In the coastal city of Punta Gorda, Florida, builders are putting the last licks of paint on a newly built luxury condo targeting retirees.
The project is one of many new homes under construction, just months after the city was struck by back-to-back hurricanes last autumn. It overlooks a web of canals downtown, where the seawall was badly damaged by an earlier hurricane a few years ago.
Even so, the development of new houses “just keeps coming and coming,” says Sean Seward, a local real estate agent who has been grappling with an ever-growing portfolio of new homes churned out by developers.
Demand has weakened since the storms, he admits, but Seward believes that inflation, increasing insurance and taxes are the main culprits for the market downturn — not the hurricanes.
“It’s beautiful, we’re close to the ocean,” he says. “If those interest rates would drop, we would [see a] stampede.”
The continued appeal of building or even ramping up new housing in areas at high risk of climate-related disasters — and where homes could face depreciating value on top of rising insurance costs as climate change intensifies — is far from unique to Punta Gorda.
Across the US, developers are building more in such places considered at high risk of climate-related disasters, including hurricanes, floods, wildfires and extreme heat, according to an FT analysis of data from CoreLogic, a property information services company, and the climate risk rating firm First Street.
In 2014, about 49 per cent of single-family homes built that year were in zip codes that First Street rated as being at “severe” or “extreme” risk of experiencing a climate disaster over the next 30 years. But the percentage of new homes built in such areas has grown gradually, reaching 57 per cent in 2023, before falling last year.
Overall, by the end of 2024, about 39 per cent of existing US single-family homes were in high-risk zip codes, according to property counts by CoreLogic — an increase of over 4mn homes in just over a decade.
It is a trend that highlights the twin challenges of adapting to a world with a more turbulent climate, while also addressing America’s severe housing shortage. Coastal communities in the US are already home to 40 per cent of the population. Even as severe weather events become more destructive, it remains profitable to sell new homes by the ocean or in warmer, riskier climes.
But this glut of development comes at a wider cost. Though new homes are usually more resilient than older ones, owing to more robust building codes, the surge of new housing in disaster-prone areas has already driven up costs for insurers — some of which have stopped selling homeowner insurance entirely in California and Florida because of worsening climate risk.
“The fundamental issue the insurance industry faces is the development of assets such as new suburbs, commercial areas or vacation resorts in high-risk areas,” says Tobias Grimm, chief climate scientist at Munich Re, the world’s largest reinsurance group.
“In the past, there may have been severe weather where there was no development,” Grimm adds. “Today, there may be a tourist centre there.”
The economic and human consequences were starkly illustrated in January when wildfires ravaged huge swaths of Los Angeles, revealing the extent to which new construction in the sprawling city had reached deeper into more flammable, wooded areas.
The fires killed nearly 30 and destroyed more than 12,000 structures, forcing around 180,000 residents to evacuate. Estimated losses from the fire for insurer State Farm alone were approximately $7.6bn.
Yet the risks are not just from wildfires and hurricanes. Intensifying convective storms, which include thunderstorms and tornadoes, are also wreaking havoc in the Midwest and other non-coastal swaths of the US. Last year, such storms were responsible for $57bn in losses in the US alone, according to Munich Re estimates.
In January, the reinsurance group estimated that hurricanes, fires and other disasters incurred around $320bn in losses last year — about a third more than the year prior.
“We’ve encouraged development in risky areas through misguided local, state and federal policies when it comes to where and what we build, how we finance and how we insure,” says Ben Keys, a professor at the Wharton School of the University of Pennsylvania, who has researched the impact of climate risk on insurance premiums.
“This is a set of long-term mistakes that’s going to take a long time to correct,” he says. “We have barely even started to throw a full set of co-ordinated policy responses at this problem.”
The growth of new housing in risky areas has followed the flow of people. Warm weather, relatively affordable housing and lower taxes have long prompted people, especially retirees, to move in droves to the southern stretch of the US known as the ‘Sunbelt.’
Texas and Florida in particular have attracted rising numbers, with large immigrant communities and relatively strong economic growth. After the start of the pandemic, an era of remote work only further propelled migration to the two states, which were home to many of the country’s fastest growing metropolitan areas in 2022 and 2023 — as well as areas with high fire and hurricane risk, and extreme heat.
In 2023, according to the real estate brokerage firm Redfin, the US counties with a high risk of wildfires saw over 60,000 more people move in than out — a trend mostly driven by migration to Texas. Counties with high flood risk also saw a net inflow of about 16,000 people that year, in part down to migration to Florida.
For some Florida residents, the threat of floods and storms — where decades of hurricanes have inured many locals to the risk — is not enough to make them relocate from a place they consider “paradise”.
Dawn and Leo Butler, who started a second-hand furniture and art boutique in Punta Gorda after moving to the area in 2021, had to shut their store for three months after hurricanes Milton and Helene last autumn, while they threw out ruined inventory and repaired flood damage. “We all have a certain degree of trauma, I’m not gonna lie,” says Dawn.
Even though traffic and business to the downtown area have not fully recovered, the couple plans to stay. “We’re not quitters,” Leo says. Punta Gorda — which has been affected by at least one hurricane every year since 2021 — needs just “one season” without a major storm, he adds. “People do have short-term memories for the most part.”
Hurricane risk is “just something you get used to”, says Tom Day, a real estate agent in Florida, who says that the subject rarely surfaces in conversations with prospective homebuyers. “Just being able to live the South Florida lifestyle and the great weather and all that, it outweighs whatever anxiety you might occasionally get from the storms.”
Dawn adds: “We all just need to get smarter, more prepared.”
In some areas of the US, cities are discouraging development in zones at high risk of climate-related damage. In 2016, the coastal city of Norfolk, Virginia, labelled certain areas as susceptible to flooding to push homebuilding inland. Boston and Charleston, South Carolina, have brought in similar reforms.
But so-called “climate-informed zoning” that deters development potentially threatens a major source of revenue: property taxes. Many local governments rely heavily on taxable properties to fund their annual budgets, like Charlotte County, which includes Punta Gorda.
In 2023, property taxes accounted for almost a third of the county’s revenue, according to its annual financial report.
“In a county like this with so much vacant land, we do need that tax base,” says Claire Jubb, assistant administrator of Charlotte County. It’s also “difficult to limit development when people have private property rights”, she adds, referring to the rights developers maintain to build on land once they have purchased it.
Meanwhile, upgrading existing housing stock to be more resilient is often “unachievable for a lot of people” because of affordability issues, says Jubb, as vulnerable areas tend to be lower income.
America’s nationwide housing shortage also gives a strong incentive to build. According to US government-backed mortgage giant Freddie Mac, there were 3.7mn fewer housing units than needed as of the third quarter of 2024.
Developers in Phoenix, Arizona, used housing shortages and affordability as an argument in a lawsuit filed in January against local officials who had imposed some limits on residential construction due to long-term concerns about groundwater supplies.
“We can’t escape the reality that we are in a huge housing crisis,” says Miyuki Hino, a professor at the University of North Carolina at Chapel Hill, who has researched management of floodplain development. “We’re not just going to develop in places that are perfectly safe from all hazards because there’s no such thing.”
Instead of limiting development, local governments can ensure housing is fit for a changing climate, she says. “We need to build with risk in mind.”
Mitigation efforts will look different depending on the risk, from impact-resistant windows for hurricanes to fire-resistant insulation, says Hino. State-level building codes can also enforce more resilient design and lower insurance costs and save money for a lot of people in the long term, she says, though developers have criticised such codes as driving up costs.
“You can build for the environment — it’s not an engineering issue,” says Craig Fugate, a consultant and former administrator of the Federal Emergency Management Agency, which provides disaster relief.
Instead, he says, the problem relates to incentives for developers looking to maximise their returns in the short term. Because risk mitigation costs more, developers will only do it if they’re “targeting a certain market and a certain affordability”, he says.
Local governments also know they can expect recovery help from the federal government — sometimes worth billions of dollars — in the event of a crisis, so are not held fully responsible “for where and how they build”, argues Fugate. “Until you reach the pain point where behaviour will change, it’s easier to kick the can down the road,” he says.
But the increasing frequency and intensity of climate disasters is prompting some homeowners to buy with the explicit goal of lowering their risk.
Chris Murray, 34, says he and his wife thought a lot about storm resiliency when looking for a home in a family-friendly neighbourhood. That is one reason why they bought a house at Babcock Ranch, an ambitious new community near Punta Gorda that has positioned itself as climate-resilient and environmentally sustainable.
The town, where there are plans to build 19,500 homes, is powered by a massive on-site solar farm and sits 30 feet above sea level. It also features lakes that can be artificially pumped and drained into wetlands ahead of storms to prevent flooding. Though the most expensive houses here cost over $1mn, the median price is roughly the same as elsewhere in Punta Gorda.
Last autumn, Babcock Ranch sheltered around 2,000 people during Hurricane Milton and never lost power.
The climate resiliency aspect was a “huge draw” for Murray, whose family members on the west coast of Florida have been flooded three times since 2022 due to successive hurricanes.
“To continue to build back the way things were is problematic because it’s going to happen again,” says Syd Kitson, founder of the Babcock Ranch, referring to sea-level rise and storm surges.
“We need to build in a way that works in concert with mother nature and not try to fight it,” says Kitson. “If you do, you’re just gonna lose.”
For others, investing in resiliency measures is a way to address storm risks without having to move.
“My house is a concrete block, I have impact windows,” says Lisa D’Esposito, who has petitioned to stop development in eastern Florida in part due to concerns about storm evacuation and overwhelmed infrastructure.
Besides, D’Esposito adds, “Where am I gonna go?”
Without co-ordinated federal, state and local policy, the housing market has been more or less left to its own devices to react to growing climate risks, say housing experts.
So far, demand nationwide still exceeds supply. And some high-risk places are still, for much of the year, “lovely places to live”, which have kept rents high and continue to draw residents and visitors, says Keys of the University of Pennsylvania.
But as insurance premiums continue to rise, buyers may be increasingly less willing to bear risks, says Keys.
Inventories are rising in some high-risk areas; in November, the number of home listings in the US rose to its highest level since 2020 because so many homes were sitting on the market, particularly in Texas and Florida, according to Redfin.
The stale listings were due to the high volume of construction in the two states, said the real estate brokerage, but also high insurance costs and destructive natural disasters.
In a worst-case scenario, homeowners could see their property values drop in a shock realignment, Keys says.
By 2055, the US housing market could see $1.47tn in net property losses due to insurance pressures and changing consumer demand linked to climate change, according to First Street.
Over this timeline, the climate is expected to only become more extreme and unstable as the world rapidly warms. According to the US National Oceanic and Atmospheric Administration, more than $100bn of coastal property is projected to disappear under the sea.
In an ideal world, prices would come down slowly to give people time to adjust, says Carolyn Kousky, who researches climate risk management at the Environmental Defense Fund, a non-profit environmental advocacy group. At the same time, “we don’t want to prop up home values in areas that are actually really risky”.
Policymakers will also have to address voluntary migration from disaster-prone areas and aid those without the resources to do so, says Kousky.
“We’re going to see people moving away from extreme heat, moving away from frequent storms,” she says. “It’s hard to live through those types of weather extremes over and over again.”
For Marianne Ferlazzo, the last straw was Hurricane Milton. The October storm was the fourth to hit her mobile home in Punta Gorda since 2021, when she and her husband bought it as a second home.
Milton had flooded the property so severely that her fridge was floating, she tells the FT, showing photos of the wreckage. When the water receded, it left a brown sludge in its wake. Two months later, the 67-year-old sold her home and isn’t planning to buy another one.
“I’m always amazed by the optimism of people who build back,” says Ferlazzo. But there “comes a point where you can’t do that any more”.
Additional data analysis by CoreLogic’s Tanya Havlicek and BuildZoom’s Brian Markley
Climate Capital
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