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By Todd Woody
Most California
homes were built long before the state required
that they be constructed to withstand wildfires.
Now, sellers of older homes in high-risk areas
must disclose to potential buyers not only a
dwelling’s susceptibility to fire
but what they’ve done to address those
vulnerabilities.
As climate change
intensifies natural disasters, states across the
US have been mandating that home sellers
disclose risks such as flooding. But the
California disclosure is the first to zero in on
a property’s ability to survive a catastrophe.
That could make the
state a model as wildfire and other climate
threats endanger homes across the US. While
three dozen states require some degree of
flood-risk disclosure, only California
currently mandates home sellers reveal wildfire
hazards.
“When you require
disclosure, you see effects on home prices,”
said Margaret Walls, a senior fellow at
Resources for the Future, a Washington, DC-based
nonprofit research institute.
Walls and other
economists’ research has shown that disclosing
climate risks results in lower home prices, but
that buyers are willing to pay more for safer
properties. That, in theory, should motivate
sellers to improve their homes’ resilience to
climate risks.
A home
destroyed by the Eaton Fire in Altadena,
California, on Jan. 22. Photographer: Kyle
Grillot/Bloomberg
The new California
rule requires sellers to list specific features
that endanger a house, including combustible
roofs, uncovered vents, single-pane windows and
vegetation within five feet (1.5 meters) of a
building. Real estate disclosures showing the
seller has remedied such threats could help
buyers when they apply for homeowners’
insurance, according to experts.
Whether a sale goes
through is increasingly contingent on a home’s
insurability as insurance companies reduce their
exposure in disaster-prone areas that are seeing
more fires and floods.
“Insurers in these
very high hazard severity zones are going to ask
homeowners to do all these things,” said
Jennifer Valdez, a fire inspector for the
Monterey Fire Department in California, where
40% of the city is subject to the wildfire
disclosure rules.
Seren Taylor, vice
president of the Personal Insurance Federation
of California, a lobbying group for the state’s
major carriers, said that in high-risk areas,
insurers will give preference to homes that have
reduced wildfire threats. “The point of sale is
clearly a terrific opportunity to start to get
home hardening built into older housing stock,”
he said.
Do
climate disclosures work?
What remains
unknown is to what extent real estate
disclosures compel sellers to preemptively
improve wildfire resilience — or how much buyers
are paying attention to the warnings amid a
deluge of disclosures that accompany the sale of
a house.
“You can give
people too much information such that they
ignore all of it,” said Matthew Kahn, an
economics professor at the University of
Southern California.
A home
burns during the Mountain Fire in Camarillo,
California, in 2024. Photographer: Eric
Thayer/Bloomberg
Kahn said further
research is needed, but he sees California’s
wildfire disclosures as potentially having a
similar effect. “For those home sellers who can
demonstrate that they've taken proactive steps
to protect their homes, they're going to sell
for a price premium,” he said. “Those homeowners
who haven't taken these steps are going to sell
their home for a lower price than they would've
if they hadn't had to disclose this stuff.”
An analysis Walls
co-authored published in the journal Land
Economics determined that older homes in
California sold for nearly 5% less when subject
to a general wildfire disclosure.
California’s
wildfire disclosures
California enacted
a two-prong
wildfire disclosure law in 2020 after a
series of destructive conflagrations. The first
part took effect in 2021 and requires home
sellers in zones the state designated as having
high and very high fire hazard to provide buyers
with documentation that they’ve complied with restrictions on
vegetation around a house that could ignite the
structure, called defensible space.
The second
provision — the new home hardening disclosure
— went into force in July and applies to homes
built before 2010.
Sellers appear to
be complying with the requirements, according to
Gov Hutchinson, assistant general counsel for
the California Association of Realtors, a trade
group. “It's another disclosure, it doesn't seem
to interfere with sales,” he said.
Home sellers will
have more work to do in the coming years as the
state begins enforcing regulations in 2029 that
require owners of existing homes in high-risk
wildfire areas to remove vegetation and other
combustible material within five feet of the
building. Some cities already require such
ember-resistant zones.
Read the
full story to see how inspectors are
handling pre-sale checks, why iconic towns
like Carmel-by-the-Sea are affected and
whether sellers are truly hardening their
homes against wildfire risk.
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