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While some of us are still arguing about the existence of climate change, one real estate and investment expert is pushing past the average conversation to warn people how it’s already transforming housing and land across the nation.
BL Sheldon is the author of Fearless: Real Estate Investing in the Era of Climate Change , which explores the future of real estate and how the climate crisis is completely changing the game.
As she clearly states in the book’s first pages: “[Climate change]is here. It’s increasing. The effects will be exponential.”
We sat down with Sheldon to discuss how climate change is shaping housing and real estate in California and what we can do now.
[Some answers have been edited for brevity]
Q: What made you interested in this issue originally?
A: I’ve been a real estate investor and mentor for over twenty years. I’m truly a real estate addict! Seriously, real estate investing and negotiating for me is the ultimate grown-up play day!
When I am teaching, training, sharing and educating investors, they are so committed and excited about all that real estate can offer them: Freedom, money in the bank (many for the first time in their lives), escape from jobs they hate, an education for their children, the ability to provide for their entire family, a sense of success, a life of independence. They have so many big, beautiful, achievable dreams—dreams real estate can absolutely fulfill.
But that means every real estate purchase must be well thought out. Real estate cannot be transplanted to a different location with a click of your mouse if you suddenly realize your investment is being compromised. it takes time to sell. It isn’t an asset with the easy transferability of other assets, like stock or bonds.
You need to do your research to make wise choices in your home purchase, land acquisition or any of your real estate investing. More and more my concern for the last several years has been: How will climate change affect me, my investments and my strategies for investing for the future? Over the course of many years, I kept my eyes open for every article about climate change I could get my hands on.
So, when I’d chat with other investors and ask them how they are handling the climate change expectations in the areas they are investing in, I’d find they’d tend to clam up quickly. Then they hem or haw with random expressions like “Yeah, I’ve gotta to talk to my insurance guy about that…” or “Really? Do you really think we have to worry about that in this area?”
When I give talks on this subject I find people who tell me they try not to think about the topic of climate change because “It is too big to solve,” “What can I really do about it anyway,” “It overwhelms me,” “I don’t even know where to begin.”
The lack of awareness of the risks to our industry made me realize I needed to take immediate action and create a resource guide for real estate investors and our supporting industries to navigate the treacherous times which have begun in the face of the winds of climate change. I am training investors to make informed, intelligent and up-to-date decisions about where and why they are investing their money in this increasingly volatile real estate investment climate.
Q: Do you think we discuss this enough in the real estate, investment or similar industries?
A: That is a great question. The answer is yes… and well, no.
There absolutely is a lot out there regarding the consequences of climate change and how it has begun to and will to continue to impact real estate. And most of that information is as helpful as it can be, but it is written very broadly. The arc of it is existential and not personal. It is often written in lofty, academic language and is not accessible to the average individual.
Additionally, the periodicals, websites, research organizations and academic studies that address the effects climate change will have and is having on real estate are not always brought to the attention of most investors. Sadly, it is usually presented in places most investors just aren’t looking at and periodicals they aren’t reading. There is truly a plethora of information available, but you must know where to look or, more importantly, how to search.
Knowledge is power.
If you look back at the historical context you will find, within about the last five years, our overall industry and its ancillary financial services providers (insurance, reinsurance, mortgage and financial institutions) have begun, out of necessity, to look at climate change with the respect it deserves. A few years back in the commercial asset management and broader large portfolio management sectors, climate change stopped being debated. If you examine the Urban Land Institute report, produced in conjunction with Heitman LLC, a global real estate management firm, you will see how innovative and proactive real estate organizations are with addressing the ongoing changes. Leaving those with old, outdated, head-in-the-sand approaches to climate change looking antiquated and foolish.
Or as Benjamin Franklin said, “By failing to prepare, you prepare to fail.”
Q: Can you describe how we’re already seeing these issues in California and LA specifically?
A: Powerful question! The answer brings up some ever-present issues in California, as well as some more recent concerns.
I was actually born and raised in California, so this issue is very close to my heart.
The newest issues that affect this state are the ever-increasing severity of the fire risks and the dramatic ferocity of the inferno-like wildfires. Painfully, these issues are exacerbated by the heavy rainfall/drought cycles that propagate an uptick in annual plant and lush grass growth, which, once dried in the intensifying summer-early fall heat cycles, becomes dense tinder and ready fuel for any random spark.
One of the historic issues intensified by climate change is, for instance, land subsidence in California’s Central Valley. Land subsidence, is the sinking of land when materials or resources in the soil are removed. The resource most often removed from underground in California is water. The California Central Valley has been sinking (subsiding) at varying rates since the 1920’s, as of recent estimates data indicates it has sunk by more than 28 feet. Yes, I said feet, not inches.
That kind of compacting and collapsing of the soil has been noted to have a significant impact on California infrastructure causing damage to highways, roads, wells, railways, bridges, pipelines and buildings.
Q: What do you wish more people knew about climate change and real estate?
A: In this case, ignorance is not bliss; it is financial suicide.
Climate change is a dramatic, evolving and permanent shift in the world as we know it. We cannot turn back time or change what is already in process. Every industry will be transformed. Every business will be altered.
Climate change’s effect on real estate is not some imaginary idea we can just ignore and continue putting off. It is not something that is GOING to happen. Global climate change IS happening. NOW.
I am watching investors whose portfolios are being devastated by extreme storms that leave massive and unprecedented hail damage, soil erosion, storm wreckage, site alterations, water and wind-driven roof failures. They are coping with serious water damage from flooding in areas that have never flooded before as well as the incursion of salt water into the groundwater currently used for drinking water. Paint is cracking and weathering at increased rates because of relentless sun damage, forcing more frequent exterior painting. Awnings, windows and roofs need more frequent repair and replacement due to damage or destruction caused by larger and more savage hail storms.
These costs can be crushing. Unanticipated increases in their costs for repair, renovation, replacement and reconstruction are negatively impacting their net operating income.
So many different issues are already occurring, creating havoc and costing money—detracting from the effectiveness of the individual investments.
You need to grasp the situation. That’s why you must be paying attention, because it is happening even as I write this. It’s happening in big ways and smaller ways. But it’s happening faster and faster. That’s why you must pay attention, learn everything you can and fearlessly comprehend and problem-solve the risks and variables quickly shifting in our abruptly changing world.
Q: What are some industries affected by this problem that we may not have thought of?
A: Well, if we’re talking about climate change solely in relation to its impact on real estate, the reverberations are already being felt intensely in the insurance industry, both commercial and residential realty, building contracting, municipal planning and zoning, institutional lenders, mortgage brokering, property managers, investment managers, real estate development companies, retailers, property inspectors, real estate attorneys and credit rating organizations.
Many of these industries I’ve mentioned here are literally integral sections of the financial underpinnings of our economy.
But overall, in truth, every business or industry in our entire global economy will be changed.