Americans are moving to areas with higher climate risk. Over the past 20 years, counties and neighborhoods at high risk of extreme heat, droughts, wildfires, and floods have seen notably faster population growth than low-risk locations. These migration patterns reflect a variety of reasons—including the appeal of oceans and mountains and the desire to escape expensive housing markets. The pandemic accelerated these trends, with more people moving away from high-cost, relatively low-risk cities like New York and San Francisco to cheaper but higher-risk areas, like suburban Phoenix and coastal Florida. This can make it hard to disentangle the role of climate risk in households’ location choices.

Official statistics often focus on the aggregate economic costs of natural disasters, but physical damage to homes and neighborhoods is becoming increasingly salient to U.S. households. The Federal Reserve Board’s Survey of Household Economics and Decisionmaking finds that 16% of adults reported some disruption from a natural disaster in the previous 12 months, with property damage the most cited category of harm.

Households can reduce their physical and financial exposure to climate risk in a variety of ways, such as moving to safer locations, renovating their homes, or purchasing disaster insurance. But most Americans are not pursuing these strategies—at least, not yet. For policymakers, this raises the question: how can they encourage households, communities, and the real estate industry to reduce Americans’ collective exposure to climate risk so communities do not just survive, but thrive?

The goal of this research brief is to illustrate the wide range of policy tools that can nudge people to lower-risk housing choices. We focus on four distinct policy domains: mortgage and insurance markets, land use and development, construction quality, and local infrastructure resilience.

Within each policy domain, there are opportunities for federal, state, and local governments, as well as private sector firms and civic groups. The federal government plays a primary role in regulating mortgage markets and providing infrastructure finance, while state governments regulate property insurance markets, and local governments oversee land use. When considering new policy tools, determining how to allocate responsibility for funding, implementation, and enforcement across federal, state, and local agencies is a complicated and important question. Private-sector developers, contractors, real estate agents, and landlords work within the rules created by governments to build, retrofit, sell, and rent homes—responding in predictable ways to financial incentives and constraints.

Read the full article about housing exposure to climate risks by Julia Gill and Jenny Schuetz at Brookings.