Reducing Climate Risks through Housing Policy, with Jenny Schuetz

Notable Quotes

• Americans aren’t always informed about local climate risks: “People don’t have ready information on the climate risks that are likely to impact their neighborhood … People know that the West has a lot of wildfires. People know that Texas and Florida have hurricanes. But they may not know what the risks are at smaller geographic scales. Different neighborhoods within the same city or metro area actually have quite different exposure.” (6:25)
• Local governments have to weigh housing needs against climate risks: “Local governments are just not going to build in [high-risk areas], because they don’t have the resources to support it, or they don’t think it’s going to be sustainable going forward. But then, you get a lot of pushback from people saying, ‘We need more homes. There’s no place to build. Housing is too expensive.’ So, local governments are really caught in a very difficult position here.” (22:10)
• Communities can mitigate risks by improving housing availability in stable areas: “We’re figuring out how to make it easier to build enough housing, particularly in places where people want to live, close to jobs and economic opportunities and, of course, in places that are safe … We need to be building more homes in climate-resilient areas in order to not push into some of the more vulnerable places.” (24:21)

Top of the Stack

• “How to Nudge Americans to Reduce Their Housing Exposure to Climate Risks” by Julia Gill and Jenny Schuetz
• Fixer-Upper: How to Repair America’s Broken Housing Systems by Jenny Schuetz
• Stuck: How the Privileged and the Propertied Broke the Engine of American Opportunity by Yoni Appelbaum

The Full Transcript

Margaret Walls: Hello, and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Margaret Walls. My guest today is Dr. Jenny Schuetz. Jenny is a vice president at Arnold Ventures, which is a foundation that focuses on evidence-based policy solutions that maximize opportunity and minimize injustice in society. Arnold Ventures has five focus areas, and one of them is infrastructure. Within that portfolio, Jenny is the vice president in charge of housing.

Now, many of you listeners may already know Jenny, but she is a noted expert on all things housing and housing policy. She joined Arnold Ventures not too long ago from the Brookings Institution, where she was a prolific writer on topics related to housing supplies, zoning, land use, housing affordability and all those related issues, including a very cleverly titled 2022 book called Fixer Upper: How to Repair America's Broken Housing Systems. I really love that title.

I've been wanting to have Jenny on the show for a while to talk about these things, and also because I'm really interested in her thoughts on how the issues in housing markets, and these proposed solutions to housing affordability problems that she and others have, intersect with climate and disaster risks. It's clear that climate and disaster risks affect housing markets, and that housing policy is, in effect, climate policy. In other words, we can design housing policies to reduce risk exposure, but what works best, and how do we do all this?

Lucky for us, it turns out that Jenny has written about these issues, so I'm really excited to have a conversation with her today about all of this. If you're concerned about these issues—the rising costs of disasters and how to tackle the difficult problem of climate and disaster-risk exposure—and you're interested in all things housing, please stay with us.

Hello, Jenny, welcome to Resources Radio. Thanks so much for coming on the show.

Jenny Schuetz: Hi, Margaret, it's great to be here.

Margaret Walls: Before we dive into our topic, I have to ask you how you got into these issues. Tell us a little bit about your background and what drove you to work on these housing issues.

Jenny Schuetz: I think, like a lot of people in the housing field, I fell into it by accident. When I graduated from college, I was hired by a company called Abt Global that has a headquarters here in Washington, DC. They hired me to work on their newly launched Public Housing Strategic Consulting Group, which was my first exposure to housing, real estate, or urban policy of any kind. I found it to be such a fascinating area, because when you start visiting different cities and looking at different neighborhoods within the same city, you realize how much variation there is in what housing looks like, what the neighborhood amenities are, what prices and rents look like … There's an infinite number of questions to ask. One of the things I really love about housing policy is that we see cycles of the most salient issue.

I started studying zoning and land use reform when I was in graduate school in Boston, because that was a huge issue there at the time. We went through the foreclosure crisis, then we came out and went back to a period of tight housing supply. Constantly, there are new issues coming up, so it feels like it's constantly relevant and constantly changing.

Margaret Walls: Yes, indeed. I have some similar interests as yours, so I think that's fascinating.

Jenny, in 2023, I read a really interesting piece you wrote for Brookings, which was coauthored with Julia Gill. It was about how Americans can be nudged to reduce their housing exposure to climate risk. So, just to set the stage here for this podcast, the first sentence in that article says, “Americans are moving to areas with higher climate risk.” Can you tell us about that? What does the data show?

Jenny Schuetz: If you look at things like recently released Census data on the fastest-growing cities and counties across the United States, it's hard to avoid seeing that there are some really strong geographic patterns. Americans have been moving from the Northeast and Midwest towards the South and West for many decades. But some of the fastest-growing areas are places like South Florida; Harris County, Texas (which is where Houston is); and Phoenix, Arizona. These are places that attract a lot of people who are looking for warm weather, particularly in the winters, but these are also some of the areas that have the highest climate risk. I mean, South Florida clearly has regular hurricanes and intense windstorms. Harris County also has hurricanes and flooding. Arizona has very high heat. So, these are areas that have amenities that are also paired with climate risks. Of course, people are moving there for the amenity side, but then they are exposed to the risk, as well.

Margaret Walls: In this piece, after you set the stage, you talk about how we can deal with this risk-exposure problem. I like the way you organized this article, Jenny—you focused on four policy areas: mortgage and insurance markets, land use and development, housing construction, and infrastructure. Then, within these, you talk about information provision, because that's really critical, and then various financial carrots and sticks. It's a really great piece for people, and we'll put a link to it on our webpage after this, when this recording launches.

Let's start with the mortgage and insurance markets. What are some of the information disclosures that we maybe don't have, or ones that we have in some places and not in others, that you would really like to see in these markets?

Jenny Schuetz: One of the really important things is that when people start looking for a place to move, that's a period of time when they're seeking out information about their neighborhood, so it's the right time to give them full options. We know that when households go searching for a place to live, for most of them, price and affordability are the chief concern. They ask themselves, “Where can I buy or rent a home that meets my needs?” They look for information on neighborhoods—things like school systems; whether you're close to job centers, shops, and restaurants; and whether you have access to public transit.

People don't have ready information on the climate risks that are likely to impact their neighborhood. If you think about something like your exposure to wildfires or hurricanes, people know that the West has a lot of wildfires. People know that Texas and Florida have hurricanes. But they may not know what the risks are at smaller geographic scales. Different neighborhoods within the same city or metro area actually have quite different exposure.

For instance, if you think about living in a place like Florida, the closer you get to the coast, the more likely your house is to flood. So, often moving even just a few miles inland might reduce the risk, or moving to a slightly higher elevation. That's the kind of information that people really don't have access to when they go looking for a place to live—the kind that provides them with more information about what the risks are that are likely to affect their neighborhood and what might mitigate the risk for a particular house. A house that is elevated is less likely to flood on the ground floor. A house that has a basement is going to have bigger issues. Often, it's the small details that people don't even know to look for and don't know to ask.

Only since relatively recently have we had small-scale geographic information that people can look at. But knowing how to interpret that, where to go find it, what to do with the information when you have it … That's still a really big area that we need to explore.

Margaret Walls: I want to probe on that last comment you made there, because it is really tricky. I think about this issue a lot in the context of flooding. Sometimes you can provide information, but people don't fully understand what they're getting, or you don’t know exactly how to make people pay attention to that information.

You know this, probably, but there's been a long-standing problem with the floodplain maps, for example, that the Federal Emergency Management Agency creates. In some places you may not even have that information but where people do have it, they sometimes misinterpret it. They think, “I'm inside or outside that boundary, that means I'm at risk, or I'm not at risk,” but that really isn't the case. And then, of course, there's other issues about whether people really pay attention to that versus, let's say, the granite countertops in the home. Do you have any more thoughts on these kinds of issues?

Jenny Schuetz: Yes, It's such a great point that people don't necessarily know how to interpret the data that they're given. When I first started looking at some of the climate risk data that First Street, an organization that does climate risk financial modeling, produces … Their standard dataset has 50 different variables, maybe—half of which are on flood risk. But they have things like the probability of flooding, including the 100-year flood, the 10-year flood, the 1-year flood, and the expected depth of flooding from those events. Most people don't know what those mean. So, there's a lot of technical information that most of us don't know how to interpret.

Even if you go looking for this, to your point, it’s not a binary, whether you're at risk of flooding or not at risk—there's a continuum. So, it’s important to understand at what point people have a risk tolerance that they're willing to accept. We know that people care a lot about the visible things in the house that they can see. Flood risk, however—something that happens in the future—isn't very tangible.

I like to think about this also with something like heat risk, where the damage is not primarily going to be to the house. It’s a question of what your lifestyle is going to be like. If you buy a house in Phoenix, and there are 45 days in a row in the summer where the temperature doesn't drop below 90 degrees, do people understand what that means for their electricity bills, for instance, and for their comfort in being able to walk to the neighborhood park? These are often just really hard to imagine until you've experienced them.

Margaret Walls: Yeah, these are all really good points. This next question relates to this—to getting people to pay attention to the information—and that is to turn to the financial sticks that you mention in your article.

Perhaps we would want to think about requiring larger down payments on homes in high-risk locations. First, can you explain why that might be a good idea and what will we need to do to make that happen? Are there changes in federal laws or regulations we would need?

Jenny Schuetz: As good economists, we want prices to send signals to consumers. One option is to give people information about the climate risks and let them choose. But given that it's hard to get that and interpret it, another way to approach this is just to make it expensive to buy homes in risky areas and cheaper to buy homes in safer areas. That way, people are paying attention to the price signals in deciding where to live.

There are many ways we could make houses more expensive. Because federal policy impacts mortgage markets, that's one of the things that we could do—require the mortgage to be a little bit more expensive. Of course, one way to do that is by making people pay a higher-percentage down payment when they buy it, so that they think about whether or not this is the location they want to be in. That's the signal side.

The other side, in practical terms for mortgage lenders, is … We know that people who have experienced some sort of a natural disaster that damages their house are more likely to default on the mortgage or to prepay the mortgage. Often, that's because the insurance payment they get doesn't fully cover the cost of rebuilding the house, so they have to pay off the mortgage and leave and move someplace else. So, from the bank's perspective, this is just covering the losses they anticipate they're likely to have in the future.

Margaret Walls: Would we need some changes in federal laws or regulations or can banks just do this?

Jenny Schuetz: Most likely, we would need to have some sort of a change. Most people get a federally backed mortgage that's securitized by Fannie Mae or Freddie Mac. Those are regulated by a federal agency, the Federal Housing Finance Administration. Currently, Fannie Mae and Freddie Mac are not allowed to charge different rates for mortgages or have different interest rates or down payment amounts based on local characteristics of the home, including climate risk. So, in order to incorporate climate risk–based pricing, they would likely need to get either guidance from the Federal Housing Finance Administration or explicit permission from Congress. This is a really difficult time to do that. There are a lot of conversations around Fannie Mae and Freddie Mac not related to climate risk, but it's hard to imagine this being a high priority policy area for this administration, or even for probably the next one.

Margaret Walls: Right. That's helpful, though.

Let's turn to land use planning and zoning at the local level. I always think this is one of the biggest things that drives housing development. Tell us a little bit about how this all works. I know you can't cover everything. What are some suggestions that you might make for how local governments can drive development within the community to the relatively less risky locations and away from the high-risk locations? What are some of the options in the planning and zoning world?

Jenny Schuetz: Local governments create zoning maps, and rules to go with it, that say distinctly whether you're allowed to build houses, commercial buildings, or other kinds of things on basically every parcel of land within the city or county they have jurisdiction over. We know that local governments do incorporate some information about the environment. For instance, areas that have sensitive wetlands or other areas they want to protect are often off limits for development, or you have to go through additional reviews and procedures to make sure they're protected. But local governments haven't done a great job at aligning their zoning maps to discourage development in risky areas, and simultaneously make it easier to build in low-risk areas. Some of this is within individual cities, but a lot of the problem winds up being that in metro areas, you have multiple cities, towns, and counties that regulate land, and the places that have low-risk land don't have an incentive to allow more development in safe places.

For instance, San Diego County has a lot of land on its eastern side that is at a relatively high risk of wildfire, but that tends to be the easiest place in the metro area to build, because you wouldn’t have a lot of neighbors and there's undeveloped land. The city of San Diego and some of the suburbs along the coast have made it very difficult to build there, even though they tend to be safer locations. As a result, the development in San Diego has pushed farther and farther east into wildfire-prone areas, while hardly growing at all in the safest parts of the metro area. So, there's partly this tension across different jurisdictions with what their incentives are.

Margaret Walls: Right. I totally understand that.

Let me ask you now about the kinds of homes we build—the wildfire thing might be one example here. One of the things we can do if we're building is make sure that the houses themselves are more resilient or able to weather the storm. You also talk about this in this piece, and I know you have thoughts about it. This gets us into things like building codes. Can you talk about this part of the problem a little bit, and some suggestions you might make in this area?

Jenny Schuetz: Building codes are meant to take health and safety dimensions into account on a number of different fronts. Building codes have been getting more stringent over time in thinking about resilience. Florida is a great example. After Hurricane Andrew in 1992, the state of Florida increased their requirements to have roofs that are bolted securely to the walls of the house, so that the roof doesn't blow off in a hurricane. We know these newer homes are much safer and less likely to sustain damage than the pre-1992 homes. So, that's both an effective and a cost-effective way to make homes more resilient.

One of the problems is that changes to building codes generally apply to new construction. Most homes are old; they're not new. The older homes generally have not been retrofitted to be safer. They're often cheaper, so people who are really price sensitive buy an older home, but then they wind up being more exposed when a natural disaster occurs.

Margaret Walls: Right. Do you have any thoughts on this retrofit challenge? Well, I actually have two questions about building codes.

First of all, enforcement varies on these things locally, doesn't it? That's one question. On the question of retrofitting older homes, are there places where building codes apply to those? I suppose if you're doing a renovation, it might, but what are some thoughts you have about dealing with the older home problem?

Jenny Schuetz: Enforcing building codes is a really touchy area, in large part because of the cost. We know that a lot of the naturally occurring affordable housing is older, not in great shape, and may have a variety of health and safety risks, including things like lead-based paint. So, older homes have been this really important part of the affordable stock, but they're also not as safe.

If you're going to enforce new building codes or more stringent building codes, a lot of lower-income homeowners or owners of lower-income rental properties are only going to be able to do that if there's a subsidy. That gets very difficult. Local governments are typically not excited about providing subsidies. Most of the time, changes to building codes only apply going forward. As you pointed out, if you try to renovate your house, you may have to bring it up to building code for good reasons. But again, this also may discourage people from renovating homes, which they should do.

Los Angeles is one example of a place that has required older buildings to do seismic retrofits, because they have a high risk of earthquakes. Some of those can be very expensive, so there was a lot of resistance to that, but also a recognition that there's so many people living in these older buildings who would be hurt if there were an earthquake and buildings weren't made more safe. So, despite the fact that there was a lot of political resistance, they decided to require this and have been systematically retrofitting older buildings.

Margaret Walls: Has that been happening? Owners of those buildings have been doing what they're supposed to do? I mean, they're going ahead and incurring those costs?

Jenny Schuetz: They have been, yes. They essentially required that, or you wouldn't be able to continue leasing this out.

Margaret Walls: Okay. In some of the work I've done, I think retrofitting older homes for flood-proofing and things like that is sometimes lower on the priority list, because the homes are so in need of other things, especially if you're in a low-income area, people aren't able to do the maintenance they need to do, or they’re renters are in these homes. I find that to be an issue, as well, in this space. I don't know if you think about that.

Jenny Schuetz: It is. We run into this with weatherization as well, whether people want to increase the energy efficiency of their home. Sometimes, the cost of doing that is just not supported by the value of the home, because it's so old and has major maintenance problems.

Part of the problem with not building enough housing to keep up with demand is that we have a lot of older homes, which probably should have been torn down and replaced with newer buildings altogether. Because we haven't been doing that, more people are living in neighborhoods that are at high risk and in homes that aren't really equipped to deal with current resilience. There's not going to be an easy or cheap solution. It's going to be expensive to retrofit homes. If we just allow these homes to be taken out of stock and say they're not safe for people to live in, then where are people supposed to go instead?

Margaret Walls: Right.

Let me turn to infrastructure, Jenny. That's the last piece of this article, and this is something I think is a bit of a conundrum in the infrastructure space. On the one hand, communities need to build and upgrade their infrastructure for storm protection, like roads and stormwater systems, so that people are better protected and property damages are lower when storms occur. But those investments could induce development in the very locations where we want to reduce exposure. How do you think about this infrastructure issue and how state and local governments, who are usually the ones paying for these things, should go about making these kinds of decisions?

Jenny Schuetz: I'll give two examples where we have seen this tension between state and local governments wanting to provide services to people who live in a community and allow for new development to accommodate growth, while also being aware of how much this is likely to cost them.

Some areas in coastal North Carolina have roads that are pretty close to the beach. As the coast erodes and as they have more frequent storms, and often even flooding without storms as sea levels rise, these roads flood. Of course, then you have periods of time where they're not usable. That puts more pressure on the roads, so they have to be resurfaced more often. Do state highway departments go out and repave these roads after storms and just keep providing this, knowing that they will always have to rebuild after a storm, which is expensive? But if you take the road away, then nobody who lives there can get to their homes, so you're essentially forcing relocation.

We've seen this more stringent approach in parts of Arizona, which has really restricted water use. There are areas where they are refusing to put in city water and sewer systems, because they don't want to support development. So, this is a decision. Local governments are just not going to build in this area, because they don't have the resources to support it, or they don't think it's going to be sustainable going forward. But then, you get a lot of pushback from people saying, "We need more homes. There's no place to build. Housing is too expensive." So, local governments are really caught in a very difficult position here.

Margaret Walls: That Arizona situation is interesting. In North Carolina, I can totally picture this with the roads and just repaving them again. It’s the same with beach nourishment and building up the sand again. Do you know if they’ve made any decisions in North Carolina? Do you know of any case where they have made the decision to let something go?

Jenny Schuetz: There certainly are some communities along the Outer Banks that are trying to plan to relocate the houses that use particular roads, so that once you get people away from there, then you can let the road go away. But as long as people are there, you need to have things like access for emergency vehicles and evacuation routes. Taking the infrastructure away while people are still living there really is not feasible.

Margaret Walls: Absolutely, that issue of evacuation and emergency vehicles looms large. I've looked at hazard mitigation plans for communities in wildfire-prone areas and that's a huge issue. They want to make the road adequate to make sure the firefighters can get in, but at the same time, the road helps induce development and keeps people there. It's a challenge.

Jenny Schuetz: Absolutely.

Margaret Walls: Well, let me ask you one more question, Jenny. We're running a little short on time here. But I want to wrap up by circling back to the issues you're really an expert on: housing supply and housing affordability.

Can you tell us a little bit about what your priorities are at Arnold Ventures on these issues, since you're leading the housing work there? You and I talked a couple of weeks ago about how fast things are moving in the policy world in some states around the housing supply and affordability issues, and that you think maybe the research is not really keeping up with the policy. Can you talk about a few of these things? Where are your priorities right now on all these issues?

Jenny Schuetz: The whole infrastructure team at Arnold Ventures is focused on how we build things faster, better, and cheaper. In the housing space, of course, we know that we have a huge shortage of housing, of about 4 million homes across the United States. So, we’re figuring out how to make it easier to build enough housing, particularly in places where people want to live, close to jobs and economic opportunities and, of course, in places that are safe. For me, these are two sides of the same coin. We need to be building more homes in climate-resilient areas in order to not push into some of the more vulnerable places.

We are really focused on what state governments can do. They have a lot of political and legal leverage over local governments, and they have the economic incentive to want to have well-functioning labor markets and not to be spending on infrastructure in dangerous places. So, state governments, over the last five or six years, have really leaned into providing guidelines or requirements for local governments to allow more housing in high-demand areas.

It's great that state governments are getting excited about this and have actually passed a lot of legislation. More than 20 states have some sort of supply-focused state policy, but we have been passing laws faster than researchers can evaluate them. So, there's a lot of experimentation going on, and we don't yet have rigorous evaluations of what works and what doesn't in different kinds of housing markets. We know the implementation for this matters a lot, because it depends on the capacity and expertise of local governments, which varies a lot across the United States.

One of the things that I'm hoping to do is to build up our evaluation of these state policies, to understand what works and what doesn't in different contexts so that we can focus our political capital going forward on the policies that will be most effective.

Margaret Walls: That's great. I'll look forward to that. Are there any particular states you would point to as being more innovative than others? What's the story there?

Jenny Schuetz: Yeah. Montana and Washington State are both really charging ahead with this. In their legislative sessions this year, both of them have passed a lot of reforms. They've looked at things like reducing parking requirements that can lower the cost of new construction. They’ve also looked at allowing a wider set of structure types, from accessory dwelling units to apartments, in more neighborhoods, so you can build more in areas that people want.

Both of those are really interesting states. Politically, they're in very different places, but both of them are winding up with similar kinds of policies, trying to allow more housing in areas with economic opportunity and preserving the open space, which is a huge deal in many of the Western spaces—preserving views of mountains and open space for recreation. Both of those lead in the direction of building more in the urban core, preserving the open space, and thinking about how to lower costs of building housing for your workforce for people at a wide range of incomes. Both of those are good places to keep an eye on.

Margaret Walls: Interesting. Thanks for sharing that; that's great.

Well, Jenny, we're going to close our podcast with a regular feature we call Top of the Stack. That's where we ask our guests to recommend a book, article, podcast, or anything that's caught their attention lately.

Jenny, what's on the top of your stack?

Jenny Schuetz: There's a new book by Yoni Applebaum, who's a reporter for The Atlantic. The book is called Stuck: How the Privileged and the Propertied Broke the Engine of American Opportunity. This is a fantastic book that gets into the history of how Americans used to move from lower-opportunity places to high-opportunity places, in part because they were allowed to build more housing in those places. This is the history not just of zoning, but of people's attitudes towards moving from one place to another. There are lots of really good historical anecdotes and a depth of information about what's changed over the course of the United States’ history, particularly within the last 50 years or so.

Margaret Walls: Great. I'll look forward to that. That sounds really interesting, thanks for sharing it.

We have to close now. Jenny, I really appreciate you coming on Resources Radio and talking about housing, land use, and climate risks—all critical issues that affect our daily lives. Thanks so much for coming on the show.

Jenny Schuetz: This has been such a fun conversation, Margaret. Thanks for having me.

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