Key Policy Levers Available to States and Localities

No single solution can address these complex and critical challenges. State and local policymakers can deploy multiple tools and levers to support household affordability and resilience to boost long-term housing supply. By doing so, communities will have more housing and be less financially impacted by changing utility and insurance rates and extreme weather events. The proposed solutions require innovation and leadership at the local and state levels.

States and localities can increase housing supply that is insurable, resilient, energy efficient, and low emissions by:

• Incentivizing Energy Efficient Resilient Housing Construction and Rehabilitation: Incentivizing energy-efficient, resilient housing construction by promoting standards that exceed minimum building and energy codes, making buildings stronger, more disaster -resilient, and more energy-efficient. Incentives include density bonuses, tax abatements, expedited permitting, utility programs, low-cost surplus land access, streamlined approvals for proven high-performance designs, low-cost loans through revolving funds, and integration of resilience and energy cost saving measures into housing ballot initiatives.
• Requiring Current Building and Energy Codes: For new construction and major renovations, require current building and energy codes as a base and consider requiring stretch codes with higher performance requirements for stronger homes and deeper energy savings and emissions reductions.
• Preventing New Construction in Risk-Prone Locations and Requiring Mitigation and Resiliency in Areas with Greatest Risk: States and localities, for example, can adopt the former Federal Flood Risk Management Standard to reduce vulnerability to loss of life and property caused by flooding by avoiding construction in flood zones and building in a way to prevent future flood damage such as elevating the home above the flood zone. Local governments can co-invest in infrastructure to support broader neighborhood resilience, such as water management and flood mitigation strategies integrated between the development and surrounding infrastructure.
• Incentivizing Building Hardening Programs: This includes programs like the Insurance Institute for Business and Home Safety’s FORTIFIED certification, which protects homes from hurricanes and hail, and the Wildfire Prepared Home to protect homes from wildfire.
• Incentivizing Weatherization, Electrification, and Onsite and Community Solar: Through expedited permitting and reviews, public land transfers, and programs funded locally through bonds, tax credits,tax abatements, rebates, or utility programs, this can cut existing home energy costs, act as a hedge against rising energy costs, improve grid reliability and resilience, and save lives during extreme heat.
• Creating Housing Near Transit and Right-Sized Housing: Upzoning, infill, mixed use as-of-right zoning, and lifting minimum building and lot size requirements can lower daily transportation costs for residents and make homes more affordable and easier to heat and cool. Cities like Cleveland have created transit oriented development standards and policy tools to enable this work.

Together, these levers lower families’ annual housing costs nationwide, while protecting their home investment. Further, these solutions decrease the likelihood of catastrophic damage to new and existing homes, which changes the odds of insurance risk pools in ways that stabilize the market. State and local governments can be proactive by requiring and incentivizing building codes and standards that make new and existing homes stronger and better able to withstand climate disasters. For new construction and major retrofits, building codes are the number one recommendation of the insurance industry and FEMA to reduce loss from climate disasters and are seen by the current Treasury Department as critical for any future Federal insurance backstop. Yet most of the country doesn’t require or incentivize them. Other standards, such as the Insurance Institute for Business and Home Safety’s FORTIFIED certification can be applied on existing housing — a strategy that has worked in Alabama, which bolstered its insurance industry and made families safer by requiring building codes in high-risk counties and incentivizing FORTIFIED roofs to protect homes from hurricanes.