Possible consequences of climate change, such as extreme heat and heavy precipitation, must be more prominently reflected in the value of a house when valued and sold. Regulator AFM wants to increase awareness of climate risks among home buyers by, among other things, giving houses a climate label.
The climate risks that the AFM refers to include, for example, possible damage to foundations as a result of drought. This can lead to subsidence. Or it concerns possible flood damage.
The AFM points out that repairs to a damaged foundation can easily cost 54,000 euros. And that damage due to river flooding is not yet insurable. This type of damage can lead to a significant drop in the value of the home. According to the AFM, the question is whether the homeowner can bear the costs of the damage himself, as well as the loss of value of the home.
According to the AFM, if buyers could take climate risks into account when purchasing, they would pay a fairer or lower purchase price. With the money they save, they might be able to reduce the risks.
‘Houses used to be figuratively under water, now literally’
“Ten years ago we were concerned about houses that were figuratively under water,” says AFM CEO Laura van Geest. At that time, many Dutch people owned a home that was worth less than the mortgage that had been taken out for it. “Now we’re worried about homes that could literally be flooded.”
The AFM wants houses to receive a kind of climate label, just like an energy label. This must include climate risks, so that potential buyers, banks, real estate agents and appraisers can work with them.
It should also be mandatory for sellers to inform potential buyers of all climate risks. In addition, the AFM wants climate risks to be taken into account in lending standards and for banks to be able to co-finance the approach to, for example, a defective foundation.