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 U.S. 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. But such outcomes need to be validated by further research, according to Walls.
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.
Nearly 91% of California’s homes was built before 2010, and there are 2 million dwellings in high-risk wildfire areas. About 3% to 4% of single-family houses come on the market annually.
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. This is particularly true in California, which also requires home sellers to flag, among other things, water-hogging toilets, possible contamination from lead paint and meth labs, and the potential presence of nearby gas pipelines and registered sexual offenders.
“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 2023 paper he co-authored, however, found that targeted climate-related disclosures can influence home buyers. Working with Redfin Corp., Kahn and his colleagues randomly provided more than 8.5 million users of the real estate service with detailed flood risk information on each property they viewed and then tracked the actions they took.
They found that people who looked at homes with high flood scores subsequently searched for properties with lower flood ratings. Homes with high flood risk sold for lower prices while buyers paid more for those that were less exposed.
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. She said correlating home sellers and buyers’ particular actions with the new disclosure requirements will prove challenging.
“You don’t really know how people interpret the information they’re given,” said Walls. “But drawing attention to these risks may make people step up and do more.”
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.
To document that they’ve complied with defensible space regulations, home sellers must request an inspection, usually from their local fire department. Alternatively, the buyer can agree to obtain such documentation after the sale closes.
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.
Valdez, the fire inspector, said 6,259 parcels in Monterey and two adjoining communities are subject to the 2020 disclosure law. That includes much of Carmel-by-the-Sea, a village of 1920s storybook cottages with highly combustible wood-shingle roofs. Her department does about 15 to 20 pre-sale inspections per month and conducts annual defensible space inspections.
“Maybe it’s because of insurance or seeing these devastating fires, but people are doing the work around their houses and are starting to take the steps that they can afford to start doing the home hardening,” said Valdez.
Top photo: A home burns during the Mountain Fire in Camarillo, California, in 2024. Photographer: Eric Thayer/Bloomberg.
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