Adapting to the New Reality of Climate Change and Housing

This article is part of The Rooftop, a blog and multimedia series from New America’s Future of Land and Housing program. Featuring insights from experts across diverse fields, the series is a home for bold ideas to improve housing in the United States and globally.

In recent decades, the United States has experienced a deeply disturbing trend of catastrophic disasters. Consider just the past two years. In August 2023, wildfires in Hawaii claimed over 100 lives and left widespread destruction. In September 2024, Hurricane Helene devastated Asheville, North Carolina, and nearby towns, killing more than 100 people. This January, a series of wildfires in Southern California forced the evacuation of over 200,000 residents and caused more than 30 deaths. And just last month, the floods along the Guadalupe River in Texas took more than 135 lives.

In addition to the tragic loss of life, these disasters have left behind staggering economic damage, much of which will not be covered by insurance. They have destroyed infrastructure, people’s homes, and entire communities. In 2023 alone, the United States endured 28 disasters that each cost at least $1 billion, totaling more than $92 billion. While the causes vary, the growing frequency and severity of these events align with the risks posed by a warming world.

Suffice it to say, climate change is no longer a distant threat; it’s a present-day force reshaping everything from public health to national security. And in the United States, perhaps no system is more vulnerable—or consequential—than housing. As climate change transforms the $50 trillion U.S. housing market, key policy, tech, and financial innovations are emerging to meet the moment.

Climate Risk in Housing and Home Insurance

The risk to housing from climate change falls into two overlapping categories. First, there are direct physical risks: sea level rise, flooding from extreme rainfall, landslides, wildfires, hurricanes, high winds, extreme heat, and cold snaps. Second, there are established systemic risks made more urgent by climate change, including, for instance, a shortage of affordable housing, out-of-date or overly complicated building code, and historical discriminatory practices.

These risks ripple through essential systems, from mortgage lending to migration patterns and community stability. One of the clearest early warning signals of the risks climate change poses to the U.S. housing market is emerging in home insurance. According to First Street, between 2013 and 2022, insurance as a percentage of mortgage payments more than doubled—from 7 to 8 percent to over 20 percent. Meanwhile, physical vulnerabilities have triggered dramatic premium hikes, which loom over households annually. A report from Jupiter Intelligence found that, across the country, insurance premiums are still far below what’s necessary to account for the financial risks posed by climate change. These costs will only increase, as will associated expenses like the costs of material and labor for repairs and rebuilding, which are already climbing.

On top of that, there is a troubling trend of non-renewals as insurers retreat from areas increasingly vulnerable to wildfires, floods, and other climate-related disasters. The implications are stark: Without insurance, mortgages cannot be issued. Beyond affecting affordability, this has the potential to erode the home equity already built in these climate-risky markets.

This cascade of risk threatens not only individual homeowners but also the financial viability of entire regions. Without mortgages, home sales collapse. And with them go property values, tax bases, and the stability of entire communities. The alarming escalation of insurance costs and policy non-renewals, seen acutely in states like Florida and California due to heightened climate risks, threatens to destabilize housing markets and community resilience nationwide.

“This cascade of risk threatens not only individual homeowners but also the financial viability of entire regions.”

Risks posed by climate change to housing are deeply personal. Climate stressors don’t just endanger the asset—they reshape lives, fracture communities, and erode the promise of homeownership. Research indicates that climate-related stress is already prompting people to leave their homes in vulnerable areas. This underscores that adaptation efforts focusing solely on structural or financial fixes might miss the human dimension—and result in maladaptation if emotional and cultural ties aren’t considered.

Emerging Solutions in the Growing Adaptation Sector

Alongside essential policy responses such as adjusting building codes, financing infrastructure through resilience bonds, mandating risk disclosures, and even promoting proactive managed retreat, more private sector solutions and public-private partnerships are emerging to mitigate climate risk to housing. These initiatives treat resilience as not just a moral imperative but a predictable economic opportunity—what one 2024 report termed the “unavoidable opportunity” of climate adaptation. Like most other sectors vulnerable to the effects of climate change, housing isn’t just risk; it is also a chance for investors to pursue opportunities that bolster resilience.

We see two overarching ways that mitigating housing-related climate change risk is an investment opportunity for capital allocators and business owners:

The first strategy focuses on investing directly in businesses that sell the means to adapt or be resilient, whether to other businesses, governments, or directly to consumers. These businesses are most likely innovating and building new products or services that respond to instability in systems underpinned by the climate—innovations such as B2C air purifiers for wildfire smoke, next-generation HVAC systems for extreme heat, and artificial intelligence tools for climate-adjusted insurance underwriting.

The second strategy focuses on how existing businesses incorporate climate resilience into their operating model. Building a business in an era of changing climate risk will force the emergence of winners and losers across sectors and asset classes. The ones that pivot from “business as usual” by adapting their infrastructure, operations, and services will be more durable and profitable. These would include, for example, manufacturers that create new business lines of heat-resistant building materials, agriculture companies that do drought-resistant irrigation, and landscaping firms that consider wildfire risk in their designs.

One successful case study in using adaptation as a risk-management lens is the Resilient Delta Fund. Launched in the aftermath of the 2025 L.A. fires by The Resiliency Company (which Abby Ross, an author of this piece, founded), this fund coordinates collaboration among builders, architects, financial institutions, insurers, policymakers, and community-based organizations to accelerate the scaling of residential and community resilience in post-disaster rebuilding. More specifically, it demonstrates how the financial opportunities of adaptation can be something more than an investment opportunity.

“The financial opportunities of adaptation can be something more than an investment opportunity.”

The fund supports upgrades for 12,000 homes impacted by the fires, bringing them up to the Wildfire Prepared Home Plus Standard from the Insurance Institute for Business Home & Safety (IBHS)—an advanced layer of home protection. These upgrades include flame- and ember-resistant vents, non-combustible downspouts, and defensible perimeters to reduce ignition risk. Specifically, the fund targets the “delta” between what traditional post-disaster financing covers and the cost of rebuilding to the highest standards of safety and damage prevention. Its goal is to broaden access to capital, enabling recovery efforts that also safeguard long-term insurability via home improvements.

By offering grants through local nonprofits, and loans through community development finance institutions and banks, the fund also creates a scalable opportunity for investors across the layers of financing used to back a project to realize meaningful returns from high-impact, risk-reducing adaptation measures. In so doing, the fund improves safety for individual homeowners and strengthens resilience across entire neighborhoods.

Building a Safer Future

Climate change is forcing a reckoning with how and where Americans live—and who ultimately pays for that risk. Adapting to this new reality will be difficult and require bold solutions.

Fortunately, a fast-growing ecosystem is forming to meet the challenge. Organizations like the IBHS are advancing standards to reduce damage from extreme weather, the Community Infrastructure Center is helping communities plan and finance resilient infrastructure, and mapping tools like those from Probable Futures enable place-based risk assessments. Meanwhile, investors such as The Lightsmith Group, Tailwind, and Wellington Management are galvanizing capital to accelerate resilience.

As demonstrated by the Resilient Delta Fund, collaborations between policy organizations, community partners, and non-profits can reduce future losses, stabilize housing and insurance markets, and build a safer, more equitable future.

Editor’s note: The views expressed in the articles on The Rooftop are those of the authors alone and do not necessarily reflect the opinions or policy positions of New America.