Building new homes in the path of floods and wildfires could cost billions, threaten affordability: report

First-of-its-kind analysis shows significant financial risks from climate change-fuelled disasters unless a small proportion of the new homes needed by 2030 are built out of harm's way

TORONTO, Feb. 6, 2025 /CNW/ - Governments across Canada are racing to build more housing to improve affordability. Yet a new study has found those efforts risk putting hundreds of thousands of homes in harm's way, and adding billions of dollars in costs each year, unless policy is improved to direct development away from the threat of wildfires and floods.

According to new research published by the Canadian Climate Institute, building new homes in areas at a high risk of flood or wildfire could force governments, insurers, and homeowners to spend up to $3 billion more each year in costs for rebuilding and disaster relief.

The Institute's report, Close to Home: How to build more housing in a changing climate, is a first-of-its-kind analysis in Canada using original modelling of the financial costs of future floods and fires on new housing slated for construction by 2030.

The report finds that more than 540,000 homes could be built in areas of flood hazard and more than 220,000 homes in locations exposed to high wildfire hazards by 2030. The associated total costs are likely to be highest in British Columbia, which faces $2.2 billion in added annual costs under a worst-case scenario, as well as Manitoba ($360 million), Alberta ($220 million), and Quebec ($214 million). Yukon could see increases in average damages as high as $1,200 for each new home from flooding alone, well beyond the national average.

Most of the projected new costs are associated with a relatively small number of homes expected to be built in the most hazardous zones—redirecting just three per cent of new homes away from the highest-risk flood areas to safer ground could save nearly 80 per cent of all losses by 2030.

The report notes that all orders of government have a role to play in reducing the threats of extreme weather disasters to new homes, and offers these policy recommendations:

• Federal, provincial, and territorial governments should steer housing and infrastructure investment to low-hazard areas and away from high-hazard zones.
• Provincial and territorial governments should strengthen land use policy to redirect new construction away from areas at high risk of flood and fire damage, to safer ground.
• Federal, provincial, and territorial governments should reform disaster assistance programs to deter risky development—for example, by making new homes built in high-hazard zones ineligible for publicly funded disaster compensation.
• Governments should create, maintain, and make publicly available maps that show hazardous areas—and mandate the disclosure of such information in real estate transactions—so that homeowners, renters, and developers have access to that knowledge.
• The federal government should empower and support Indigenous communities to build climate-resilient homes in safer areas within their territories.

Wildfire risk models used in the report were developed by Co-operators (a Canadian financial services co-operative); flood risk modelling was done through Fathom Global and SSG (Sustainability Solutions Group) analyzed future housing risk.

The Climate Institute also commissioned a companion report, Indigenous Housing and Climate Resilience, by Shared Value Solutions to identify unique challenges and barriers faced by Indigenous Nations in developing climate-resilient homes, with a particular focus on housing on First Nations reserves. The report examines successful policies and practices, and presents nine policy recommendations.

QUOTES

"Building more homes in unsafe places would be an incredibly costly mistake. This landmark report is the first of its kind to show the costs of building new housing in areas prone to wildfires and floods. Fortunately, there are ways to build millions of much-needed homes that avoid these future costs—this report shows the path forward for policymakers."
— Rick Smith, President, Canadian Climate Institute

"The most affordable home is the one you don't have to rebuild after a disaster. Governments across Canada can save billions of dollars each year and keep people safe from disasters by building just a small percentage of new homes away from the highest-risk areas for wildfires and floods. Our new report outlines the tools policymakers have to steer new housing to safer ground and support affordability in the process."
— Ryan Ness, Director of Adaptation, Canadian Climate Institute

"Solving Canada's housing crisis requires not just building more homes but ensuring they're affordable in the long term. This includes building new homes in safe locations that are resilient to increasingly severe floods and wildfires. This new Climate Institute report highlights the financial risks Canada faces if housing policy continues to allow risky development, and offers actionable solutions to protect people and property."
— Lisa Raitt, Vice-Chair of Global Investment Banking, CIBC; Co-Chair of the Task Force for Housing and Climate

"Canada faces a critical moment—we urgently need millions of new homes to improve affordability, but outdated policies still allow development in areas prone to climate-fueled disasters like wildfires and floods. This groundbreaking report from the Canadian Climate Institute is the first to quantify these risks and provides a stark wake-up call for policymakers to avoid billions of dollars in future damages."
—Don Iveson, Executive Advisor, Climate Investing and Community Resilience, Co-operators; Co-Chair of the Task Force for Housing and Climate; Member of Canadian Climate Institute Expert Panel on Adaptation

"Co-operators has helped thousands navigate and recover after losing their homes and livelihoods to catastrophic weather, wildfire and flooding—a reality that's increasing both in frequency and severity. We are proud to partner with the Canadian Climate Institute to help millions more by sharing our intelligence and expertise for this analysis in support of reducing risks, influencing policy decisions, increasing affordability, and mitigating damage and losses when the inevitable events do occur."
— Robert Wesseling, Chief Executive Officer, Co-operators

"Canada is becoming a riskier place to live, work, and insure due to the substantial risks that severe weather events—exacerbated by climate change—pose to our families, communities, and economy. This new report from the Canadian Climate Institute underscores the need to avoid the unacceptable costs and risks of business-as-usual while providing pragmatic recommendations to maintain insurability and address the housing supply crisis."
— Jason Clark, National Director of Climate Change Advocacy, Insurance Bureau of Canada, and Chair, Climate Proof Canada

"Local governments, at the forefront of both the climate and housing crises, are essential partners in safeguarding Canadians and protecting communities from escalating climate impacts. This report highlights the urgency of coordinating across all orders of government and sectors to keep Canadians and their homes safe from increasingly severe wildfires and floods."
— Carole Saab, Chief Executive Officer, Federation of Canadian Municipalities

RESOURCES

• Report | Close to Home: How to build more housing in a changing climate
• Companion Report | Indigenous Housing and Climate Resilience 
• Podcast | The Climate Brief
• Blog | From Los Angeles to Jasper: how we can better prepare for wildfires 
• Fact sheet | Climate change and wildfires
• Fact sheet | Climate change and flooding

About the Canadian Climate Institute 

The Canadian Climate Institute is Canada's leading climate change policy research organization. The Institute produces rigorous analysis, economic modelling, and in-depth research focused on incentivizing clean economic growth and low-carbon competitiveness, reducing emissions and accelerating Canada's net zero energy transition, and making our economy and infrastructure more resilient to a warming climate.

SOURCE Canadian Climate Institute

CONTACTS: Claudine Brulé (Eastern Time), Lead, Communications and External Affairs, Canadian Climate Institute, [phone]; Krystal Northey (Pacific Time), Public Affairs Lead, Canadian Climate Institute, (250)-818-3748