they would pay more for resilient homes,” they add, saying about half of respondents to a small recent survey indicated that they would be willing to invest at least $5,000 or more. “Between four and eight per cent would pay at least $25,000 extra. Canadians want their homes to be more resilient to disasters and are willing to pay for it,” they write. But, they acknowledge, “responding to surveys is one thing. Paying for a house is another.”
Canadian real estate findings
Although the sample sizes are very small, creating some uncertainty they admit, the researcher’s attention to real estate prices then found consistently that mention of hail resilience in a Calgary real estate listing added 2.9 per cent to the home’s asking price. Flood resilience measures in Calgary also appeared to add between 2.1 per cent and 2.8 per cent to closing prices.
In the Edmonton survey, after controlling for other features, it appears that flood resilience added 5.6 per cent to asking prices, while flood resilience measures in Toronto’s housing market added between 4.4 per cent and 6.9 per cent to the median home closing price.
“Results are consistent: in places with high hail or flood risk, resilience features appear to add $20,000 to $50,000 to a home’s resale value, much like in the four U.S. studies,” they write. “Despite interesting open questions, the research seems to all point to the same findings.”
