Breanna Brown, Fordham Environmental Law Review Staffer, Class of 2027 

Bearing striking similarities to the housing bubble that triggered the Great Recession, climate change has created a new crisis in the American real estate market. Rising sea levels, intensifying floods, rampant wildfires, and a real estate market that won’t price climate risk have created a new bubble that will place millions of Americans at risk of catastrophic economic loss when it bursts: the climate bubble.

In a climate bubble, properties are overvalued because the market fails to account for environmental risk. Residential properties exposed to flood risk and other extreme weather events are overvalued from $121 billion USD up to $520 billion USD. As climate disasters intensify and insurance companies cease coverage in expensive, high-risk markets, the market will correct itself, causing property values to plummet. Lenders will refuse mortgages, while insurers deny coverage, and buyers attempt to sell their homes and flee the disaster-ridden areas. Approximately 14.6 million properties face significant flood risk, yet our current regulatory framework does little to disclose the risk to homeowners or accurately price insurance policies. Unless there is immediate policy intervention, in a pattern following a long history of environmental and social injustice, low-income communities will bear the brunt of this burden. 

Improving transparency in real estate transactions at the federal level is a critical step toward mitigating loss after the eventual crash. Low-income homeowners are more likely to purchase homes in high-risk areas because the land tends to be less expensive. In non-coastal regions, lower-income neighborhoods have a 40.6% chance of flooding over 30 years, compared to a national average of 35.4%. Without mandatory disclosures, these buyers may involuntarily assume a risk that destroys their primary wealth asset. It is important to note that many buyers are aware of the risks associated with buying waterfront properties in flood-prone areas, and they do so because they are unwilling to compromise on the access to the beach or waterfront view. However, the far majority of homeowners are people who cannot afford homes in areas less likely to be affected by extreme weather events, or have a cultural difference or language barrier that prevent them from fully appreciating the risks. 

Currently, flood disclosure requirements are set at the state level. New York’s March 2025 law requires sellers to disclose a home’s flood risk, history, and insurance to potential buyers. Florida–the nation’s most flood-prone state–recently enacted Statute 689.302, which similarly requires disclosure of flood risks to prospective purchasers. However, other states trail behind. In Missouri–where floods are the most common natural disaster and around 700,000 residents live in flood-prone areas–there is no mandatory flood disclosure requirement in place. This inconsistent regulatory landscape does not provide adequate protection across the board, especially as weather events become more severe and increase flood risks in previously unexposed areas. 

The climate bubble continues to grow with every real estate transaction. While this is an inescapable truth, it is crucial to remember who will suffer the most when it bursts: the low-income communities that, on average, contribute significantly less to climate change than their wealthy counterparts. Climate change may be environmental, but its fallout is baked into the social inequality that has plagued this nation for centuries. National disclosure standards alone will not cause the climate bubble to shrink back before it causes irreversible damage. Still, it is a logical first step in protecting the homeowners whose livelihoods and personal equity hinge on their home’s value–and one that ensures the stability of the housing market amid rapid environmental change.