Pay Dirt: Climate Change and House Buying

[minoanmiss]

Dear Pay Dirt,

I recently came into a delightful, low six-figure windfall. I’ve spent my entire adult life (I’m 38) renting in ultra-high-cost cities. I finally have a chance to make a down payment on a house, which I barely felt comfortable dreaming about before. The problem? My brother is a climate change-oriented scientist, and when he heard of my plan to use the money for a house, his reaction was an emphatic “DON’T DO IT!”

I live in a city that, like many parts of the world, is already being affected by climate change and will certainly continue to worsen. My brother believes my city will be unlivable and my house worthless in just a few years. Meanwhile, I anticipate needing to live in this city for another five to 10 years due to my career, and I don’t want to be a renter any longer! I’m so tired of the underlying instability and the gross feeling of paying off someone else’s mortgage (I rent a house). How much should I really consider climate change in terms of investing in real estate, specifically in an area that will definitely be affected down the line?

—Global Warning

Dear Global Warning,

My initial response when reading your brother’s reaction to your purchasing a home was to advise you to take it with a grain of salt. But that’s what many have been doing to scientists for years. If your brother is a climate change scientist, he probably knows what he’s talking about. I would consider what he is saying and weigh it seriously.

About 13 years ago, there was a television program that aired on ABC called Earth 2100. It was released in 2009 and dove into what life could hypothetically look like if climate change wasn’t taken seriously. I’m sad that some of the scenarios depicted in the program have already come true. The film predicted that Las Vegas would run dry by 2030. It’s 2022, and Lake Mead (which supplies much of Las Vegas’ water supply) is the lowest it’s ever been. It’s so low that random dead bodies potentially linked to organized crime are now rising to the surface. Las Vegas is currently asking its residents to limit their water use, but it remains to be seen if the city’s efforts will be successful. The film also depicted a worldwide pandemic that sounds very similar to COVID-19. This fictional pandemic damaged the world’s trade. I could go on, but that’s neither here nor there. Scientists have known about these threats all along. Whether we have chosen to listen is a different story.

My answer is to hear what your brother has to say. If the city hasn’t addressed this issue, and there is reason to believe they are in a climate change crisis, it might not be a wise move to purchase the property you originally intended to. If your city is committed to making improvements, and you feel confident in these changes, then I would encourage you to go ahead. I hope this makes sense.

Comments

[xenacryst]

I feel like this barely scratches the surface. LW is asking about (and kinda realizes it, but only kinda) an investment. Owning a home, being able to sell it, and creating generational wealth is one of the big ways that families have moved up the social classes. So it makes sense to look at ways that that investment is at risk or protected, and what the city is doing about climate change is ... one of those things. What city it is, where in the city LW can buy, the local politics, the regional and state work on climate change - those also play into it. Purely from a climate change perspective. And also, humanity is notoriously good at finding pig headed ways to keep living in a place that is, by all rational standards, unlivable - does LW want to buy into that pig headedness and bank on it, or not? Do they want to play the game of sell the place and make off with the profits just before the brink of collapse to some poor sucker who's suddenly going to have a swamp or a crumbling sea cliff? Honest question. People will do that, and some will be able to live with themselves and some wouldn't.

I would suggest seriously thinking about, and learning a lot more about socially and environmentally conscious real estate, if that's the direction LW wants to go. And also thinking about whether real estate is the best way to use that windfall in the long term, or whether something else makes sense (or, for that matter, real estate elsewhere that is less on the edge).

[syderia]

Riffing off your last paragraph, there's a very real question about how the LW would use the money if not to buy a house.
If renting for five years consumes the money, buying could be attractive even in a scenario where the house is lost in five years.
(There's also other possibilities for investment, but they all have their share of risk.)

[hashiveinu]

+1

[castiron]

Where does LW's brother think would be an okay place to buy real estate? Is it a place with enough of a rental market that LW could buy a house there and rent it out for 5-10 years, then move in when their career lets them? That absolutely has its share of stress and hassle and expense, but could be an option for investing this money in a place that could be LW's home when they're 45-50.

[jadelennox]

It's hard to know what this means without having a sense of the city. (I'm mostly assuming united states in my examples.)

• Is LW considering Miami? Then fuck no, they shouldn't buy.
• Are they considering Philly? Then I would really expect Brother to pony up some evidence.
• Are they considering the drying parts of the U.S. southwest? Meh, it depends on the place, and what LW is worried about, and their living and investment goals.
• Are they considering someplace in increased fire risk (say, most of California) or flood/storm risk (the Caribbean, much of the Gulf of Mexico)? Ugh, that's where it gets messy. They probably shouldn't buy, and if they do, they absolutely shouldn't believe a word that a developer or realtor says about fire or flood safety. But at that point you're ruling out half of the populated areas in the U.S., so I don't know.

[melannen]

If you believe your brother, don't buy, and also, look into career options elsewhere. It won't be fun to live there even as a renter if things get that bad.

That said, there are probably places (and houses) in the city that are safer investments than others. Don't buy in a flood zone (either river or tidal) or in an area that will be isolated by a flood. Don't buy in a high fire risk area. Buy a house that's designed for the climate it's built in, even if the temperature goes way up and the A/C goes way down, or if the storms and snows get way worse. Buy in an area with lots of mature trees and green. Look at the water situation of the specific neighborhood and think about worst-case scenarios for it. Ask what disaster insurance looks like for the house. If you buy a resilient house in the only neighborhood that still has houses standing, it'll probably be a pretty good investment anyway.

Also, a house doesn't have to be a long-term investment. If you're going to be there ten years, and the city will be unlivable in fifteen, you will probably still be making a profit on it if you sell after ten, because real estate markets are not reality-based. So if you want to buy just to Not Rent, and not to get a Forever Home, go for it (and make plans to get out as soon as you can.)