California has become the first state in the U.S. to require sellers of older homes in high-risk wildfire zones to disclose not just the property’s fire risk but also what measures have been taken to reduce those vulnerabilities, according to a recent Bloomberg article.
New Disclosure Rules
The new rule applies to homes built before 2010 and took effect in July. Sellers must now identify features that increase wildfire risk, such as:
- Combustible roofs
- Uncovered vents
- Single-pane windows
- Vegetation within five feet of the structure
Documentation showing improvements may also assist buyers when applying for homeowners’ insurance, as insurers are increasingly limiting exposure in disaster-prone areas.
Background on California’s Wildfire Disclosure Law
California first enacted a two-part wildfire disclosure law in 2020 after years of destructive wildfires:
- 2021: Sellers in designated high and very high fire hazard zones were required to provide proof of compliance with defensible space regulations, limiting vegetation that could ignite a home.
- 2025: The home hardening provision now requires sellers to disclose whether a property’s construction makes it more vulnerable to fire.
Future requirements are scheduled for 2029, when all existing homes in high-risk zones will be mandated to remove combustible material within five feet of buildings.
Impact on Home Sales and Insurance
Nearly 91% of California homes were built before 2010, with about 2 million located in high-risk wildfire areas. Roughly 3% to 4% of single-family homes go on the market each year.
Experts note that insurers are more likely to offer coverage to homes that have implemented fire-risk reduction measures. According to Jennifer Valdez, a fire inspector with the Monterey Fire Department, many homeowners are beginning to adopt hardening strategies, citing both insurance considerations and the reality of recent devastating fires.
Seren Taylor, vice president of the Personal Insurance Federation of California, said insurers give preference to homes that have taken steps to reduce wildfire threats. He noted that the point of sale is a key opportunity to encourage upgrades to older housing stock.
Economic Research on Risk Disclosures
Research has shown that climate risk disclosures can affect home prices:
- Homes with higher disclosed risks often sell for less.
- Buyers may pay more for properties that demonstrate resilience improvements.
- Economists caution that further research is needed to measure the long-term effects of these disclosures.
A 2023 study involving more than 8.5 million users of Redfin found that targeted disclosures, such as flood risk ratings, influenced buyer behavior, leading them to seek lower-risk properties. Economists suggest California’s wildfire disclosure law could produce similar outcomes.
Compliance and Local Enforcement
According to the California Association of Realtors, sellers appear to be following the new requirements without significantly disrupting sales. Compliance involves inspections from local fire departments to certify defensible space, or buyers may agree to obtain certification after closing.
For example, in Monterey and nearby communities, more than 6,000 parcels are subject to the disclosure law. Local fire departments perform pre-sale inspections and annual checks for defensible space.
Looking Ahead
While it remains unclear how much these wildfire disclosures will influence buyer and seller behavior, the law underscores the growing emphasis on adapting existing housing stock to withstand natural disasters. California’s approach is being closely watched, as climate change continues to drive wildfire and flood risks nationwide.
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