Property Tax and Home Insurance Rates Up as Global Temperatures Rise

Climate Change Impacts on Property Taxes and Home Insurance

Impact on Property Taxes:

• Reassessments: Natural disasters often lead to property reassessments, temporarily lowering the value of damaged properties and thus reducing property taxes. As stated in the Yahoo article, "natural disasters usually spur property reassessments, which temporarily lower the values of damaged properties while simultaneously reducing homeowners’ taxes."
• Tax Rate Increases: Municipalities might raise property tax rates to offset revenue losses from damaged properties and to fund recovery efforts. The article notes, "In areas that were not affected, tax rates were increased to help offset the loss in revenue,” and, "In Los Angeles, wildfires similarly create more expensive places with taxes to meet increased funding needs."
• Temporary Reductions & Refunds: Some areas provide temporary property tax reductions or refunds to homeowners who have experienced significant losses due to disasters. California, for instance, offers this relief if losses are at least $10,000 of the current market value of the property.
• Restoration of Value: Once rebuilt, a property’s pre-damaged value is typically restored.
• Variations in Laws: Property tax relief measures vary by location, with states like New York enacting specific climate change property tax relief bills. As the Yahoo article states, New York's "Climate Change Property Tax Relief bill... provides assessment relief to property owners within eligible municipalities."
• Higher Rates in Disaster-Prone Areas: "Living in a disaster-prone area can affect your property taxes in several ways. They may be assessed at a higher rate because of the cost of municipal services that include emergency response, building, and maintaining flood control infrastructure." This highlights an ongoing cost for homeowners in these regions.Impact on Home Insurance:

• Rising Premiums: Insurance premiums are rising, particularly in high-risk areas like flood zones and regions prone to hurricanes or wildfires. The Yahoo article quotes, "insurance premiums often rise ‘in areas with the highest risk of natural disasters such as hurricanes or wildfires."
• Policy Non-Renewals: Insurance companies are increasingly dropping coverage for homeowners in disaster-prone areas. The Axios article notes that the share of home insurance policies not renewed in the US ticked up to 1.06% in 2023 from 0.8% in 2018. In Los Angeles County, the increase was more significant, from 0.86% to 1.43%.
• Reduced Market Appeal: Properties in flood zones may see reduced market appeal unless they have mitigation measures in place and the cost of insurance rises as a result, impacting the entire real estate market.
• Concerns about Uninsurability: There is growing concern that some areas could become uninsurable entirely. The Axios piece includes the quote from the outgoing Senate Budget Committee chair, Sen. Sheldon Whitehouse, stating that rising home non-renewals "spells trouble for property values in climate-exposed communities across the country."
• Climate Risk as Tangible: As noted by Jeremy Porter, "Insurance prices are often the first way that 'climate risk becomes tangible to people'."
• Insurers' Perspective: It is also noted that an insurer trade group argues non-renewal data is "unsuitable" for understanding climate change impacts, since it doesn't explain the reasoning for company decisions.