Updated: Imagine you own a ground floor unit on the waterfront in a Queensland town and six years after you buy it, a tropical cyclone hits and the floor is flooded. The building’s vital infrastructure is damaged.
What happens next?
With the support of the Queensland government, Green Cross Australia has been using hypothetical scenarios like this to explore the issues that homeowners and other stakeholders face with changes to sea-level rise and flooding caused by climate change. The Home ownership exposure to climate risk report is the practical research findings of the event.
The verdict, according to non-executive director of Green Cross Australia Jeremy Mansfield, is that this is a “significant challenge” that could leave people financially stranded if not addressed appropriately.
He says that there are systemic issues (related to policy settings, regulatory frameworks and market requirements) that are leaving people vulnerable despite the “best efforts of council, state, neighbours, insurers, banks and lawyers to act in a way to support their stakeholder.”
It is not currently possible, he says, for public or private property market structures to provide viable ways for a hazard exposed property owner to successfully navigate climate change.
This is not a problem reserved to the distant future, Mansfield says. The themes identified during the hypothetical are being played out in reality as natural disasters keep hitting the state.
For example, the recent floods in Townsville has raised questions about whether the community has the same appetite for risk as it has had in the past.
“Does the community understand what 1 per cent Annual Exceedance Probability (AEP) or 1:100 scenario means?” Mansfield asks.
“And do those that have lived through a number of these events or worse, accept the risk they face, the higher premium of insurance cover and potential changes to property valuations that could flow from this?”
Setting the scene
One scenario was discussed by a panel of experts at the Green Building Council of Australia’s Transform event in March. It involves a ground floor unit in a strata development, and is set over 25 years (the average length of a home loan).
Mansfield says the hypothetical tried to avoid creating a “blame game” by assuming the development complied with all state, local planning and building code requirements.
“We assume they do everything right, but it still ended up bad,” Mansfield says.
“If that’s the minimum outcome, it represents a big problem for our sector.”
Critical challenges for homeowners
Homeowners are exposed to a range of challenges from increasing storm intensity and associated flooding, with the loss of the asset entirely the worst-case scenario. A notable drop in its value is also possible.
There’s also the risk that the cost of insurance will rise and ultimately, the property may become uninsurable.
Financing the repairs caused by the flooding is also a problem, as is the next step of accessing and financing property adaptations.
In strata buildings, there’s the additional concern of body corporate laws that prevent funding of collective adaptation responses of property.
The scenario also brought to the fore gaps in homeowner awareness, policies and funds that need to be addressed.
This includes a lack of awareness and knowledge of hazards, flood risk and the influence of climate change on properties, and about insurance cover and the value proposition for increased resilience to extreme events and climate change.
Homeowners also don’t often know about possible adaptation options and when to implement them.
There’s also a lack of appropriate policy, standards and guidance preventing action, and a lack of funds or access to appropriate funding mechanisms
The views expressed in the hypothetical enacted at Transform are not based on any specific location and/or circumstance. It was a fictitious example and role play for the purposes of education and dialogue.