Experts: Wildfire Risk Hurting CA Home Values, Increasing Insurance Costs
Wednesday, June 7, 2023
It is getting increasingly expensive to have a home on the edge of the woods in California, in terms of home value and insurance costs.
A new study from the nonprofit think tank Resources for the Future found home values in a fire hazard severity zone drop 4.3%, an average of $21,500, when sellers make the required disclosure.
Margaret Walls, director of the climate risks and resilience program for Resources for the Future and the report's co-author, said the market is driving the price drop.
"We want to know that people understand the risks when they choose where to buy a house," Walls explained. "And if they do know the risks, we would expect them to be reflected in the prices."
Walls pointed out that to mitigate the risk of a destructive wildfire, local governments can limit building in the urban/wildland interface. The state and federal governments can reduce the fuel load on public lands. Homeowners can remove brush and other flammable materials, make sure building materials are fire-resistant, and build in defensible space.
Two large insurance companies, State Farm and Allstate, just announced they are no longer writing new homeowner's policies in California, in large part due to the risk of wildfire. Walls noted the effects of climate change are taking a financial toll.
"If you're in a high-fire-risk area, it's already hard to get insurance," Walls stressed. "So now, two more companies are unavailable to you. So, you'll probably end up going to the FAIR plan, considered the insurance of last resort."
The FAIR plan is a state-run risk pool offering fire insurance in high-risk areas not served by traditional insurers.
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