Climate Risks Could Erase $1.47T in Property Value by 2055

The real estate sector is facing significant challenges due to climate change, with projections indicating that property values could decline by a staggering $1.47 trillion by 2055. This article explores the key factors contributing to this loss and discusses potential policy interventions and market-driven adaptations to mitigate the impact.



Factors Contributing to Property Value Loss

1. Rising home insurance costs: As climate change increases the frequency and severity of natural disasters, home insurance premiums are expected to rise by an average of 29.4% nationwide by 2055. This increase is driven by factors such as more intense and frequent weather events, sea-level rise, and shifting weather patterns (First Street Foundation, 2025).
2. Climate-related migration: Climate change is expected to cause 55 million Americans to relocate within the U.S. over the next 30 years, with more than 5 million people moving this year alone. This migration will be driven by factors such as extreme heat, wildfires, and flooding (First Street Foundation, 2025).
3. Property value depreciation: As climate risks become more salient and severe, property values in vulnerable areas are expected to decline. By 2055, some counties in California, Florida, and Texas may experience net declines of 10% to 40% in their property values (First Street Foundation, 2025).



Regional Disparities and Vulnerability

Regional disparities in climate risk and property value changes can significantly influence the overall economic impact, with certain areas being more vulnerable to substantial losses. According to a report by the First Street Foundation, climate change will wipe out about $1.47 trillion in U.S. home values over the next three decades, with some regions experiencing more significant losses than others (First Street Foundation, 2025).

The three biggest Sun Belt states—California, Florida, and Texas—have taken on more than 40% of the country's $2.8 billion in natural disaster costs since 1980. By 2055, these states are expected to experience substantial increases in insurance premiums, with Miami, Jacksonville, Tampa, and New Orleans seeing net declines of 10% to 40% in their property values (First Street Foundation, 2025).

The report also highlights that areas with weaker economies, such as the Rust Belt, could face more significant property value losses due to climate change. In contrast, markets like Los Angeles, Miami, and Houston, which face strong climate hazards, could continue to grow due to their amenities (First Street Foundation, 2025).

Policy Interventions and Market-Driven Adaptations

To mitigate the projected property value losses due to climate change, several policy interventions and market-driven adaptations can be implemented. These measures can help reduce the impact of climate risks on real estate assets and preserve their value in the long term.

1. Improved Risk Communication and Awareness: Enhance communication of flood risk information to ensure it is appropriately reflected in market outcomes (PNAS, 2021). Increase public awareness of climate risks to encourage more informed decision-making by buyers and investors (First Street Foundation, 2025).
2. Climate Resilient Infrastructure and Building Standards: Invest in climate-resilient infrastructure, such as drainage systems, utility networks, and emergency services, to improve local communities' ability to withstand climate events (LEO Impact Capital, 2025). Implement building standards and codes that promote climate resilience, such as elevated structures, flood barriers, and heat-resistant materials (ULI & Heitman, 2024).
3. Green Finance and Incentives: Encourage green finance initiatives, such as green bonds and sustainability-linked loans, to fund climate adaptation projects and promote sustainable development (UNEP FI, 2025). Offer incentives, such as tax credits or rebates, for property owners who invest in climate-resilient improvements and energy-efficient upgrades (McKinsey, 2021).
4. Land Use Planning and Zoning: Implement land use planning and zoning policies that discourage development in high-risk areas and encourage development in safer locations (First Street Foundation, 2025). Promote transit-oriented development and mixed-use projects to reduce the carbon footprint and improve resilience (ULI & Heitman, 2024).
5. Insurance and Risk Transfer: Encourage the use of insurance products, such as parametric insurance, to transfer climate risks and protect property owners and investors (Insurance Institute for Business & Home Safety, 2025). Promote public-private partnerships to develop innovative risk transfer solutions, such as catastrophe bonds and other financial instruments (Swiss Re, 2021).

The effectiveness of these measures in the long term depends on their timely implementation, adequate funding, and strong public-private collaboration. By combining policy interventions and market-driven adaptations, it is possible to mitigate the projected property value losses and build more resilient real estate markets. However, it is crucial to address climate risks proactively and adaptively, as the impacts of climate change are expected to become more severe and frequent over time.