A new report that examined the impact of extreme weather-related floods on housing sales in five Canadian communities over the past eight years concluded they pushed down prices of the dwellings by an average of 8.2 per cent.
The flooding also led to a 44.3 per cent reduction in the number of houses listed for sale over the same time period and a 19.8 per cent increase in the number of days it took to sell the houses.
The report, called Treading Water: Impact of Catastrophic Flooding on Canada’s Housing Market, was done by the Intact Centre on Climate Adaptation at the University of Waterloo.
“What we’re seeing is climate change in action and we’re experiencing storms of greater magnitude, greater frequency, more water coming down over shorter periods of time that is, in this case, impacting the residential housing market,” explains study co-author Blair Feltmate, who is head of the Intact Centre.
“What’s not really well understood in Canada right now is the need to act with urgency to put measures in place to limit the damage realized when extreme weather events occur, in this case it’s flooding.”
The report looked at the impact on housing prices in Grand Forks, B.C., Burlington, Toronto and Ottawa, Ont., and Gatineau, Que. Each community experienced catastrophic flooding between 2009 and 2020 that triggered upwards of $25 million in insurable claims.
For context, an 8.2 per cent impact on price would mean that a house that would sell at the Canadian average price of $713,500 would be sold for $654,993, reflecting a “flood discount” of $58,507 if the neighbourhood was subject to catastrophic flooding.
The impact of flooding was measured for periods of six months before and after flood events. Attribution of flood impacts was determined by comparing changes in nearby non-flooded control communities over identical timeframes.
The study also examined the impact of community-level flooding on mortgage arrears and deferrals in two Canadian cities for six months pre- and post-flooding. Results showed no change in homeowners’ ability to pay their mortgage, but a reduction in the appraised value of a house due to flooding would influence limits on lending by mortgage providers.
Feltmate says residential flooding is the most costly and pervasive impact of extreme weather and municipal planners should double-down on ensuring that communities are designed to limit the damage.
“Most of the discussion around climate change in Canada today has been on mitigating greenhouse gas emissions and using a carbon-tax or cap-and-trade system, all of which I’m in favour of. However, that’s occupied about 90 per cent of the discussion on climate change and only about 10 per cent or a small number has been devoted towards adaptation to climate change. We need to get far more aggressive on that file.”
Climate change is irreversible so planning decisions must recognize that fact and housing must be built accordingly, says Feltmate.
“To get beyond management by disaster, which is what we have in the country right now, we’ve really got to get aggressive on operationalizing adaptation best practices. We know exactly what to do in the country to mitigate flood risk at the level of the home and in reference to how to build new communities and reference to how to retrofit existing communities.”
Over the period 1983-2008, catastrophic insurable claims in Canada hovered around $250 to 450 million per year, whereas from 2009-2021 claims average $1.96 billion per year, with more than half of this escalation attributable to flooding. The average cost of a weather-induced flooded basement is $43,000 in Canada and property casualty claims are going up rapidly in the aftermath of extreme flooding over time.
Feltmate says the results of the report are important because they provide a measurement of the quantitative impact of the flooding on the housing market and why Canada should be working aggressively on mitigation measures.
With a real number of the hit that housing takes due to catastrophic flooding, it also enables the Intact Centre to develop programs and best practices guidelines.
“That’s all ammunition to say that we should be launching in Canada a national home flood protection education program for homeowners to give them direction on how they can better prepare their properties, around the outside of the property and in the basement itself, to lower the chances that when big storms hit they experience a flooded basement. It also gives us guidance to say we should be doing more work to develop and deploy the Climate Adaptation Home Rating Program (CAHRP) announced by the federal government in 2021.”
To mitigate flood risk, the Intact Centre report suggests municipalities, banks, insurers and real estate associations should distribute guidance to home owners on means to lower risk of basement flooding.
The report also recommends that the federal government link the CAHRP to EnerGuide home energy audits, that flood risk maps should be updated and publicly accessible, a home flood-risk scoring system should be adopted, all governments should commit to retaining and restoring natural infrastructure to limit current and future flood risk, and communities should act now to identify and protect areas at high risk of flooding.
For more related stories, check out our Climate Change and Construction feature below.
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