Issue 103 – Climate Change is Causing a Flood of Real Estate Problems

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Issue 103 – Climate Change is Causing a Flood of Real Estate Problems

November 1, 2024

It seems just about every week, we receive an update on a hurricane, flood, or tornado making its presence known around the globe and highlighting the loss of homes — and more importantly, loss of life. The damage to structures and how the natural disaster is stopping bustling cities in their tracks is always in the news. Climate change is indeed taking its toll, and not just exclusively on coastal regions. In addition to impacting lives physically, it also impacts them financially through diminished market value and increased insurance costs. To wit: Climate change is becoming the most significant impact on real estate value.

Just last month, we witnessed massive destruction in Asheville, North Carolina, where storm seasons had not typically been a concern. Sadly, that storm was followed by Hurricane Milton, which targeted the Tampa, Florida, area. In October 2024, Tampa Mayor Jane Castor warned residents in evacuation zones that they would die if they stayed behind. We now brace ourselves against extremely devastating weather events from May through November. Many New Yorkers live in fear of another Hurricane Sandy.

One of the by-products of these increasingly intense hurricanes is how homeowners or would-be buyers will be impacted in terms of homeowner’s insurance coverage, without which one cannot secure a mortgage. Moreover, the city’s flood maps are being rewritten, further increasing insurance premiums for many owners; some may even be dropped by their current insurance provider, resulting in properties in highly desirable neighborhoods being unable to sell — or to sell well.

According to The Atlantic, “Across the United States, homeowner’s insurance is getting more expensive. In storm-battered Florida and coastal Louisiana, they’ve gone up a lot; the same is true for scorched Colorado and California. But even Ohio and Wisconsin have seen rate hikes greater than 15 percent in a single year.” Clearly, everyone is affected by this, not just in hurricane-prone areas. And if buyers can’t secure homeowner’s insurance or premiums are prohibitively expensive, they won’t be able to take on a mortgage.

The Economist details this trend as well, explaining, “Private insurers burned by huge payouts after disasters are abandoning risky markets. Homeowners are turning to state-backed insurers as a last resort, which offer less coverage for a higher price. When these plans cannot cover claims, taxpayers are often left with the bill. As climate change continues, the uninsurable parts of America will only grow.” Thus, this outcome becomes the most significant divide in value nationwide and globally.

Yale Connections concurs in a recent story explaining that as storms surge, so do insurance premiums. “Climate futurist Alex Steffen has described the climate change–worsened real estate bubble this way: ‘As awareness of risk grows, the financial value of risky places drops. Where meeting that risk is more expensive than decision-makers think a place is worth, it simply won’t be defended. It will be unofficially abandoned. That will then create more problems. Bonds for big projects, loans and mortgages, business investment, insurance, talented workers — all will grow scarcer. Then, value will crash, a phenomenon I call the Brittleness Bubble.’” This scenario is not something that can be repaired easily.

That publication also cites a 2023 study in the peer-reviewed journal Nature Climate Change that has drawn attention to a massive real estate bubble in the U.S. — property overvalued by $121 to $237 billion because of current flood risk. It warns, “Declines in property values due to climate risk are unlikely to be temporary, particularly for properties affected by sea-level rise … local governments may need to adapt their fiscal structure to continue to provide essential public goods and services.”

According to a 2024 report from Realtor.com, almost 44.8% of homes in the United States, with a total value nearing $22.0 trillion, confront at least one type of severe or extreme climate risk from either flood, wind, wildfire, heat, or air quality.”

It appears FEMA [Federal Emergency Management Agency] is underfunded, understaffed, and has minimal authority. Many are calling on officials to revamp and increase funds to the organization — and create a National Safety Board.

We are no strangers to the impact of hurricane season in NYC. “New Yorkers face thousands of dollars of hidden costs to consider when purchasing a home in a flood-prone area from flood insurance to major construction projects,” a recent story in The New York Times reported. “Across the five boroughs, over $3.6 billion worth of one- to three-family homes sold last year were likely to flood before the end of a 30-year mortgage, according to a new report from Rebuild by Design, a climate resiliency nonprofit. That represents roughly one out of every five such homes sold in New York City in 2023,” the article continued.

It then quoted two other sources: “Flood insurance premiums can range from $350 to $10,000 a year, depending on the size and type of home, policy specifics and the flood history and zone of the area,” said Monroe Shannon, a program manager for resiliency and insurance at Neighborhood Housing Services of Brooklyn, a nonprofit group.

“FEMA mapping does not account for stormwater. There’s a misperception that if you’re not in one of these mapped flood zones, then you don’t need flood insurance, and that’s not the case,” stated a climate expert.

Despite all the perils involved with buying in areas in flood zones and reports of massive moves inland, The New York Times separately reported that some intrepid New Yorkers are throwing caution to the wind — and that New Yorkers continue to spend billions on houses in flood-prone areas despite growing awareness of the effects of climate change.

One such intrepid New Yorker interviewed in the article said, “If you want a house with a good view, close to the water, you know what the deal is.”

Regardless of one’s comfort with risk, this problem will only grow, so ignoring it is foolhardy. Going forward, the real estate community must be fully aware of the impact of climate change and bring their clients up to speed. If those needing insurance can’t get it or afford it, that will eventually impact sales because of the inability to secure a mortgage.

Some experts feel sellers must disclose flood risks when selling their property. In addition, they say insurance rates should be based on the market. In the future, more and more people will need to buy coverage, but those who can’t handle increasing rates might consider canceling flood insurance to their detriment. In fact, Zillow just announced it will include climate risk data for each listing — signaling a definite value creation predicated on mitigating risk.

For now, the real estate community must do its due diligence to best advise clients about potential risk versus reward, allowing one to make sound investment choices and get the most value from their property ownership. While the 2024 hurricane season has passed, extreme storms are the new normal, and we all need to remain aware of climate change and its impact, especially as we move forward.

Issue 124 – “The Freeze Heard Across New York”

August 1, 2026

Even those of us who spend most of our days in the world of sales rather than rentals cannot ignore the conversation dominating New York real estate this summer: the city’s newly approved two-year rent freeze on nearly one million rent-stabilized apartments. The decision, fulfilling one of Mayor Zohran Mamdani’s signature campaign promises, has ignited passionate debate from tenants, landlords, developers, and economists alike.

As Time Magazine recently reported, “’Freeze the rent’ became the definitive rallying cry of Mamdani’s affordability-focused mayoral campaign for New York City, one of the most expensive cities in the world. Despite skepticism that he could actually pull it off, a board he controls made good on his pledge just six months into his term.”

In a 7-1 vote this June, the Rent Guidelines Board approved a rent freeze on one- and two-year leases on rent-stabilized apartments — which, according to the Time article, “make up about 27% of overall NYC housing stock.”

For tenants living in stabilized housing, the appeal is obvious. In a city where affordability persists as one of the defining challenges of our time, freezing rents offers immediate relief and greater certainty in an increasingly pricey environment.

Yet, as is so often the case in New York real estate, the story is more nuanced than the headlines suggest.

The New York Post presented the other side of the story, explaining that building owners are grappling with rising operating costs: insurance premiums, labor expenses, property taxes, and capital improvements have all increased substantially.

Critics argue that while the freeze protects tenants in the short term, rising expenses without corresponding rent increases may make it harder, particularly for smaller landlords, to maintain and improve aging buildings.

Rent freezes are not unprecedented. Previous freezes have provided short-term relief for tenants while renewing debates over maintenance, capital improvements, and investment in aging housing stock.

The broader issue is supply. Economists across the political spectrum generally agree that New York’s housing shortage cannot be solved through rent regulation alone. As Vox reported, demand continues to outpace inventory, making new housing production, zoning reform, and development incentives essential.

Although the freeze does not directly affect market-rate apartments, landlords with both stabilized and market-rate units may feel pressure to offset constrained revenue by increasing free-market rents where legally permissible. New York State’s 2024 Good Cause Eviction law, however, limits annual rent increases to the lesser of 10% or the local inflation index.

For buyers, particularly investors considering multifamily assets, the freeze introduces additional uncertainty around future income growth. Buildings with significant rent-stabilized components may trade at lower valuations because purchasers will have to underwrite higher operating costs against stagnant revenue.

For sellers, especially owners of mixed-use or rent-stabilized assets, the challenge becomes demonstrating long-term upside. We may see some owners delay sales, while others bring assets to market sooner out of concern that future regulation could become even more restrictive.

From a residential perspective, one unintended consequence may be increased demand for condominiums and co-ops. When rental policy becomes less predictable, many affluent New Yorkers begin to view ownership as a more stable, controllable alternative.

Foreign investors are unlikely to retreat from purchasing trophy condominiums or prime co-ops, which operate outside the stabilized system. In fact, increased regulation in the rental market could strengthen the appeal of luxury ownership as a store of wealth.

The greater consequence will be on institutional and international investors exploring multifamily acquisitions, where limits on revenue growth coupled with rising operating expenses may prompt some capital to pause, reprice risk, or seek opportunities elsewhere.

A major concern today is that the economics are more challenging than they were a decade ago. The Rent Guidelines Board’s own data shows that operating expenses continue to rise, with insurance costs increasing by more than 10% and overall operating costs rising by more than 5%. The effects will likely be felt most acutely in neighborhoods with large concentrations of rent-stabilized housing, while luxury condominium markets such as Tribeca, SoHo, and much of the West Village, where condominium and market-rate inventory dominate, will experience relatively little direct change.

New York remains one of the most desirable real estate markets in the world. The larger question is whether future housing policy can strike the right balance between protecting tenants and preserving the incentives necessary to maintain and improve the city’s housing stock. Recent reporting suggests that landlords and tenants alike are increasingly worried about the long-term sustainability of that balance.

Perhaps most interesting is what this moment reveals about New York itself. Housing has become far more than an economic issue—it has become a cultural and political one. The debate over rent stabilization reflects larger questions about who gets to stay in the city, who can afford to enter it, and what balance should exist between protecting existing residents and encouraging future investment.

As someone whose business focuses primarily on the sales market, I often remind clients that New York real estate rarely moves in straight lines. Policy shifts ripple through every corner of the market, shaping rental demand, buyer behavior, and investment strategy alike.

Yet what doesn’t change is New York’s capacity to reinvent itself. The conversation around housing will evolve, administrations will change, and policies will come and go. But the city’s enduring challenge — and opportunity — will always be finding ways to be both livable and aspirational.