As the effects of climate change grow more apparent, the question of where to build is due to become a significantly more complicated affair. 

A case in point comes from a recent report in The New York Times highlighting the ties between financing, land-use, and climate vulnerability.

The report delves into a paper studying the ways in which financial lenders are already shielding themselves from exposure to climate-vulnerable real estate investments by shifting risky mortgages over to the American federal government via institutions like Fannie Mae and Freddie Mac. According to The New York Times, because the two entities cannot include risk of natural disaster as part of their mortgage pricing strategy, the move effectively allows the mortgage companies to receive full-rate for investments that might otherwise be worth less than stated. According to the report, the increasing number of mortgages tied up held under this arrangement raises "troubling questions about who will bear the financial cost of climate change in the United States." 

Not only that, but the loophole also effectively subsidizes construction in climate-vulnerable areas, since banks can effectively offload risky assets for effectively no cost to them. The potential financial impact of these assets, according to the report, could eclipse the losses seen during the housing crisis that fueled the Great Recession. Sean Becketti, former chief economist at Freddie Mac, is quoted in The New York Times saying, “The economic losses and social disruption may happen gradually, but they are likely to be greater in total than those experienced in the housing crisis and Great Recession. It is less likely that borrowers will continue to make mortgage payments if their homes are literally underwater.”