How the Continued Effects of Climate Change May Influence Property Values

Climate change predictions show continued warming for the planet. The latest projections suggest that even with current efforts to combat global warming, the earth could see an average temperature increase of 2 degrees C (3.6 degrees F) by 2055. These forecasts go against the 2015 Paris Agreement, which sought to keep global temperature below 1.5 degrees C (2.7 degrees F) of warming on average.

Efforts are increasing to adopt cleaner energies to limit the impact of global warming. The world has expanded global renewable energy capacity to more than 440 gigawatts (GW) in recent years. Home and business owners can be part of the switch to renewables by installing solar panels to power buildings. There are also unique applications for solar energy, such as powering specific systems like HVAC units or pest control systems that would otherwise require energy from carbon-emitting sources.

At the same time, property owners need to balance their investment in renewables with preparations to deal with the irreversible effects of global warming. These preparations may involve adding climate-resilient features and adjusting property value expectations. Value projections should account not only for sustainable building design, but also for the impacts of climate change on the quality of living in a specific area.

The real effects of climate change

Climate change is often measured by increases in the global average temperature, but those few degrees of warming are not the effects that people are likely to feel directly. Instead, it’s the broader implications for regional weather and environmental health that will impact our daily lives as temperatures increase. Here are some notable effects of climate change that are already happening and may continue to worsen in the future:

• ​Less predictable weather patterns impact seasonal preparations for agriculture and fisheries.
• ​Wider temperature swings affect natural ecosystems and livability in some regions. Extreme temperatures also strain the power grid as people need more energy to heat or cool their homes.
• ​Rising sea levels impact the livability of coastal and low-lying areas. Some areas will become flooded, and others could still be rendered uninhabitable by erosion, salt water intrusion, and other side effects of rising sea levels.
• ​More violent storms lead to more extensive property damage and risk to human life, straining current disaster preparedness and response systems.
• ​Decreased biodiversity affects the natural world and could permanently alter agriculture in some regions.
• ​Increasingly severe wildfires impact ecosystems, as well as air and water quality. They can also significantly damage and destroy property.

In general, most buildings are constructed to withstand the current and historical climate conditions in places they are built. With the effects of climate change, however, these buildings and their surrounding infrastructure may become poorly suited to the new realities. On the other hand, buildings that are able to withstand these climate change challenges could be in higher demand in the future as people look for more resilient places to live and operate businesses.

Negative impacts on property values

Climate change presents certain direct threats to property values, such as increased flooding in coastal areas, but other changes that are less dramatic can still impact the quality of life and therefore erode property values in other areas. Examples are extreme weather, scarcity of resources, higher energy costs, and worsening pollution.

Here is a closer look at how such factors affect property values.

Increased risk of extreme weather

Extreme weather causes billions of dollars in property damage every year, and the figures are rising with global warming. As of 2024, the previous five years saw an average of 20 disasters exceeding $1 billion in damages within the United States. For comparison, the average in the 1980s was just three such billion-dollar disasters, and the number has increased every decade since then.

Climate change increases the severity of storms. Warmer temperatures increase the wind speed and speed up water evaporation. This leads to generally more powerful hurricanes, thunderstorms, and rainfall. Meanwhile, shifting weather patterns can create dry, windy conditions that lead to larger wildfires in other areas.

In some cases, multiple climate change-related conditions combine to cause even more damage. For example, not only are hurricanes fed by warmer temperatures and increased evaporation, but higher sea levels lead to more severe storm surges, which cause worse coastal flooding and more erosion.

If extreme weather risks are common, an area could become less desirable to live in, lowering property values. In addition to these risks, higher insurance costs or the need for insurance riders for hurricanes, wildfires, or floods could also impact long-term property value.

Rising costs of living

The increased risk of climate-related disasters translates into higher insurance premiums in some areas. Insurers have already increased property insurance rates in California due to rising wildfire risks and in Florida and Louisiana as high-category hurricanes become more common.

Meanwhile, extreme temperature swings lead to higher energy demands for heating or cooling. Increased demand can cause utility prices to rise, making homeowners pay more on their bills. The same phenomenon drives water prices up during droughts. The result is a generally higher cost of living, which can price some buyers out of the real estate market and compel sellers to lower prices.

Environmental degradation

Even slight changes in temperature or precipitation patterns can alter an ecosystem, and climate change can produce some dramatic effects over time. For example, the spring thaw now comes earlier in the year for many regions, and though the growing season becomes longer, summers become hotter and drier. If plants and animals cannot adapt quickly to these changes, then they become less abundant or disappear completely from areas where they once thrived.

This loss of biodiversity can impact economic activities like fishing and farming. It can also disrupt natural ecological cycles that help keep our water and air cleaner. A damaged ecosystem and more pollution makes any place less desirable to live in, and lower desirability creates a negative impact on property values.

Positive impacts on property values

Climate change is such a complicated issue because the effects are not the same everywhere you go. While some areas suffer more natural disasters due to climate change, other areas might become more desirable to live in if they don’t experience the same likelihood of extremes.

The realities of shifting weather patterns and increasing demand for eco-friendly design also mean that owners can preserve or even increase property values by making certain upgrades with sustainability in mind. Here is a closer look at how property owners can take advantage of climate resilience and other potential changes to boost property value in the face of climate change.

Location in temperate climate zones

Climate risks are hurting the desire for property in once-popular coastal areas, such as in Florida. A survey by Redfin found that 62% of home buyers were hesitant to move to an area because of its high risk of climate-related disasters. Meanwhile, 40% of recent buyers and sellers were motivated, at least in part, by climate risk.

As people move away from tropical areas prone to hurricanes or dry regions at risk for wildfires, demand for property in low-risk, temperate regions could continue to increase and raise property values in those places.

Access to water and other resources

Water access is already a mounting casualty of climate change. Evaporation and droughts are more common but are only part of the story. Floods are also an issue because they can contaminate water supplies, leaving people without safe water to drink.

There is evidence that access to high-quality water supplies positively impacts property value. Property investors can look for land with reliable water supplies with low contamination risk to enjoy the chance of future demand for such resources.

Reliable access to clean energy is another resource that buyers may value more in the future. For example, an electrical grid bolstered by utility-scale solar arrays or wind farms has a diversified portfolio of energy sources and lower emissions compared to a traditional fossil fuel-powered grid. Installing solar panels on a property itself may further increase value to potential buyers as well.

Green building and renewable energy

Energy efficiency can increase property value. According to Energy Star, certified energy-efficient homes can earn a 2-8% premium over other properties. Meanwhile, a survey of 1,000 Americans found that they were willing to pay an average of $50,000 more for a home with eco-friendly and energy-efficient features.

This trend extends to business, with many customers wanting to support companies with strong sustainability practices. Many improvements can make your property more efficient and climate resilient. These could include installing rooftop solar, improving windows or insulation, adding water recycling systems, or opting for other forms of clean energy.

Resilient infrastructure

Climate resilient infrastructure can continue to function normally in the face of challenges due to climate change. Examples might include flood defenses in coastal areas, transit systems or power grids that can withstand natural disasters, and effective water management systems.

Self-reliant and sustainably built cities are better equipped to adapt with climate change, which helps preserve the value of properties within them. This leads to a better return on investment for purchases within a sustainable community.

While climate change presents many challenges to home and business owners, it also offers opportunities for those willing to make improvements to create more sustainable, resilient homes and businesses.