Prioritise climate-vulnerable neighbourhoods

• Problems with the foundations, the risk of flooding and overdue sustainability measures are all examples of problems that can throw household finances off balance.

• Despite extensive coverage of the accumulation of these problems, it is our conclusion that very few places face all these problems simultaneously.

• However, this does not alter the fact that the Netherlands has 90 climate-vulnerable neighbourhoods, which simply lack the capacity to deal with one, or sometimes two, of these problems at the same time.

• The government, owners and financial institutions should work together to prioritise these climate-vulnerable neighbourhoods, starting with the 19 neighbourhoods where over 70% of buildings are privately owned.

• Climate risks urgently need to be factored in throughout the Netherlands. This will lead to the costs of repair being shared between current and future owners.

Accumulation of climate and sustainability risks generates climate-vulnerable neighbourhoods

At the moment, climate risks are barely factored into house prices, which means that houses with high climate risks are no cheaper than houses without.As a result, the cost of potential future climate damage is disproportionately high for buyers, while home-owners are in jeopardy of negative equity, which can lead to a residual debt. These are ABN AMRO’s conclusions in a study entitled ‘Stapeling klimaatrisico’s en financiële draagkracht op de woningmarkt’ (Accumulation of climate risks and financial capacity on the housing market), due to be published on Tuesday 28 November. This report is the first to pinpoint the locations in the Netherlands where climate risks are accumulating and where residents are becoming financially vulnerable. The study reveals that two or more risks are accumulating in 90 vulnerable neighbourhoods. The analysis combines data from the Key Register of Addresses and Buildings, Statistics Netherlands, the Climate Impact Atlas and the ‘Landelijk Informatiesysteem Water en Overstromingen’ (National Information System for Water and Floods). This is the first time that this data has been amalgamated for research purposes.

Area and concentration of each neighbourhood key in determining sensitivity to climate risks

Neighbourhoods designated as ‘climate vulnerable’ in the analysis are areas where it is more than likely that the residents will not be able to shoulder the burden of climate risks. In these neighbourhoods, over 10% of houses have a medium to high physical climate risk (flooding, foundations or sustainability measures), an average property value (according to the Dutch Valuation of Immovable Property Act) of under €350,000 and an average household income of under €35,000. Most neighbourhoods like this are in cities and in the north and west of the Netherlands. Many of them are built in rural areas, on peat or clay soil, which dries out quickly during periods of dry weather. Most of the neighbourhoods at risk of flooding are situated along the River Meuse. The value of these properties and average household incomes are lower than in the rest of the Netherlands, and the percentage of home-owners is relatively high.

Climate damage recovery fund needed to protect the most vulnerable neighbourhoods

The consequences of climate change can gradually reduce the value of properties in specific locations. “The aggregate view of the Netherlands shows that the problems certainly aren’t occurring everywhere, but that there are specific neighbourhoods where the risks are accumulating. This requires a customised solution - such as a recovery fund for climate damage, which can also fund sustainability measures,” says Bram Vendel, Housing Market Economist at ABN AMRO. “Our study is the first to pinpoint the most climate-vulnerable neighbourhoods in the Netherlands. However, when looking at the Netherlands as a whole, physical climate risks are rarely taken into account when buying a house, unlike sustainability measures. This is slowing down the adaptation process and lowering the capacity to limit damage, which is why it’s crucial to make all those involved aware of the risks that can be caused by climate change.One measure could involve looking at potential buyers’ capacity to bear repair costs during mortgage advice meetings.

Read the report here (only in Dutch).