California has become the first US state where property owners in fire-prone areas must warn buyers about the risks of wildfires and explain the measures taken to reduce them. This is reported by UNN with reference to Bloomberg.
Details
As climate change often causes natural disasters, states across the US require home sellers to disclose information about risks such as floods. But in California, such attention is paid to risks associated with wildfires.
Now, sellers of older homes in high-risk areas must disclose to potential buyers not only the home's vulnerability to fire, but also what they have done to address those vulnerabilities.
How this affects housing costs
"When you require disclosure, you see an impact on housing prices," said Margaret Walls, a senior fellow at Resources for the Future, a non-profit research institute in Washington, D.C.
Research by Walls and other economists has shown that this leads to lower housing prices, but at the same time, buyers are willing to pay more for safer properties. In theory, this should motivate sellers to monitor the safety of their properties in case of natural disasters.
What exactly is the new rule?
The new California rule requires sellers to list specific features that threaten a home, including combustible roofs, open vents, single-pane windows, and vegetation within 1.5 meters of the building. Property disclosures that show a seller has addressed such threats can help buyers when they apply for homeowners insurance, according to experts.
In the case of a sale, everything will depend on the possibility of insuring the home, as insurance companies do not want to risk insuring homes in areas where fires and floods are more frequent.
"Insurance companies in very high-hazard zones will ask homeowners to do all of this," said Jennifer Valdez, a fire safety inspector for the Monterey Fire Department in California, where 40% of the city is subject to wildfire disclosure rules.
Seren Taylor, vice president of the Personal Insurance Federation of California, a lobbying group for the state's major insurance companies, said that in high-risk areas, insurers would prioritize homes with reduced wildfire threats.
California Housing Stock
Almost 91% of homes in California were built before 2010, and 2 million residential buildings are located in high-risk wildfire areas. Annually, about 3%-4% of single-family homes enter the market.
Does climate disclosure work?
The question of how effective climate risk disclosures are remains open. It is unknown whether they actually encourage owners to strengthen their homes in advance and whether buyers pay enough attention to these warnings. In California, for example, home sellers are required to inform not only about fire hazards, but also about other risks - from old plumbing systems and lead paint contamination to the proximity of gas pipelines or the presence of registered criminals. As Matthew Kahn, a professor of economics at the University of Southern California, notes, an excess of information can have the opposite effect: people simply stop taking it seriously.