Florida has built 77,000 new homes in high-risk flood areas

Since 2019, the state of Florida has built more than 77,000 new properties in areas with a high risk of flooding. This is the most among all states, according to an analysis by climate-modeling firm First Street Foundation on behalf of the The Wall Street Journal.

The construction activity is likely to place the housing industry and its financing partners on a “collision course” with insurers, the outlet said. According to Morningstar DBRS, the cost of recovery from hurricanes Helene and Milton — storms that battered the Southeast in recent weeks — is expected to be between $40 billion and $75 billion. Homes built in high-risk flood zones contribute significantly to the total.

“Big payouts from natural disasters are driving insurers to raise rates and pull back on coverage,” the report stated. “Nationally, 290,000 new properties were built in high-risk flood areas from 2019 through 2023, almost one in five of the 1.6 million built in total in that period, the First Street analysis found.”

The construction figure in Florida far exceeds the next most prominent states. These include Texas (63,000 properties built in high-risk flood areas since 2019), California (21,000) and North Carolina (11,000).

Robert Gordon, a senior vice president at the American Property Casualty Insurance Association, told the Journal that mortgage lenders need to be more involved in these processes.

“The lenders […] are really in the best position to make sure there’s the right consideration of the long-term risk,” Gordon said. “A lot of times that’s not happening right now.”

Climate change is having a pronounced impact on the housing market, particularly when it comes to the accelerating risks of extreme weather events in areas that were already vulnerable to impact. Developers continue to build in these areas with few obvious signs of slowing, the story said.

“La Linda Estates is made up of 13 homes on Siesta Key near Sarasota, located steps from the Gulf of Mexico,” the report said. “They sell for just under $3 million. Listings say they are at high risk of flooding and wind damage, as well as high heat. The area was still cleaning up from Helene when Milton hit.”

A real estate agent overseeing the listings told the Journal that the properties suffered no major damage from recent storms, while the property developer told the outlet that “the homes have a concrete structure and conform to Florida’s design code.”

A report in August from Redfin showed that 2023 migration patterns weren’t interrupted by climate change. Instead, relocation trends appear to be driven by other factors unrelated to extreme weather risk.

But the dynamics are evolving, and the fallout from storms like Helene and Milton are playing havoc with the intersection between mortgage and insurance.

The challenges that higher costs place on carriers, regulators, lenders and consumers has been well documented this year. The acceleration of extreme weather events has only made things worse.