My parents bought their first home in 1959. It was a 1,001 square foot semi-detached home built in a brand new subdivision, in a bedroom community just outside Toronto. Being three years old at the time, I don’t have any clear memories of our move from our one-bedroom basement apartment in Toronto, other than the ones made by my parents constant retelling of the story. As it was goes, it was a very, very cold day in February. They shared one egg for dinner – this both because they had no money, and also because there were no stores or restaurants anywhere nearby. They were the first pioneers in the new subdivision. And their mortgage payment was $101 a month – a heavy and always pressing burden for a factory worker and his stay-at-home wife.
That was our home for 17 years. It was lovingly, if economically maintained. We did all the things that families did back then – built a wooden frame garage (which I’m proud to say still looks brand new) and a family room – of course with a never-used bar, and we kept our pie-shaped lot neat and tidy. For, next to my Dad’s company pension, our home was by far our greatest asset, as was the case of every single one of our neighbours. For most in fact, their only asset.
Though much more fortunate than my parents in the homes I subsequently bought and sold, like them, I continued to view the home as a principal asset, though not the only one. But like them, I always saw the weather as, well, like the weather. Something that one just accepted, something that has always behaved the way it did, and more to the point, always would.
But then something did happen. Us BoomXer’s started to note that there were fewer and fewer snow days. That the winters seemed milder, the summers hotter. Unusual, and unusually violent – especially wind - storms started happening year-round. Curiously, we could start to experiment with planting shrubs and trees from farther and farther south as new critters such as possums started heading north. The more astute of us noticed that the bird songs of our neighbourhoods, towns and cities was changing, if not muted, as the average bird was wintering up to 650km north of their 1965 range.
And of course, one would have to be living under a rock, or be a Trumplican not to have noted the dangerously bizarre weather roiling the world. More hurricanes and cyclones of greater and greater ferocity, wildfires, shifting precipitation, drying aquifers, and rapidly melting glaciers and ice caps. Even we atheists saw the end-of-days signs in the increasingly frantic warnings of the United Nations as it’s Secretary General told us that the world is on a “fast track” to disaster, and that extraordinary steps needed to be taken now to prevent the world from becoming “uninhabitable.” Yes. Uninhabitable.
But for this discussion, that’s above our pay-grade to address. Or is it? One of our biggest challenges is to convince our fellow citizens of the immediacy - the reality – of climate impact. Most of us accept climate change as an abstract concept, but tying it to our own reality, where we live is problematic. Unless of course, one lives in the Pacific island nation of Kiribati, where the entire population is contemplating a forced migration to Fiji or New Zealand because of rising sea levels – or you live in Ft. McMurray Alberta, where 60,000 insurance claims were made following a devastating fire in 2016 that destroyed 20% of the structures in the city. The hard cost of climate impact is very real to them, and increasingly to hundreds of millions more around the world.
My next guest has a compelling idea as to how to bring this reality to all of us, and address the very pragmatic issue – how do we empirically access the impact of climate change on our homes?
Toronto-based Chris Chopik is a sought-after expert in real estate, sustainability, and how climate change impacts the way we work, earn, and live around the world. As an advisor to government, NGOs, policymakers, community stakeholders, and homeowners, Chopik has navigated many challenging issues facing communities as they strive to grow their economies and become climate-resilient in the face of rapid change. Chris is well known for his zealous promotion of high-performance buildings, renewable energy, intermodal transit infrastructure and healthy houses.
He holds a Masters degree in Strategic Foresight and Innovation from OCAD University in Toronto.
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Bob Westrope
Okay, so what is your big idea?
Chris Chopik
Well, essentially, the idea is that climate change is causing hazard to people, or the place they live, and that there is a way to reduce the level of risk to property and lives that happens as a result of climate change in the context of real estate. And so, understanding there's a clear path, and that everyone's self-interest around their real estate valuation, and the impacts that climate change can have on the value of those assets, is aligned to solve the problem together. You own your house, I own my house, everybody owns a house, every city owns the parks and the infrastructure that are part of that city. We all have a vested interest together and individually, to protect those assets. I've come up with a concept called the Real Estate Climate Risk Index. The idea is essentially that you could put an address for any property, anywhere, into an online form, and discover whether you have static, stable risk, whether the risk is increasing, as might be the case with a coastal property with sea level rise, or whether the risk is decreasing based upon meteorlogic changes or changes in wildfire activity, in order to get a relative rating, and then discover what you can do about it.
Bob Westrope
This has been an evolving passion of yours for quite a while now. Can you connect the dots on your background, and where this came from?
Chris Chopik
Sure, I guess optimistically, I started working at the nexus of housing and energy. My first big idea was that the disclosure of energy use at the time of purchase and sale would result in a market driven demand for higher performing, or more energy efficient houses. The same as we see miles-per-gallon in automobiles being a buying consideration, or as we see in the ENERGY STAR rating being a preferred standard for electronic appliances - the idea that the battery life of my laptop, that really matters, whether it's twenty hours or three. The same thing goes with your house. A very well insulated, high performing house can last a long time without any heating input in the dead of winter when the power goes down. In 2008 I started working with the government to create legislation supporting that. It’s now an international standard. Thirty-six regions of Europe are using that standard time-of-sale energy disclosure, in order to create both market literacy, so that everyone understands what you're talking about, and then why it matters. Because if one house costs $300 a month, and another costs $50, they have the same use value, the same square footage, the same parking scenario - why wouldn't you choose the one that works better? Right now, we don't know. We do know how much salt is in our in our can of soup, we know how much energy our fridge uses annually. But we don't know what the energy use of our house is - the largest asset that we have. What changed is that climate change and catastrophic loss has been coming very quickly into the housing marketplace. More and more we're hearing about people being displaced from their houses, severe property damage, a long time to recover, and a lot of money to recover. Incidences, like Katrina are examples. But what we saw last autumn in the Fraser Valley, what we saw last month in Australia are all, increasingly alarming, more severe than previously thought possible events that are impacting huge numbers of houses, and numbers of people who are then displaced and need a place to live short term. Then they build back in a potentially high-risk area.
Bob Westrope
This is something that strikes near and dear to the heart of any homeowner. I can imagine the emotion around applying a standard such as you're talking about to the valuation of their homes if they're declared to be in a floodplain. Who are the people, the actors that are allies of yours in this?
Chris Chopik
I would say that everyone in the housing supply chain holds some risk. The insurer, the lender, the people involved in the transaction - the realtor, the appraiser, the home inspector and the lawyer - all of these actors are actors who have a vested interest. In the case of new development, developers and municipalities who are approving permits. The entire supply chain has risk. For example, let's say that I'm a municipality, and I say it's okay to build there, and I know it's a floodplain. If I'm a developer, and I choose that too, and I don't build any flood mitigation into that, then I could potentially have some liability down the line. If that's 1,000 units, so 1,000 taxpayers, 1,000 homeowners in my community, and I’m in this municipality, I’m the frontline responder if those people are affected and need to be displaced. So now as a municipality, I'm going to have to provide the infrastructure for those people that have a temporary place to go, should they get flooded out. The insurer is increasingly concerned about the impact of value, and the lender, of course. If I hold a mortgage on your house, and you're in a floodplain, and you get affected by flooding, and then you're displaced, and that puts a whole bunch of stresses on you, then there's a real increased possibility that you could be defaulting. I studied this issue across five categories of risk across North America, and one of the things that's challenging is that sometimes the value impacts can be very steep. If it's a severe event, and if the property is very damaged, I could get into a position where my loan-to-value ratio is greater than my equity to lose. So, in that case, I'd be handing the keys back to the bank, the lender would be taking over the house, but that asset may not hold as much value as the lender has lent to me to borrow to buy that place. And so, each of the supply chain players has something to lose, and a motive to reducing risk.
Bob Westrope
That strikes me as true in the abstract. In practice, I can see that that would be a real challenge. If banks, for example, looking at their mortgage portfolio in an area such as Fort McMurray, Alberta, after the fire, isn't there a built-in incentive to turn a blind eye, or to not be as diligent as you would expect? It strikes me that different actors at different times within this process, have a stake in the game, but they have different motivations about addressing it.
Chris Chopik
That might absolutely be true. So you get into market behavior, and behavioral economics around all of that. There's some really alarming stuff that I've seen in terms of research out of the US, for example, politicians who come out and save the day after an event, versus politicians who invest in the right things in order to avoid the event. They get rewarded for responding to the event, as opposed to being proactive. In markets in the US where there is a higher percentage of people who are climate deniers, the impact-to-value of climate related negative impacts is lower because there's a sense of disbelief. The reality though, is if you're in a place that's potentially going to flood and then it does flood, you are displaced, and your property is devalued. It's a bit like living with prostate cancer - you know that it's there, you can choose to deal with it, or you can let it slide until it's too late.
What I've seen is that in places like California, where you have universal disclosure as part of the real estate transaction, this is emerging in Australia as well, and there's lots of conversation happening in Europe about this, that is if you disclose the information then the marketplace will bake in the new prices. Just like they do in the condo market. One condo with affordable condo fees, and another with higher condo fees - that gets baked into the price. They could have the same location characteristics, but when it gets baked into the price, there's no sticker shock, because I borrow money against the baked in value.
I was recently part of a research group out of the University of Waterloo at the Intact Centre on Climate Adaptation, and we did a study called Treading Water: Impact of catastrophic flooding on Canada’s housing market. We examined a bunch of markets across Canada, from Grand Forks BC, to Fredericton NB. We measured serious flood events and their impact on value pre and post-sale. On average it was 8.2%, that is a value impact of minus 8.2% after a flood event, on average, across all markets. Fredericton was an interesting study, though, in that they have relatively frequent flooding, rivers everywhere, they know there's flooding, most people know where the flooding is. We found that in that marketplace, it is already baked in, because it's more like common knowledge. It's a small community, and everybody knows it. It's not a situation where I have buyers coming in from out of town and it's a ‘trust me’ marketplace, where we're trying to hoodwink the Ontarians who are buying there. It's just common practice to, you know that you're very likely to get a flood there, so don't put your valuables in the basement.
Bob Westrope
You're coming at this as an environmental activist. How would you rate the importance of this? It's something that you've put a lot of time and effort into - is it something that you believe to be a critical part of the tool set in addressing climate change, climate action?
Chris Chopik
I do believe that the orientation towards self-interest, whether it's from an individual property owner, or from a municipality who wants a stable tax base, and all the players in between, that the reason to orient to this is self-interest and money. And yes, there is definitely a benefit to all of us by reducing that risk. But the first point of interest is, it doesn't matter whether you believe in climate change, reducing your risk will reduce your insurance premiums and reduce the impact that you have from the actual event. And the rate of increase in probability of an event happening to you is growing exponentially on a continuing basis and will continue to do so in the future. From a marketplace perspective, from a real estate perspective I think Canada is a great place to own real estate, and I've been practicing real estate for 18 years. It would always be my advice to renovate for energy efficiency, comfort, luxury and resiliency – and minimal loss of use. So always build better. But it's all about asset value. If I think of cities that I want to be invested in as an individual, knowing what I know, I want to be part of a city that is progressively addressing community level risk, so that I can invest in that marketplace with confidence. And that happens across every municipality across Canada. What's changed is that the context changes. If I'm on Water Street in Halifax, Water Street is landfill – it’s under water regularly. So I'm going to know that that is going to be affected by sea level rise, but maybe as an average person not necessarily to the level that I might, if I was putting all of my life savings into a building that I'm going to run my dream business out of, only to discover later that I've invested in Atlantis. It is going to be underwater. So now I bought something with all the money I had, and I can't sell it, or I can only sell it for half what I paid for it, or some other depreciating problem like that. So, on the one hand, it's basic consumer protection. One of the challenges is that, I think currently there are instances of predatory behavior where some parties know that the place is at risk, and they're not disclosing that. When individuals are taking everything they've got and putting it down on number 36, it's just a bad risk in some cases. Without the market knowing about that, it offers market stability and trust risk, which is a pan market risk and its financial.
Bob Westrope
It's clear that in the next two decades, there's going to be incredible dislocation or implications as coastal regions are forced to adapt to climate change. By associating in a transparent way, the impact of climate change on your home or property, it makes it really personal for the individual, which from an awareness perspective is something that's very powerful. And it raises the issue in a way that moves it from being abstract to very tangible.
Chris Chopik
Yes, and I think what's exciting about it is that it does bring back a sense of community. I've done a lot of research in this area in the last couple of years, and one of the research interviews I did with one of Canada's leading commercial real estate investment companies revealed that, we're only as strong as our weakest link. It makes no sense to have a great seawall wall in front of my property if all of my neighbors don't. Or if I can't take the road that comes to my front door. I'm high and dry, but I can't go anywhere, unless I've got a canoe. The idea that this can also inspire a community level awareness and conversation about those kinds of risks, and the rewards of acting together to reduce the risk - that creates a new kind of participation from a ratepayer and from a constituent.
Bob Westrope
Well, and it's taking, if I understand you correctly, that appreciation of risk to the micro level of your specific house versus your neighbor's house, correct?
Chris Chopik
It does that, yes. There will be trend lines there that will be area based as well, for sure.
Bob Westrope
I have to believe that if we're now starting to consider each home or each unit in an area, that will have huge implications with urban planning. Can you comment about that?
Chris Chopik
I can. A recent study that I've done with CMHC, and the Insurance Bureau of Canada, which consisted of expert interviews, and then a workshop, revealed some really interesting trend lines in terms of what capacity the market has to respond, and what the level of risk is. There will be instances, for example, where divestment is the right thing to do, and that's a retroactive thing. So, we invested there before, and now we want to undo our investment. What's a true mistake, and it's happening often, is that somebody has a piece of land, they paid a lot of money for it, probably because land is expensive. But it does hold some hazard value. The municipality wants to develop that land, because it gets more taxpayers and gets to build more infrastructure. But it could be in hazard area. In instances like that, where there is political pressure from developers on local politicians to approve things, results in things being built that maybe shouldn't be built in places where they shouldn't be built.
The challenge is that the underwriter of the risk is typically the insurance companies, and who do we call when everything has hit the fan? We call the federal government to bail us out. They didn't really have a hand in making that local land use development decision. So there's a disconnect in terms of what we're choosing to build and where, compared with what the ultimate responsibility is, and who holds the ultimate liability. The feds should not be responsible for paying for bad decisions made by local governments and developers. That's one example of how it's going to impact land use planning. Somebody's going to have to hold the liability for bad choices. Let's say today's the day that Kumbaya, we have this podcast, we say today's the day we decide that we know where a good place to build and what a bad place to build is. So every day from now forward, we're going to reorient the liability associated with making bad land use planning decisions as it relates to, let's say, flood potential specific impact.
Bob Westrope
As I'm listening to you, I'm struck at the implications of that political divide that we see which, broadly speaking includes those that are climate deniers and those who are not. All countries have regions where there's a greater propensity for climate denial, but their banks and their insurance companies aren't going to share in that denial. It's interesting to see how the different areas might respond and adapt to this. Coming back to a question, you've been working on this big idea for the last several years, as I understand it. Of those actors we've been talking about, is there a group that's particularly supportive of your work, or a particular ally in having taken it to where it is today?
Chris Chopik
Yes. I would say that the real estate industry has been allergic to this file, both in Canada and the United States. The real estate industry, as it relates to energy disclosure in Ontario specifically, has been obstructionist, which would be the way to say it accurately. They've done everything they can from a government lobbying perspective to avoid the implementation of that legislation that I helped the government create in 2008. I think that's a mistake. Historically, I think that's going to be seen as a mistake, and that mistake is certainly politically motivated. Where the support comes from is from the insurance industry, and from governments who have a hard cost, bottom line that they're seeing increase. The budget that they have to set aside to pay for fixes as an insurance industry, and from a government responding to flood and then the needs of people in response to that. And we're only measuring the acute impacts - we're not measuring PTSD for example. If you do a scan of literature on psychological effects to the people in the community of Fort McMurray after their fire, the kid and the teacher and the parents all have PTSD, driving by the burnt-out shell of a house where their best friend used to live every day on the way to school. What we're talking about in terms of direct motive is the cost of response and recovery, and disaster management, and the cost of building back which is absorbed by government and insurance companies. They have the most to lose, they have the most responsibility, and they are definitely allies. Additionally, what we're seeing in the capital markets is that there's increased desire to disclose transition risk and climate risk. How do I disclose that if I'm a bank? How do I disclose my risk within my mortgage portfolio? I can do it is by aggregating the risk and saying, “we don't know where it is”, so less than eight to ten percent of it is invested in Atlantis. Or we measure it, and then we get some competition amongst the banks for who has the lowest risk in their mortgage portfolio and therefore the cheapest bond. So there are market drivers in those areas that seem to me have momentum of their own and that there is desire to collaborate to an end result that's positive.
Bob Westrope
The buyer in the process, from a consumer perspective, would clearly have a reason to understand the impact of climate on the value of their property, and that that skews younger to first time buyers. The target audience that that I address with this podcast, what I call BoomXer’s, people that are downsizing or reducing their real estate portfolio, trying to monetize their investment. That can work, I guess for a lot of them, but for a lot of them, it wouldn't be to their advantage.
Chris Chopik
If we estimate that 10% of the market is prone to some discount, that they're ripe to be discounted a little bit, then yes, if I'm selling one of those properties, I don't want to reduce the value of that property today. But when I buy, I might be very keen. Even people who are quite good at this conversation could go shopping for a house next weekend and not be able to access the information even though they know they need to, they should look for it, they can't find it - then buying something does hold risk.
Where's the next hot, hot marketplace? When I started in real estate in Toronto, I wanted to know where the gentrification boundary was going to move, because I wanted to bypass the boundary, so that within a couple of years, while I lived there, as the boundary moves, I get a big hit on elevated real estate value. I would say that climate change and climate risk is going to be part of where to buy next. Whether you're trying to grow food or trying to enjoy your ocean view. You know, my ocean view is best enjoyed when I can see it, and I'm not dealing with frequent flooding. In Miami they call it climate gentrification, people buying in Little Haiti instead of a coastal location. They're a short drive from the amenity of the beach, but they don't have to deal with the ocean coming through the front door once a year.
Bob Westrope
I live in Niagara on the Lake, and having lived most of my life in Toronto, it's only now at my ripe old age that I've actually appreciated microclimates that are quite distinct, even just a few kilometers apart, where the terrain has a great impact on, and is impacted by, climate change. One can imagine visualizing this one day, hopefully soon, where you're looking at a map and you're picking the areas, the regions that are green on your scale, as opposed to an amber or red. Where are you in the process of this being made a reality?
Chris Chopik
Well, in the US, there's something called ClimateCheck. It came out after my research and was released in 2019. It essentially gives you a score just like the one I'm talking about. We don't have that yet here in Canada. Part of the challenge is that in Canada, we've got less scientific data collection, because we've got a less dense population, so there are fewer points of data being entered into the arena. So we've got that major hurdle in terms of datasets. But in terms of will, the government has declared that they are going to be releasing something called ResiliGuide, a resilience guide like EnerGuide, which is the energy performance for houses. I expect that ultimately, within a few years, we're going to see the decarbonization and energy efficiency efforts getting us toward net zero, which, protects us from severe quality of life impacts due to climate change in the future, being blended with the real-life resiliency responses in order to reduce our property impact and displacement risk.
We've got a very tight housing market. If you imagine being in the Fraser Valley, and you've got a valley full of homeowners needing to live on their friends’ couches in an already tight marketplace, every hotel booked while I wait for my house to be habitable again. We can't afford to not be hyperactive on this file, both energy and resilience. Then it's going to be very contextual. What I do to protect my property on a mountain side in BC is going to be very different than what I do in an urban location in southern Ontario, or a coastal location on the east coast. It's not like I need a steel roof everywhere. Steel roofs are better at reducing fire risk. You'll see that more and more as a listed property feature that's appreciated. And then urban flood protection, all of that is going to start to become something that you think of, just like we thought of knob and tube wiring. When shopping for a house, we saw the knob and tube and said, either you get an electrician in to say, “it's okay, or you replace the knob and tube, it's going to cost you maybe $25,000.” That’s a relative value of price, it's part of the negotiating for what you buy. It gets into the marketplace quite easily. We will see the same kinds of things - you're in an at -risk area, what you need is the following list of contextual responses to make it more resilient. And then we're going to plan to do that when you buy the house so that you can get the insurance that you want.
Bob Westrope
So that would be baked into the inspection process. In terms of a metaphor, we're talking about something that would look like the WalkScore, that's common in North America. Is that right?
Chris Chopik
Yes. The Real Estate Climate Risk Index would say, “I have a low risk of wildfire, I have a high risk of urban flooding, I have a high risk of coastal flooding.” And so it will give you a score on a number of data points, which are going to be flooding, droughts and heat etc, and then it would tell you whether that score was rising or falling, not dissimilar to a Walk Score - very low flood risk, very high wildfire risk, because drought and wildfire go together. That's the kind of thing that you'd be able to see. But then you can make a choice. “Do I want to live in a wildfire risk zone? I love the view here. I love mountain biking, I love skiing, this is where I want to be,” and it's perfect for you. Now that you've bought the property, make sure the propane tanks are 10 meters away from the house, that your woodshed is 10 meters away from the house, that you don't have hot flammable items close to the house, and that your house is made of stuff that's not going to attract fire. Then you're ready to go, then your new dream house, then you knew what to do. And it's baked into the price. So you're not overextended. You know that there's lots of people who love to live in that area, and that you've done everything you can do to protect your own asset.
Bob Westrope
Yes, and no future surprises with any of the other stakeholders – governments, insurance companies or banks. Is there a difference between commercial real estate versus consumer or residential real estate in this regard?
Chris Chopik
Well, the difference is that you and I can go out today and we can spend $1,500 and get a very robust report on what the climate risk is in the location. There are a number of service providers that do that. If I'm sitting on a commercial building in some location, I can afford to do that test. Again, I can pay for that service. And so more players in that marketplace will know what their relative risk is in that location, already. The difference is that that's already part of that marketplace. Now, not every player in that marketplace is going to think that way. So there is some opportunity there for people who are in the know, that could create some real business value for players like REITs. The difference for an individual is that for most people in Canada, if they own a house, it's their largest asset, they have a huge amount of their personal wealth stored in that asset. And they cannot afford the depreciation of that asset. There's two things. One, I can't afford to retire when I plan to and the income that comes from that. But two, if I have an event and my asset value decreases by let's say, 30% my capacity to buy in a place that's high and dry has now been reduced by 30%. So now I can't even choose to move.
This is where you get a real consumer protection and equity issue - that as we start to see more frequent impacts on people from these variety of risks, the capacity of those people to respond on their own with their own asset, that is with their own money, is going to be less and less and less. We're seeing that in the United States in places like New Jersey coastal areas that you might have said, great place to live, love that, are being devalued by weather events, and then they become in the red. So they're in a new kind of redlined area where it's hard to get insurance or the insurance premiums are, you know, astronomical, and the risk of flooding is annual, so, you're going to get some flooding annually is going to be catastrophic, or is just going to be a nuisance, but there'll be some, and so then my assets are not worth anything, and I can't move anywhere, because the whole market has continued to grow.
Bob Westrope
As just a lay observer of this, the impacts of climate change are quickly accelerating, so this is becoming an exponentially greater issue, that is how we value our biggest assets. As a real estate agent, amongst other things, is this a pretty lonely point of view to be taking? Are your colleagues, as a group more or less supportive of what you're doing?
Chris Chopik
I would say that, from an industry perspective, there is a sense of, of reluctant reality. “Yes, it's, suddenly it's reality, I guess we’ve got to do something about it.” I wouldn't say that the industry has taken a leadership position. I don't think there are very many individuals who have taken a leadership position. But you will find that the more professional players, and there's 60,000 realtors in the Greater Toronto Area now, when I started in real estate, there were 24,000, and to say that there is a universal practice in any way is wrong. There are very diverse ways of being a realtor. But yes, I would say that there aren't that many people who want to be the courageous person who says, “hey, 10% of our marketplace should be worth less than it is.” Because that's not good politics. It's really hard to win a listing presentation, if you're in a neighborhood that happens to be in at-risk area, it’s probably not the best thing to say. My job, when I list your house is to get the most dollars for you with the least inconvenience to you, as quickly as possible. That sounds like bad news if you're going into an at-risk area and saying, the first thing we need to do is to see what your risk score is. The marketplace is allergic to that. Most practitioners don't want to get in the way of their own deals, move their deals along because it is a volume-based business, you get successful by doing volume. And so yes, I would say it's a little bit lonely. But the industry, the Canadian Real Estate Association, the federal government and the insurance industry are all on side with “we have to do something about this.” So I think we've turned a corner where we're past the resistance stage and into the “okay, how can we collaborate to make this happen, to create stability in the marketplace?”
Bob Westrope
What's needed then? What actions can or should be taken to support this? What does that support or action look like?
Chris Chopik
Well, it comes down to touch points with customers and transaction points. I'd say a very powerful action point is getting approved for a mortgage. If every mortgage lender in Canada was required to know what the climate risk is, as part of their lending evaluation, that would be one thing. If every sale required that a home inspector take a look at the flood risk of a house as part of the listing process, that would be something. It's hard to have a single brush, but everyone can ask the easiest and fastest ways to make it publicly available to everyone equally. Then there's no price barrier to entry, and it will naturally get baked into every aspect of it. Because what will happen is part of the buying decision will be, what is my insurance going to cost here? And if it's going to be $10,000 instead of $3,000 a year, then I might gravitate to spending more money on my mortgage payments, and less money on my insurance payments, and so that will then come out in the wash. So the fastest track is to make it publicly widely available. The Interim process would be to create some regulation that imposes disclosure or at least acknowledgement of risk, sometime along the supply chain, and a mortgage approval might be the place.
Bob Westrope
I'm thinking of the difference between at least Ontario and US jurisdictions - the transparency of real estate information in the US is dramatically greater than we enjoy here in Ontario. It's hard for me to imagine the sharing of the kinds of information willingly by the real estate industry. That's something that has to be governmentally mandated. It's not something that industry is going to adopt on its own.
Chris Chopik
There is regulation to not hide information, latent defects etc. The industry standard is to disclose and not hide that stuff. Where it becomes complicated is if you're my client, and you choose not to tell me that you've had flooding issues, and I don't know, because I as a realtor, I just don't know, I haven't sold houses in your block recently. And I didn't know that that was the case. Then then you don't tell me about it, I list it and I don't talk about that. Then somebody buys it and has the same experience you did before we list it, then we potentially both hold some liability for that. Then the purchaser could potentially seek remedy in court, after us, so the disclosure essentially reduces that liability across all players in the marketplace.
Bob Westrope
You mentioned earlier in our discussion of commercial properties that it's “easy” to get a pretty detailed report on a property for $1,500. I guess we're talking about two types of information. There's what you've done to your property. The R-value of your insulation and what you've done with landscaping etc., but there's also the publicly available information about whether or not you're in a floodplain or areas susceptible to fire. An average property in Toronto, is what, a million dollars or something? So $1,500 Isn't going to make or break a difference on any sale. There's no financial reason or logistical reason. We have the data. It's really a question of will as to whether or not we create the environment where that data is used for each residential property. Is that right?
Chris Chopik
That's part of it. The $1,500 result tells you what your risk is, it doesn't tell you what to do about it, right? Then you have to go to your engineering team, and you say, “okay, what do we do to reduce our risk on this building?” But these are problems that are typically archetypal, right? That kind of thing happens to those kinds of buildings in those kinds of locations. So the solutions are also for those kinds of buildings in those kinds of locations, here's the list of things that you can consider doing to, to make it more livable, or reduce the risk or make it more energy efficient. And that needs to be understandable to an average person, and it needs to be delivered sometime when action can be taken. So the time of sale is a great time, but it could be the time of insurance renewal, right? If you live in that area and your insurers are renewing the thing, they can tell you, “if you do these five things, you'll save 1% in your annual insurance renewal.” Because like you say, these events are growing. You don't have to be a scientist, look at your own life experience, and see how things have changed, and recognize that the rate of change is accelerating and that this is suddenly becoming serious. We should be doing everything across all lines to reduce the risk for everyone.
Bob Westrope
For our listeners, is there a question that I didn't ask that we should address for them to better understand the nature of the challenge, but more importantly, the opportunity?
Chris Chopik
I would just say this, whether you own an asset that you're planning on retiring in, or you're looking for something new, understanding this risk is good for you. You can't hide from a potential cancer diagnosis, it's better to it address it as early as possible. It's much easier to get sleep if you know what you're afraid of, than it is to wonder what might be there to be afraid of. So go and figure it out if you can, and then make decisions about whether you're going to hold that asset, invest in that asset, or sell it.
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Here’s my take on my chat with Chris today.
Chris’s proposition is, simply, a no-brainer. Firstly, as a consumer protection issue. Climate change has introduced a critical new variable into the algorithm for every real estate transaction on the planet. It’s only logical that the result be something that is calculated and shared consistently, equitably and transparently.
What’s especially attractive about the proposition is the relative ease with which it could be implemented. There are relatively few players to start. There’s the consumer/buyer, the consumer/seller and then the stakeholders in-between - the real-estate agent, the inspector, the developer, the lender and the insurer. That’s a fairly small eco-system within which to effect change. All that is required is the will to change and the capacity to change.
Second though, what excites me about Chris’s challenge, is the potential to smack people in their faces to wake up to the incredibly harsh reality – and immediacy - of climate change. It’s hard to dismiss the work of policy-makers trying to address climate change, when you find your home devalued by 30% - or you’re literally underwater. As Chris puts it, ‘baking-in’ the risk of climate impact on the biggest transaction that most of us ever make, raises the issue powerfully, especially when it's a key factor in pricing, and you need your mortgage lender and your insurer on-board.
So why isn’t it universally adopted, if it’s a relative no-brainer, and a relatively simple eco-system of financially motivated stakeholders to engage with? I would argue that this is a perfect illustration of the need for something like the DEMOS Project.
What’s missing, given that we know that “time is running out” and that we are “on track” to an “uninhabitable world”? The biggest roadblock it seems, is the real estate industry, estimated by consulting/advisory firm MSCI to be US$10.5 trillion global sector. Like most ‘institutions’ that evolved in the 20th century, I submit that the real estate sector lacks the will, the agility, the agency to change – certainly in the very few years we have left to act on climate change. Instead, one can imagine a well-funded pressure campaign executed by tens of thousands of BoomXer’s committed to a purposeful, global effort over say, a five- or ten-year period being decisively successful. All that is missing is the money to underwrite the requisite scaffolding. There is no lack of willing collaborators.
There is also no doubt that, in the fullness of time, all of the many noted actors involved, in the great many jurisdictions involved, will each in their own way, achieve some impact. But with respect, we don’t have the fucking time. This very simple step, that protects us all as consumers, but vitally raises the profile of climate impact as almost nothing else can, is not a nice-to-have in our societies. It is a must have. And the only way that is going to happen is with a purposeful, systemic, global civic effort. Our leaders, and the institutions they lead – left to their own devices, and on their own – are simply insufficient to our needs in 2022.
As I wrote in my preceding article on substack,
“The reality everywhere is that the systems based on god’s and great men (and all of their ‘ism’s’) are simply not up to the challenge of leading the societies of today. Where most institutions exist to stand against time and change, most today in most civil societies are fading into dangerous irrelevance, because they are not agile enough to show the way, nor have the agency to remake themselves. We suddenly find ourselves with instruction manuals for our hospitals, our police forces, our schools, our legislatures - written decades or even centuries ago - that make no sense anymore. They don’t have application. More to the point, they actually impede the near future Age of Wonder that is imminent if we allow it to be.
Almost all that we all are doing is moving the deck chairs on the Titanic. Yes, we need to talk. Of course we MUST vote. And sometimes we need to protest, maybe even die. But all are existential distractions if we don’t address the root causes of systemic, global institutional and leadership insufficiency. And we need to do that now. Times up.”
That’s’ a sombre note to end on what might be considered to be a relatively uncontroversial topic. But there are thousands or tens of thousands of such fairly simple initiatives that humanity needs done in the next 5, 10 or at the most, 15 years. And then there are the harder ones, like eliminating the prospect of nuclear Armageddon. And the choices are in their way few and simple. We can keep on doing what we are doing, faster and faster with greater and greater urgency. Or we can wait for the system to collapse, so that we might insert our preferred ideological solution into the mix and hope for the post-revolutionary best. Or we can try to augment our institutions and leadership with a powered and powerful third rail – a systemic, global, civic movement, that has the capacity to transform the world. Something like the DEMOS Project.
This marks the end of season one of my podcast series. I have loved every second of producing these 12 episodes with my producer Stephen Hurley, and my sponsor Mike Wittenstein, of StoryMiners. I thank them both. Of course, my guests were and are the stars – each presenting both powerfully big ideas and big, world transforming solutions. However, my first posting on substack on July 6th marked my transition to this powerful platform, and the start of a summer of writing and reflection. I remain committed to catalyzing a systemic, global scale mobilization of centrists, and will use this platform to continue to evangelize the concept. Corny as it might sound on a beautiful summer day in July in Niagara on the Lake, I think the world depends on someone doing just that.
Please look for my next article in your inbox!
Chris Chopik: We need to rethink the value of our homes if we really want to address climate change.