A Fiduciary Duty: Why the Housing Market Must Invest in Resilience

By Alexis M. Pelosi, Former Senior Advisor for Climate at HUD, Principal at AP Strategies, LLC

The Urban Institute’s article “A Perfect Storm of Rising Costs Threatens America’s Housing Market” correctly identifies a “quiet crisis” that is brewing in housing markets across the country. The report used Harris County in Texas—home to Houston—as a case study of a national trend: underinsurance and rising housing costs are not only making homeownership increasingly unaffordable, but they’re also creating hidden vulnerabilities in housing markets across the country as risk is shifted from institution to homeowner.

To build on its analysis, we must reframe how the housing industry thinks about the public infrastructure that underpins every home’s value. From stormwater systems to flood mitigation projects, we must redefine community-level investments in resilience not as a municipal cost, but rather as a direct investment in preserving property values and stabilizing the private cost of homeownership.

The 30-year fixed-rate mortgage has long been a pillar of American financial stability, anchoring both family wealth and community prosperity. But more frequent climate disasters, rising property values, and soaring insurance premiums are eroding that foundation of the U.S. housing market. (From 2021 to 2024, annual insurance premiums for a typical homeowner increased by 24% nationally, or an average of $648).

The 30-year mortgage also faces structural risk as the physical infrastructure that once supported its reliability is under strain. Today, the housing market is increasingly penalizing assets that are unprotected from weather, creating a feedback loop that ties personal and public investment together.

With more than $35 trillion, or 21% of American total household wealth, held in home equity—an increase of nearly 80% since 2020—investing in resilience has become a fiduciary responsibility to homeowners, lenders, and every institution whose balance sheet depends on housing stability.

To meet this challenge, we must think differently about how resilience is financed and how its benefits are captured. State Revolving Funds, or SRFs, for Resilience offer an important model. They allow states to transfer their lower cost of capital to local communities, financing infrastructure that safeguards property values and mitigates systemic risk. This structure provides a framework for scaling resilience investments in ways that are fiscally responsible, locally grounded, and economically productive.

The Environmental Protection Agency's Clean Water SRFs have provided over $172 billion in funding across hundreds of projects. In one example, facing increased intensity of rain and flooding, the City of Lubbock, Texas, financed $35 million wastewater infrastructure upgrades, fortifying residential areas in the city.

The SRF approach does more than fund stormwater projects or coastal defenses. It transforms resilience into a form of long-term value creation, allowing both governments and homeowners to share in the benefits of reduced risk and stable property markets.

Those benefits, often referred to as Resilience Dividends, extend beyond avoided losses. They include lower insurance premiums, stabilized housing markets, improved access to credit, and reduced municipal borrowing costs. These outcomes are ancillary in nature, emerging not from a single investment but from a collective system of protection that strengthens communities over time. Resilience Dividends represent the financial and social return of proactive risk management. They are the quiet rewards of shared security.

To fully capture these dividends, we must see resilience across the full spectrum of investment—from the individual homeowner deciding what and where to buy to the community investing in the infrastructure that makes that home viable.

We already know that the value and insurability of homes are tied to the strength of community infrastructure. Yet the conventional tax-and-bond model used to fund that infrastructure forces homeowners to shoulder the rising costs of climate risk through tax hikes and insurance surcharges. Rather than continuing to pass costs to households, we should adopt proven financial structures that treat resilience as an essential service for protecting home values and community stability.

Tulsa, Oklahoma, offers one example of what this approach can yield. A stormwater utility fee there helped finance flood mitigation projects that resulted in a Class 1 Community Rating System score and up to a 45% reduction in flood insurance premiums for residents. The result was direct financial relief for homeowners and a stronger, more affordable housing market for the entire community.

The Urban Institute’s brief is an important warning. Our response must be specific and focused. We have a fiduciary duty to invest in resilient infrastructure and to embed avoided losses and Resilience Dividends into the decision-making processes of housing finance. Resilience is not an optional expense reserved for moments of recovery. It is an ongoing investment that stabilizes property values, strengthens markets, and secures the American dream of homeownership for future generations.

This work underscores a simple truth: every person in the nation is subscribed to the resilience challenge, whether they recognize it or not.