Fannie Mae CEO: Beyoncé is right. Climate change has hit the housing market and homeowners are unprepared
Two names you never expect to hear together: Beyoncé and Fannie Mae. But in the song “YA YA” from her new album, “Cowboy Carter,” she sounds an increasingly louder alarm in communities across America. “The wildfire that destroyed his/Fannie Mae house will not be covered by insurance.”
We appreciate Beyoncé raising this issue. Honestly, Fannie Mae would help this man. While we don’t make home loans or collect payments (we buy and repay mortgages), we do offer payment assistance and other help if disaster strikes your homeowner. we.
However, Beyoncé has a point: Estimate 1 in 13 households in the US are uninsured And two-thirds are underinsured. This means millions of families are left unprotected or unprotected from growing climate-related risks, such as wildfires and other disasters.
For housing, climate change is an issue today. Every year since 2021, the United States has averaged 22 natural disasters caused damage of over 1 billion USD. Last year brought 28. In the 1980s, the average was three per year. Forecasters have predicted This year’s Atlantic hurricane season will be “extremely active” with the most storms since 1995.
Disasters are happening in every state, including inland flooding in areas like Vermont and Las Vegas, which are not typically considered high risk. Low-income communities are the most vulnerable, with housing often less resilient and located in areas more vulnerable to natural disasters. In the long term, rising temperatures, increased flooding, water scarcity and more wildfires could reduce homeowners’ property values and even cause climate migration as people escape. away from high-risk areas.
Because Fannie Mae insures approximately one-fourth of its home mortgages plus rental housing loans, we are closely assessing the financial risks to both the company and the mortgage industry, e.g. such as the potential impact on mortgage delinquencies, property values and affordability, availability, and reliability of insurance.
But climate change is a growing risk that requires a collective response, starting with three urgent priorities.
Raise consumer awareness and action
Homeowners are a home’s first line of defense, but do they realize it?
ONE Fannie Mae survey found that nearly 50% of consumers are worried about climate impacts on their homes, especially from extreme heat, strong winds from tornadoes and hurricanes, drought, wildfires and floods. And 66% of insured homeowners say weather-related events and damages have affected their insurance premiums.
Other Fannie Mae survey found only 37% of people living in FEMA high-risk flood zones and 5% in moderate-risk zones knew about their flood risk. However, 51% say a home’s flood history is important to their home-buying decision. Together these numbers underscore the importance of the industry making this information more widely available to potential buyers.
Similarly, Fannie Mae engages in year-round outreach efforts to provide homeowners and renters in disaster-prone areas with information about how to prevent natural disasters and work with FEMA, other agencies and mortgage lenders to recover faster. We, along with others, are testing messages to spread this type of information that can be leveraged in home climate preparedness and awareness efforts nationwide.
Make housing more climate resilient
Less than one-third of building codes take into account the frequency and severity of today’s natural hazards. It would be crazy to rebuild houses destroyed by natural disasters in the same way.
Lenders can offer our affordable financing to homeowners to protect their homes with storm surge barriers, roof upgrades or wildfire home reinforcement. But we need bigger, bolder housing recovery solutions that include measures that encourage builders, insurers, buyers and owners to act now. It won’t be easy. Solutions need to be localized to reflect the real risks faced by specific communities. They also require difficult trade-offs and costs.
Pay attention to early insurance warnings
Home insurance is a big concern. Inflation and state-specific issues are the big drivers affecting prices and availability to date. But climate risk is a growing factor as extreme weather continues to increase. Raising consumer awareness of their insurance needs and making the home more flexible will help sustain our insurance market. But that may not be enough, and the insurance and housing industries need to think creatively about new approaches and tough choices.
Climate risks to housing are complex and there are no easy win-win answers. But it’s clear that as an industry we need to step up by raising awareness, building resilience and being proactive about insurance. This is not alarmism—it is our responsibility. As a housing leader, I am committed to working across sectors to find common-sense answers. For her help in highlighting the issue, thank Beyoncé.
Priscilla Almodovar is the CEO of Fannie Mae.
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