Exclusive: HUD unveils plan to tackle climate change, protect homeowners and low-income renters

The U.S. Department of Housing and Urban Development announced a plan Thursday to advance climate preparedness, in one of the most concrete steps the department has taken to tackle the effects of global warming on housing.

Provisions include factoring in climate risk when underwriting loans, incentivizing the construction of energy-efficient housing and updating grant guidelines that provide states funding to rebuild infrastructure after a major natural disaster.

The move is part of a wider strategy led by the White House and 20 other federal agencies more than a month after Hurricane Ida's unprecedented levels of rainfall left 95 people dead as it flooded Louisiana, New York and New Jersey.

“HUD is taking an agency-wide approach to prioritize climate resilience because we cannot put America on the path to building a stronger and more sustainable housing infrastructure without addressing the impacts of climate change,” HUD Secretary Marcia Fudge said in a statement.

According to HUD, the agency is working with the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture to integrate climate-related financial risk into underwriting standards and loan terms and conditions.

HUD mortgage financing programs, primarily its insurance programs, enable billions of dollars to fund the purchase, refinancing, construction and rehabilitation of single-family homes and multifamily housing, assisted housing and health care facilities. 

Many low-income or first-time homeowners rely on federal financing programs.

Housing and Urban Development Secretary Marcia Fudge says the agency prioritizes "climate resilience."

Federal agencies don't currently take into account climate risk issues, such as flooding, wildfires or subsidence when underwriting loans.

Though the details are being ironed out, factoring climate risk could affect policies as early as 18 months from now that would protect homeowners and last several years.

The Mortgage Bankers Association called for industry-wide climate change reform in a report published earlier this month.

The mortgage industry needs to "prepare for increased reporting to regulators and investors on the quantitative estimates of climate-related risks," said Edward Seiler, the association's associate vice president for housing economics.  

Changes to Federal Housing Administration (FHA) loans would not affect loan terms for current mortgage holders.

HUD hopes to incentivize developers through grants and tax credits to build resilient infrastructure that is energy- and water-efficient beyond programs such as the Green Mortgage Insurance Program, which provides discounts on mortgage premiums for multifamily borrowers.

Hurricane Ida walloped Grand Isle, La., in August.

HUD is transforming how the agency gets aid to states through community development block grants after natural disasters, prioritizing funding for rebuilding efforts in communities of color that increase flood resilience and minimize the adverse effects to floodplains and wetlands. 

People of color are disproportionately affected by climate change and natural disasters. According to a study by the University of Pittsburgh and Rice University in Houston, when a natural disaster hits, white counties with at least $10 billion in damages gained an average of $126,000 in wealth per household after recovery efforts. In counties with a majority of people of color, wealth decreased by $10,000 to $29,000 per household after a natural disaster.

The agency said it will collect data on the impact of climate change to guide decisions and protect renters that live in public housing. 

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