Neglecting to properly address climate change and safeguard homes against it will lead to an uptick in mortgage defaults, according to one leading academic.
“In cities with pockets of homes where there is no longer sewer backup coverage, if those cities get hit by rains that cause mass flooding … where are these people going to get money to correct it?” Blair Feltmate, head of the Intact Centre on Climate Adaptation and Faculty of Environment at the University of Waterloo, told MortgageBrokerNews.ca. “If they don’t have large pockets of money … how are they going to fix this problem?
“As a result of that, my prediction is that when the big storms hit … in these communities, I think you’ll see these people walk out of their homes or certainly default on their mortgages.”
As head of the Centre of Climate Adaptation, it’s Feltmate’s mandate to look at how Canada can de-risk itself in terms of extreme weather events, which are occurring with increased frequency.
His primary focus is on flood events.
“Up until the Fort Mac fire was the Calgary and Toronto floods in 2013. On the long-term basis, we need to get the risk out of the system,” Feltmate said. “We’ve developed the Home Adaptation Assessment program. It’s a properly trained person who walks around the house with the homeowner and looks at 40-50 ways water can enter the basement. It culminates in a well-illustrated report that suggests things the homeowner can do to safeguard their home.”
According to Feltmate, catastrophic loss claims, which are any event in a given year that causes over $25 million in damages, have increased dramatically over the past few years.
From 1983-2008, catastrophic losses caused Canadian property and casualty insurers between $200-500 million.
“What’s changed is from 2008 and onward we’ve gone to about $1 billion per year total claims payouts on a regular basis, with the curve bending upward rapidly,” Feltmate said. “Therein lies the problem.”
He has brought his concerns to the big banks and the government. But their lack of action is concerning to Feltmate.
And a failure to address the concern on a wide-scale could lead to an uptick in mortgage defaults, he argues.
“[The banks] are asleep at the switch,” Feltmate said. “It’s in your guys best interest to work to support programs to lower the probability of flooding in basements in homes in Canada or you’re going to start to increasingly realize major losses of people just simply walking out of their homes because they can’t correct the problem or the amount of money that is required to correct the problem [will be too much].”