Rising Seas Threaten an American Institution: The 30-Year Mortgage

There was nothing magical about a period of 30 years, Dr. Caplin said; it simply proved useful, making payments predictable and affordable by stretching them out over decades. “It was designed from a viewpoint of a consumer, who wouldn’t find it too hard to understand exactly what they had committed to,” Dr. Caplin said.

But now, as the world warms, that long-term nature of conventional mortgages might not be as desirable as it once was, as rising seas and worsening storms threaten to make some land uninhabitable. A retreat from the 30-year mortgage could also put homeownership out of reach for more Americans.

Changes to the housing market are just one of myriad ways global warming is disrupting American life, including spreading disease and threatening the food supply. It could also be one of the most economically significant. During the 2008 financial crisis, a decline in home values helped cripple the financial system and pushed almost nine million Americans out of work.

But increased flooding nationwide could have more far-reaching consequences on financial housing markets. In 2016, Freddie Mac’s chief economist at the time, Sean Becketti, warned that losses from flooding both inland and along the coasts are “likely to be greater in total than those experienced in the housing crisis and the Great Recession.”

If climate change makes coastal homes uninsurable, Dr. Becketti wrote, their value could fall to nothing, and unlike the 2008 financial crisis, “homeowners will have no expectation that the values of their homes will ever recover.”

In 30 years from now, if global-warming emissions follow their current trajectory, almost half a million existing homes will be on land that floods at least once a year, according to data from Climate Central, a research organization. Those homes are valued at $241 billion.

Currently, new research shows banks rapidly shifting mortgages with flood risk off their books and over to organizations like Fannie Mae and Freddie Mac, government-sponsored entities whose debts are backed by taxpayers. In a paper this month in the journal Climatic Change, Dr. Keenan and Jacob T. Bradt, a doctoral student at Harvard University, described the activity, which suggests growing awareness among banks that climate change could cause defaults.

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