We don’t have to look back and fear that the most exciting times of history have passed. We are living in consequential times — the 2020 pandemic was just one of them, and climate migration is another.
Fascinating book that weaves together some impressions from HBS. The first is the idea that the current insurance/ federal system is not prepared for the expensive consequences of climate change, specifically the housing market. The author covers hurricanes and floods in Florida and Texas to wildfires in California to extreme heat and drought in agricultural swathes in Arizona. As a non-American the obvious place to live/ rent for me would be the coastal cities, but fascinating to wonder if the economic and cultural power will eventually shift away from NYC/ LA/ SF to the middle, and where my classmates would end up. As an investor, you would want to invest in climate resilient assets. Also so grateful for the education I received in the past 2 years, without which this book would be so much more foreign to me.
But tying this with our first year FIELD experience where we visited the inner cities of America, which people were migrating away from and wanted to attract the tax dollars back: Boise, Detroit, Baltimore — these cities could actually stand a chance as climate migration draws people inland. Fascinating to see the cycles of history and how nothing is ever permanent — not the collapse of the catfish industry in Alabama, or the death of mining towns like Branson Missouri.
Not mad that my 30% federal tax dollars could be going to climate adaptation and resilience.
Excerpts
Disasters tend to make people more attached to their homes, not less. […] What gets lost when a fire consumes a place like Greenville are not just houses and streets, but floors that witnessed children's first steps, kitchens that hosted nighttime arguments, cul-de-sacs that signaled the end of evening commutes. When a community disappears, so does a map that orients us in the world.
Elected officials [in California] had every political incentive to deny new housing rather than approve it. The oldest, wealthiest, most engaged constituents all tended to be longtime homeowners rather than newcomers or renters, and these homeowners abhorred new development that might disrupt their idyllic single-family neighborhoods. The result was a classic tragedy of the commons: everyone supported new housing in theory, but no one supported it in practice.
California's combination of restrictive laws and rapid growth has made homeownership burdensome for middle-class families and all but impossible for low-income households. According to one estimate, the shortage exceeds four million units, which means ten million people need a home but do not have one. […] The insurance market socialized the risk of fire damage across the state, creating an equilibrium that allowed people to live in areas that were destined to burn.
The developers who carpeted Houston with concrete had been running up a flood debt with Mother Nature. Every time they built a new neighborhood on the northwest edge of the city, they destroyed more of the natural drainage system that had helped prevent flooding. The rainwater that fell on the uplands still had to drain southeast through the city and into the gulf, but now there was no soil to soak it up as it passed through the landscape. […] The rapid outward pace of real estate development had slammed up against the immovable facts of nature, creating urban and suburban landscapes that faced perennial risk from flooding. The residents of these neighborhoods were the victims not of bad luck but of bad design.
Harvey was a thousand-year flood event, many times more severe than anything the county had ever incorporated into its plans. The storm exhibited all the strange and terrifying characteristics common to hurricanes in the age of climate change: it intensified to full strength in a matter of days, stalled over the moist gulf landscape, and seemed to contain an infinite amount of rain. Even for seasoned Houstonians, it was truly unprecedented. Harvey only further underscored what the county already knew, which was that many older sections of Houston should never have been built at all.
The developers then wrote a letter to FEMA asking the agency to grant a "letter of map revision"-in other words, to gerrymander the maps-so that they could build on the site. The dirt wasn't enough to stop Harvey, though, and after the storm, residents returned to find their McMansions filled with brown water.
The investment firm Blackstone had purchased thousands of these homes through a subsidiary and had at one time become the nation's largest owner of such properties. An analysis by the Houston Chronicle found that between five thousand and twelve thousand flooded homes were sold after Harvey, and that many of those sales were to large institutional investors and hedge funds.
The ripple effect now spreads beyond the individual homeowners and begins to disturb the labyrinthine financial system that makes their mortgages possible. Large banks like Wells Fargo and Bank of America have written thousands of mortgages in the Norfolk area, but they don't seem too concerned even as home values plummet in Larchmont and some mortgage holders go belly-up. That's because the banks have already taken steps to shield themselves from a climate-driven crash like this one. Many financial institutions have already begun to conduct internal "stress tests" of their mortgage holdings, using proprietary data to identify the areas with the greatest flood risk. In many cases, when banks write home loans in one of these areas, they quickly sell the mortgage to either Fannie Mae or Freddie Мас.
The trend of migration from California to Idaho is among the best illustrations of how climate negentropy will work over the next decades. […] Patterns began to emerge in the Maria diaspora. The biggest destinations were Orlando and Miami, which was predictable: these two cities had large Puerto Rican and Spanish-speaking populations as well as ample spare housing in the city and suburbs, and they were only an hour's flight from Puerto Rico. […] Buffalo, New York, and Springfield, Massachusetts, both of which were hundreds of miles away from the island and had a far smaller stock of hotels and affordable housing. But both cities boasted large Puerto Rican communities that had bloomed over generations as Puerto Ricans arrived to work manufacturing jobs.
A permanent regional crisis like this one, should it come to pass, would threaten an ideal at the heart of American history-the ideal of expansion. The history of the United States since the very moment of its colonization has been a series of attempts to chart new lands, till new sections of ground, and build in new places. The coming era of climate catastrophe will force us to backtrack this centuries-long pattern of growth, shrinking back from the most hostile and vulnerable areas. When that happens, the eyes of the nation may once again shift north.
The Rust Belt, and in particular the cities that border the Great Lakes. Many Rust Belt cities have been losing population for decades, shrinking down to a fraction of their mid-century size, so they have plenty of room for new arrivals. Indeed, many of these cities are already trying to brand themselves as climate havens.