Remarks by CEA Chair Jared Bernstein at the HUD Insurance Summit
As Prepared for Delivery
The question I get most often in my interactions with the media on the economy is why is there such a wide gap between the strong economy and how people feel about it. I think housing is a big part of that gap, but before I turn to that, I’d be remiss if I didn’t begin with a brief take on the current economy.
Of course, this is no victory lap. Every time the President talks about these facts, he starts by acknowledging peoples’ experiences, and how prices are still too high. That, of course, is the motivation behind our aggressive cost-cutting agenda, where we’re trying to get families some breathing room in every aspect of their budgets. Thus, we’ve taken strong actions against high drug and health coverage costs, nuisance and junk fees folks too often face in their everyday lives, energy costs, child care, and of course, the cost of housing.
The decade-in-the-making shortage of affordable housing remains one of the main challenges we face, and we have a plan to fulsomely attack it by adding 2 million units of affordable housing, both multifamily rentals and homeownership. It is an agenda that taps the skill and drive and all of federal agency partners that work on housing including HUD, USDA, VA as well as FHFA, without whom these policies would neither exist nor have a chance of being enacted.
Today, in this meeting, I know you are thinking about another critical and timely dimension of this challenge of housing affordability: home insurance, and the growing stressors on that part of the market. Let me close out these comments with brief remarks about this part of the problem.
First, we know that climate change is augmenting these challenges by increasing the frequency and intensity of extreme events such as wildfires and hurricanes. In the 1980s, the United States averaged 3.3 natural disasters costing over $1 billion per year (in 2023 dollars); in the last three years, the United States has averaged 22 per year, for a total loss of $441 billion. Such numbers have dramatic implications for many aspects of the lives of Americans, including but not limited to insuring single and multifamily homes.
Therefore, policy makers must not think solely of affordable housing. We must pave the way to affordable housing with affordable housing insurance.
This means tackling the root cause: climate change. We must reduce the risks from climate change through 1) improving resiliency and 2) reducing GHG emissions to curb the climate crisis.
President Biden, against tall legislative odds, legislated the most significant investments in climate-change mitigation in the history of our nation, spurring over 80 billion in private clean energy manufacturing investments through the Inflation Reduction Act and committing over $50 billion for climate resilience to fortify infrastructure such as our energy grid, bridges and roads and our housing and buildings through the IRA and the Bipartisan Infrastructure Law. This is a down payment on the security and stability of not just our nation’s, but of our world’s environment.
Some of these measures speak directly to resilience and adaptation necessary to address the dual challenge—housing AND home insurance—of affordability.
–HUD and FEMA have implemented Federal Flood Risk Management Standards, which protect lives and property from flood damage.
— HUD’s Green and Resilient Retrofit Program is investing in the physical risk reduction and resilience of affordable housing across America and hardening them against climate risks, and putting these properties on the path to zero emissions.
–In 2022, President Biden launched the National Initiative to Advance Building Codes – aimed at boosting resiliency, lowering utility bills, and reaching underserved communities. FEMA leads this 20-agency Initiative. Strong building codes save lives, reduce property damage, make properties more insurable, lower utility bills, and cut climate pollution.
–President Biden also directed Treasury to launch a first-of-a-kind effort to collect data on climate and insurance risk, in coordination with the National Association of Insurance Commissioners, to help us understand what we’re up against.
— Because states are the main regulators of insurance markets, it’s critical that we work together to keep homeowner insurance available for all Americans. States, especially those that have not acted yet, need to take steps to address climate-related risks in insurance markets. We commend states implementing policies that incentivize greater physical resiliency to deal with immediate risks. In some states, homeowners now receive a discount in insurance for investing in physical risk mitigation from wind damage using the FORTIFIED standard. Other states are updating their building codes and energy codes to strengthen and protect structures from physical risk, which are invariably more likely to hurt lower-income persons and communities.
Of course, much more is needed. We need to work together with folks like those here today to realize our dual goals of affordable housing underwritten with affordable insurance. Yes, that calls for the stabilization of a market going through an extremely challenging transition. Yes, that calls for Incorporating climate-driven risk reduction and mitigation into pricing models, as well as building out models that reduce risk – building codes, energy codes, and emissions reductions that get to the root cause of climate change. Yes, that calls for the continuing and deepening our actions against climate change. And yes, that calls for taking the fight to those who, in the face of undeniable realities and incontrovertible science, have the audacity to deny challenges that are staring them in the face.
If that sounds like a daunting agenda, then I offer you this. It IS a daunting agenda, but it is one we can, will, and must face down together, and I look forward to doing so with you.
