Climate Change Impacts Across California - Housing

Climate Change Impacts Across California Housing HOUSING Other Reports Summary in This Series Climate change will have a number of serious impacts on California, including public health risks, damage to property and infrastructure, life-threatening events, and impaired natural resources. This report focuses on how a changing CROSSCUTTING ISSUES climate is affecting the housing sector and key issues the Legislature faces in responding to those impacts. This is one of a series of reports summarizing how climate change will impact different sectors across California. In this report, we find that climate change will affect where and how new housing HEALTH should be built. For example, decision makers will not be able to depend solely on historical data—such as on maps of past flooding and fire activity—when determining where to locate new housing. Instead, given increasing climate change impacts, K-12 EDUCATION decisions will need to incorporate information about the projected future risks of these hazards. Some existing homes and communities also will need to adapt to ensure they are adequately protected from growing climate change-driven hazards. For instance, many older homes are not elevated sufficiently to protect them from TRANSPORTATION flooding and were built without features—such as air conditioning, modern insulation, and air filtration—to mitigate the effects of extreme heat or outdoor wildfire smoke. We further find that climate change is likely to put upward pressure on residential property insurance and housing costs, and to disproportionally impact low-income WORKERS & residents who tend to live in geographic areas and housing types (such as older EMPLOYERS housing units) that are more vulnerable to the effects of climate change. To respond to these impacts, the Legislature may want to consider whether the state should take additional actions to influence where and how housing should be constructed and modified. Additionally, encouraging community-level mitigations, keeping the residential property insurance market healthy, and mitigating the disproportionate risks faced by low-income residents are areas where the Legislature could consider additional actions. As the Legislature considers its preferred actions to address the impacts of climate change on housing, it will be important for it to weigh the relevant trade-offs, particularly those related to potential effects on housing affordability. Housing affordability is a serious and widespread challenge in California. While many factors have a role in driving California’s high housing costs, the significant shortage of housing is the most substantial. Increased housing development is of foremost importance to address the state’s housing challenges. Thus, while climate change can and will negatively impact housing in some locations, curbing housing development overall is untenable given the state’s housing shortage. Instead, an increased focus on where and how new housing is built will be necessary to mitigate and adapt to the current and growing impacts of climate change. Gabriel Petek Ap1ril 2022 LEGISLATIVE ANALYST’S OFFICE Introduction This report contains three primary sections: schools, and other community amenities that (1) the major ways climate hazards impact can be accessed with public transportation—can housing, (2) significant existing state-level efforts help reduce dependence on vehicles, thereby underway to address climate change impacts limiting greenhouse gas emissions. Additionally, on the housing sector, and (3) key questions for if dense housing is placed strategically, it the Legislature to consider in response to these can enable the state to build more housing impacts. Given the complexity of the issues, this without having to resort to building in locations report does not contain explicit recommendations that are at the highest risk for climate change or a specific path forward; rather, it is intended as impacts such as wildfires and extreme heat. a framing document to help the Legislature adopt California Faces Five Major Climate a “climate lens” across the housing policy area. Hazards. As discussed in depth in our companion Because some degree of climate change report, Climate Change Impacts Across California: already is occurring and more changes are Crosscutting Issues, California faces five inevitable, this document focuses primarily on major hazards as the result of climate change. how the Legislature can think about responding Specifically, increasing temperatures, a changing to resulting impacts. Of note, the state is also hydrology, and rising sea levels will lead to: engaged in numerous efforts to limit the degree • Higher average temperatures and to which climate change occurs by enacting periods of extreme heat. policies and programs to reduce emissions of greenhouse gases (such as by encouraging • More frequent and intense droughts. buildings to be more energy efficient). However, the state’s mitigation and adaptation policies are • Increased risk of floods. not necessarily mutually exclusive. For example, • More severe wildfires. strategically building more dense communities can both mitigate the future effects of climate change • Coastal flooding and erosion. and help to respond to its current impacts. This Below, we discuss specific impacts is because building dense housing—near jobs, these hazards will have on housing. Major Climate Change Impacts on Housing We expect climate change to impact housing is built will be vital to mitigating and adapting to the in a variety of ways. We discuss these impacts current and growing impacts of climate change. within the broader context of the serious and As we discuss further below, climate change also widespread housing affordability challenges in will necessitate changes to existing homes and California. Increased housing development is communities, affect housing costs, and have of foremost importance to address the state’s disproportionate impacts on low-income residents. housing challenges. Moreover, responding to Climate Change Will Affect Where New climate change impacts does not preclude the Housing Should Be Built. In recent years, state from meeting its housing goals. Instead, an much of the new housing construction in the state increased focus on where and how new housing 2 LEGISLATIVE ANALYST’S OFFICE has occurred in areas that are at significant risk state are at risk of one or more effects of climate of the effects of climate change. For example, change and increased housing development over the past decade, six out of ten of the state’s is critical to addressing the lack of affordable fastest growing counties have been in the Central housing in the state, avoiding construction of new Valley and Inland Empire, which are regions housing in all at-risk areas likely is not feasible. that are a comparatively high risk of excessive However, those areas that are at highest risk may heat. As shown in Figure 1, these areas also no longer be suitable for new development absent are anticipated to become hotter in the future. sufficient planning and mitigation. Moreover, Historically, climate change has not been a decision makers will not be able to depend solely major consideration in locating new housing. on historical data—such as on maps of past Increasingly, however, this will need to change, and flooding and fire activity—when determining where the risks posed by a changing climate will need to to locate new housing. Instead, given increasing be considered as a more significant factor when climate change impacts, decisions will need to building new housing. Given that large parts of the incorporate information about the projected future Figure 1 Projected Increases in Average Maximum Temperatures Are Greatest in Inland and Southern California Mid-Century 2035-2064 End of Century 2070-2099 Fahrenheit +3.6° +5.4° +7.2° Reflects changes from historical baseline 30-year average maximum temperatures (1961-1990). These estimates assume the moderate climate change scenario of "RCP 4.5," in which international practices result in the rate of worldwide greenhouse gas emissions slowly declining in the coming decades. Data from www.Cal-Adapt.org LEGISLATIVE ANALYST’S OFFICE 3 risks of these hazards. For some hazards, such the state does not currently have standards for the as sea-level rise, maps showing the areas that construction of new homes that comprehensively are anticipated to be inundated under various incorporate high future risks of some other possible future scenarios are widely available, hazards, such as related to sea-level rise. although the time horizon for when the changes Climate Change Will Necessitate Changes will occur is uncertain. For other hazards, such to Existing Housing. When considering climate as wildfire, while maps of current risks are widely change impacts, assessing the effects on existing available, maps of anticipated future risks are housing, as well as new housing, is important not. This is in part because the evolution of these because many existing homes are located in risks over time is complicated to model. The areas that already are at risk. For example, lack of widely available maps of the full range of about 1 million structures are located in areas future climate-driven risks makes it more difficult that the California Department of Forestry and for decision makers to fully incorporate these Fire Protection classifies as being at very high risks into their planning activities. Additionally, risk of wildfires. Additionally, a recent report since some communities face multiple risks from estimated that four feet of flooding expected climate change, understanding how maps of from sea-level rise over the next 40 to 100 years future risks for individual hazards overlay to affect could make 13,000 existing homes in the Bay a community’s overall risk will be important. Area uninhabitable, uninsurable, or undesirable Climate Change Will Affect How New places to live. Many existing homes were built to Housing Should Be Built. Climate change will different standards than are commonplace today, not only affect where but also how new housing making them less resilient to the effects of climate should be built. This includes both the design of change. For example, many older homes were individual homes as well as of communities. For built with features—such as wood shake roofs, example, unless new homes in areas expected cedar siding, or single-paned windows—that make to face high flood risks are elevated, they could them more vulnerable to igniting during wildfires. confront a greater likelihood of inundation. Additionally, many older homes are not elevated Similarly, new housing that is built in areas sufficiently to protect them from flooding and were that are expected to face high wildfire risks will built without features—such as air conditioning, encounter greater threats, particularly if they modern insulation, and air filtration—to mitigate do not incorporate defensible space and home the effects of extreme heat or outdoor wildfire hardening approaches, such as fire-resistant smoke. As climate change increases the risk of siding. Additionally, new communities in these high hazards such as wildfires, flooding, and extreme fire-risk areas will need to be built with adequate heat, existing homes will need to be modified access for evacuations. New communities will to make them more resilient to these risks. also need to be surrounded by design elements Climate Change Will Require Greater that can serve as natural fuel breaks, such as Community Coordination and Intervention to roads or greenbelts. While state requirements Protect Housing. Even if individual homeowners presently exist or are planned for the construction take steps to protect their properties from the of new homes and communities in areas currently effects of climate change, they still will face risks designated as being at high risk of wildfire or under if community-level mitigations—such as levees the state’s responsibility for fire protection, these that protect communities from inundation during requirements do not cover other areas that may high-water storm events and open spaces become high risk in the near future. Additionally, 4 LEGISLATIVE ANALYST’S OFFICE that serve as fuel breaks to help safeguard individual and community mitigations in their fire-prone communities from wildfires—are not rate setting.) Even with appropriate mitigations, adequate to protect against growing threats. there may be increasing numbers of structures Community-level mitigations can be complicated lost to natural disasters—such as wildfires and to undertake because they often require significant floods—as a result of climate change. This likely coordination among stakeholders, lengthy will put continued upward pressure on residential planning, and substantial amounts of funding. property insurance rates and make insurance more difficult to obtain in a greater number of areas. Climate Change Will Affect Residential Insurance Availability and Cost. Homeowners Climate Change Will Put Upward Pressure purchase insurance so that they may be on Housing Costs. Housing in California is compensated in the event their properties are already very expensive, primarily because there is damaged or destroyed as a result of a storm, fire, not enough to meet demand. Many of the key ways or other covered event. Climate change already that climate change will affect housing discussed has increased the frequency and severity of these above also could further increase housing costs. risks in many parts of the state which has, in turn, These effects likely will vary geographically based had significant impacts on the insurance market. on climate change impacts. For example, the need For example, insurance companies experienced to modify and maintain existing homes and higher historically large losses due to wildfires in 2017, insurance premiums will directly increase the costs 2018, 2020, and 2021. In response, insurance of homeownership. This could be of particular companies have increased rates broadly and concern to the extent it reduces the availability dropped homeowners in some wildfire-prone of less expensive housing. Additionally, climate areas. While Chapter 616 of 2018 (SB 824, Lara) change could impede housing supply, particularly protects homeowners from being dropped by in the short term. For example, the state’s potential their insurers for one year following a wildfire, over housing supply will be reduced to the degree the longer term, homeowners in areas at high climate change risks limit development in some risk from wildfires may increasingly have difficulty areas, although building more densely in strategic getting and maintaining insurance. Complicating locations would mitigate this impact. Additionally, matters, California’s insurance regulations limit supply will be impacted—at least in the near term— how rates are set and specify many aspects of if a large number of structures are destroyed by insurance coverage. For example, rates are based wildfire, flooding, or other hazards. To the extent on historical losses and cannot integrate models that climate change keeps the supply of housing that estimate how climate change could increase lower than it otherwise would be, this will put some catastrophic risks in the near future. While upward pressure on housing costs, exacerbating several insurance companies voluntarily offer the state’s housing affordability challenges. discounts to homeowners who have modified Climate Change Will Have Disproportionate their homes to make them less vulnerable to Housing Impacts on Lower-Income igniting during wildfires, such as by maintaining Residents. The scale of climate change impacts defensible space, the state’s current rate setting on housing will vary geographically and across rules do not address how mitigation measures housing types. In many cases, impacts will be that reduce risk should be considered. (We note felt most acutely by low-income households that the Department of Insurance recently has who disproportionately live in (1) areas of the proposed a new regulation that would require state that will be exposed to higher risks and insurance companies to consider specified LEGISLATIVE ANALYST’S OFFICE 5 (2) types of housing that are typically less resilient. more likely to live in rental housing, and thus For example, many inland areas that tend to be more likely to be reliant on landlords to conduct at increased risk of extreme heat also are home modifications to their homes to mitigate the to higher proportions of low-income households. effects of climate change. While current state Low-income households also are more likely to live regulations require that landlords provide their in communities that face greater climate impacts tenants with heating facilities to maintain a related to historical discriminatory housing policies. minimum temperature of 70 degrees, there is no Specifically, recent research suggests that comparable requirement for cooling mechanisms communities the federal government designated to avoid exceeding any maximum threshold. in the 1930s as “hazardous” for real estate Climate Change Will Further Affect State investment through a process known as redlining Costs Related to Housing. Private parties, tend to experience hotter temperatures and more such as homeowners and renters, likely will bear flood risk than other areas. In addition, these many of the costs that climate change imposes on areas often have fewer parks and trees and more housing. However, there also likely will be some paved surfaces that radiate heat. Similarly, rural additional increased state costs. For example, communities that are dependent on wells and less the state likely will continue to face growing costs sophisticated water systems have experienced associated with protecting communities from or are at greater risk of experiencing water climate-fueled disasters, such as wildfires, and shortages due to droughts. These communities helping to rebuild communities that are affected. tend to be home to large proportions of Illustrating this example, the costs to the state lower-income households, due in part to historical General Fund of providing fire protection have housing discrimination practices that restricted increased substantially in recent years—growing which racial groups could live and purchase from roughly $750 million in 2005-06 to about homes in the communities that contained $2.9 billion in 2020-21. Additionally, state costs larger and more developed water systems. associated with removing debris—such as the Low-income residents also are more likely to remains of homes—from the 2020 fires are live in older housing that requires modifications to estimated at roughly $700 million. Furthermore, adapt to increased risks. For example, low-income because the state helps fund affordable housing, households are less likely to live in homes with to the degree construction costs are higher to central air conditioning than are higher-income protect against climate change impacts, this households, and may also find it challenging also would reduce the number of units the state to pay for electricity to run the systems they could fund with a given amount of funding. have. Notably, low-income residents also are Significant Existing Efforts and Funding The state has undertaken various efforts aimed Safety Elements of Local General at making housing more resilient to the impacts Plans. Chapter 608 of 2015 (SB 379, Jackson) of climate change, such as through encouraging requires that climate change adaptation and more robust local planning and imposing resilience be addressed in the safety elements certain requirements on new construction. of all general plans in California. Additionally, We describe some of these efforts below. Chapter 202 of 2019 (SB 99, Nielsen) and Chapter 681 of 2019 (AB 747, Levine) require that safety elements identify evacuation routes. 6 LEGISLATIVE ANALYST’S OFFICE California Green Building Standards to develop recommendations for an improved Code (CALGreen). Among other components, regional housing needs allocation process. While the CALGreen state-mandated building code not explicitly required, these recommendations includes requirements that new and certain could potentially include greater attention to retrofitted homes meet higher water efficiency climate change impacts during the RHNA standards for their outdoor landscapes. The process, among other considerations. CALGreen codes also include measures Moratorium on Non-Renewals of related to heat reduction for new and retrofitted Homeowner’s Insurance. Chapter 616 of homes, but they are voluntary, not mandatory. 2018 (SB 824, Lara) prevents insurers from Update to Fire Hazard Planning Technical cancelling or refusing to renew a homeowner’s Advisory. Undertaken by the Governor’s Office insurance policy based solely on the fact that the of Planning and Research (OPR), as required insured structure is located in an area in which by Chapter 626 of 2018 (SB 901, Dodd) and a wildfire has occurred for one year after the Chapter 641 of 2018 (AB 2911, Friedman), this declaration of a wildfire state of emergency. effort is intended to assist local governments Funding for Regional Planning. The develop effective policies, codes, standards, 2021-22 budget package included funding for and programs aimed at mitigating fire hazards. regional efforts that could help communities Minimum Fire Safe Regulations. These plan for and help mitigate the impacts of regulations include requirements for Very climate change on housing. This included High Fire Hazard Severity Zones and the $275 million across three years for OPR to State Responsibility Area, such as for administer climate adaptation planning and ingress/egress, signage, and fuel reduction. implementation grants for local governments and regional partnerships. The budget also Wildfire Mitigation Partnership and provided $600 million in one-time funds for HCD Safer From Wildfires Framework. The to administer planning and implementation grants Department of Insurance, working with other to regional entities for activities targeted towards state agencies and stakeholders, has developed the state’s climate goals and reducing vehicle a list of specific mitigations for existing homes miles traveled, such as infill developments. and communities in order to help homeowners reduce their individual risk. The Insurance Weatherization Programs for Low-Income Commissioner proposed a regulation in Californians. The Department of Community February 2022 that would require insurance Services and Development administers the federal companies to incorporate these mitigations in Weatherization Assistance Program (WAP) and the their rate setting, to provide information about state Low-Income Weatherization Program (LIWP). wildfire risk to homeowners, and to create a Both programs help reduce energy usage and process through which homeowners may correct costs and help regulate temperatures in homes or appeal the insurers’ assessment of this risk. by providing energy efficiency upgrades for eligible low-income households. LIWP also Regional Housing Needs Assessment funds solar panel installations, and focuses (RHNA) Reform Study. Chapter 159 of 2019 on energy efficiency and renewable energy for (AB 101, Committee on Budget) requires farmworker housing and multifamily affordable the Department of Housing and Community housing in addition to single-family housing. Development (HCD), in collaboration with OPR, LEGISLATIVE ANALYST’S OFFICE 7 The state budget has provided $227 million total from the General Fund through 2024 (with from the Greenhouse Gas Reduction Fund $25 million in 2021-22 dedicated exclusively to the for LIWP since 2014, and the 2021-22 budget farmworker housing component). Federal funding package committed an additional $75 million for WAP in 2020-21 was around $8.3 million. Key Issues for Legislative Consideration Traditionally, cities and counties have made consider those risks. These changes most of the decisions about housing in their could address various components of the communities. However, given the potentially severe housing planning and building process: and widespread effects of climate change on • Determining Statewide Housing Needs. the housing sector, the Legislature may want to The Legislature could consider whether consider whether the state should take additional the state should make changes to the actions to mitigate these effects. Below, we RHNA process to ensure that climate provide several key questions for the Legislature to change is considered when existing and consider regarding its role in influencing where and projected housing needs are allocated to how housing should be constructed and modified, cities and counties. These changes could encouraging community-level mitigations, include determining whether state-level addressing the effects of climate change on the population estimates should incorporate residential insurance market, and mitigating the climate-related migration effects. disproportionate climate change risks faced by low-income residents. We also summarize these • Requirements for General Plans. The issues in Figure 2. Given the magnitude of climate Legislature could consider whether to require change’s impact on housing, the Legislature likely local governments to more fully consider will need to take a comprehensive approach that climate change impacts in the housing addresses the problem from multiple angles, while elements of their general plans, such as by also keeping in mind the importance of promoting ensuring that they comprehensively integrate housing affordability. Figure 2 What Role Should the Climate Change Impacts on Housing: State Play in Influencing Key Issues for Legislative Consideration Where New Homes Are Built? Cities and counties 9 What role should the state play in influencing where new homes are built? generally decide when, 9 where, and to what extent What steps should the state take to influence how new homes are built? housing can be built within 9 What should the state’s role be in helping mitigate risks to existing housing? their jurisdictions. As 9 climate risks increase, the What should the state’s role be in encouraging community-level efforts to mitigate climate change impacts on housing? Legislature could consider 9 whether to make changes What actions should the state take to respond to climate change impacts on to the existing processes for the residential insurance market? planning for new housing to 9 How should the state address disproportionate risks and costs faced by more fully and consistently low-income residents? 8 LEGISLATIVE ANALYST’S OFFICE disaster risk. (Under existing state law, What Should the State’s Role Be in cities and counties must consider disaster Helping Mitigate Risks to Existing Housing? risk when they create the safety element Mitigating risks to housing is largely a property of their general plans, but not the housing owner’s responsibility, but in certain cases the element.) For example, local governments Legislature may want to consider encouraging could be required to implement adaptation and/or supporting these efforts. Specifically, measures like requiring land to be set aside the Legislature could consider taking actions surrounding developments for uses that to require or incentivize property owners to can serve as natural fuel breaks to help undertake modifications to existing houses and reduce the fire risk to those developments. apartments. For example, the Legislature could require property owners to undertake specific • Affordable Housing Construction. mitigations when properties are sold or undergo The Legislature could consider whether major renovations, such as attic insulation to additional risk factors should help better moderate heat. The Legislature also could guide where state-funded affordable consider whether to provide targeted financial housing is built, given the amount assistance in some cases. This could include of state investment involved and the support for homeowners who have limited financial vulnerable communities it serves. resources, for publicly supported affordable As it considers these questions, the Legislature housing, or when the inaction of homeowners will face difficult choices about how to balance can impose significant costs on others. For the trade-offs of potentially limiting construction example, as we discuss in our recent report, of new homes in the riskiest areas against other Reducing the Destructiveness of Wildfires: competing priorities, such as ensuring adequate Promoting Defensible Space in California, housing is built across the state, housing one argument for providing state support for affordability concerns, and preserving local control. maintaining defensible space is that when homeowners fail to do so, it could increase the What Steps Should the State Take to risk that nearby homes will ignite, thus imposing Influence How New Homes Are Built? costs on the broader community and state. The Typically, building new homes to be resilient Legislature also may want to consider whether to climate change is more cost-effective than different approaches are needed to mitigate modifying existing homes later. Accordingly, the risks to rental housing, since landlords may not Legislature could consider how it can encourage be fully incentivized to modify their properties for new homes to be built with climate resilience climate change impacts such as heat and wildfire in mind, when feasible. The state imposes smoke, when their tenants—and not the property certain requirements for how housing must be itself—will bear many of the associated costs. built through the adoption of statewide building codes, which local governments can then What Should the State’s Role Be in strengthen based on their own priorities. The Encouraging Community-Level Efforts Legislature may want to consider whether the to Mitigate Climate Change Impacts on state should set new or different requirements Housing? The Legislature also will want to for how homes are to be built. For example, consider the appropriate role for the state in this could include strengthened or broadened supporting community-level mitigations. There requirements for fire-resistant home exteriors. may be certain targeted areas where providing some financial support for these activities has LEGISLATIVE ANALYST’S OFFICE 9 merit, such as providing “seed money” to help private actions, such as through linking home spur local adaptation project planning efforts. modifications more closely to rates; (3) whether (As discussed above, the 2021-22 budget rules governing insurance rates and coverage package included funding through both HCD should be different for new homes versus existing and OPR for regional planning activities.) ones; and (4) whether insurance companies Besides providing financial support, the state should be allowed to consider factors such as also could encourage community-level efforts modeling of future climate risk in setting their rates. through other actions, such as facilitating How Should the State Address coordination among relevant entities and by Disproportionate Risks and Costs Faced collecting and disseminating information. by Low-Income Residents? The Legislature What Actions Should the State Take to may want to consider how the state could Respond to Climate Change Impacts on the address the unequal effects that climate change Residential Insurance Market? The state will is likely to have on certain groups’ housing, need to grapple with how to address the impacts such as low-income households. Since past of climate change on the insurance market. As government actions—such as redlining—have it does so, the Legislature will need to weigh exacerbated the disproportionate risks that some conflicting goals, such as promoting the availability communities face and they may have fewer and affordability of insurance while also aligning resources upon which to draw, the Legislature may the incentives for homeowners to consider want to consider whether the state should take disaster risks in their housing decisions. Some key actions such as targeting assistance to certain questions for the Legislature to consider include neighborhoods. Additionally, the state could (1) to what extent homeowners in lower-risk areas explore opportunities to incentivize landlords to should be required to subsidize homeowners in modify their rental properties to mitigate the effects higher-risk areas; (2) whether and to what extent of heat and wildfire smoke on their tenants. the state should use insurance to influence Conclusion Climate change will have significant and market, and address the disproportionate risks growing effects on the housing sector. In order faced by low-income residents. Notably, while to lessen these effects, climate change will need taking such additional steps will be important to be a more central consideration in future to mitigating the effects of climate change, housing-related policy and planning decisions. they will come with trade-offs. Accordingly, The state can build off of its existing efforts by it will be important for the state to consider taking additional steps to increase the resilience these trade-offs, including ensuring that of new and existing homes and communities, impacts on housing supply and affordability are protect the health of the residential insurance appropriately considered as part of any actions. 10 LEGISLATIVE ANALYST’S OFFICE LEGISLATIVE ANALYST’S OFFICE 11 LAO Publications This report was prepared by Lourdes Morales, Helen Kerstein, and Brian Weatherford, and reviewed by Rachel Ehlers and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 12 LEGISLATIVE ANALYST’S OFFICE