Global temperatures are going sharply up while US cities' financial ability to cope with the ravages of accelerating climate change is going sharply down

Maybe people are hoping to buy the city dip

Apr 17, 2025

The buildup of risk being caused by our nationwide reluctance to deal with the consequences of climate change is becoming more obvious. The bill will likely end up being paid by ordinary Americans, and particularly people who live in cities.

It turns out that 2015 was an important year for the intersection of climate change and finance. That year, global warming began speeding up—a long-lasting anomaly that hasn't stopped since and likely won't stop in 2025 (although scientists won't know that until the year ends). And that was the year Mark Carney, then the Bank of England governor and now Canada's prime minister, made a famous speech about the temporal mismatch between financial planning and accelerating climate impacts—something he called the "tragedy of the horizon"—and the need to find ways to incorporate longterm climate risks into financial decision-making.

We have learned since then that the physical risks of climate change are both greater (with doubling of C02 likely causing higher temperatures than current IPCC models show) and coming sooner than we thought ten years ago—making the "horizon" in Carney's phrase much closer than anyone thought in 2015.

The ongoing, ferocious transition in where and how we live is unquestionably underway, whether or not officials are planning for it: chronic, extreme climate-related effects are already happening, and many of these nearer-term risks are being priced in by the most liquid elements of the financial markets, like insurance and reinsurance. Still, many decisions being made now by policymakers about how to prioritize, measure, and withdraw investments inadequately reflect the known physical risks of rapidly accelerating climate change. (I talked to Louie Woodall about this larger picture earlier this week on a Climate Proof podcast.)

Meanwhile, the constraints keeping cities from adjusting are markedly increasing.

Most people in America live in cities. Our economy is built on what happens in cities. But the current federal administration, it is fair to say, is not focused on the needs of cities. Earlier this week, the administration issued executive orders "encouraging agencies to move out of downtown districts," according to Bloomberg's Gregory Corte, reversing Carter/Clinton directives aimed at moving them into downtowns. Members of the House Budget Committee have pointed to eliminating or trimming the tax-exempt status of municipal bonds as a source of revenue. State governors, wary of retribution, are not speaking up in favor of the exemption. Events are moving quickly. The threat is real, and it would have enormous consequences for cities and their residents.

Here is Houston's independently-elected Chief Financial Officer, Chris Hollins, speaking at a Bond Buyer conference last week:

Municipal bonds are one of the most important tools we have for funding major infrastructure projects—public safety, roads, water systems, schools. If Congress repeals the tax-exempt status, it would drive up borrowing costs for Houston by 15 to 20 percent, at a time when one out of every six general fund dollars already goes to debt service.

If that happens, it means fewer dollars going to critical city services and more going to interest payments. It means more pressure on property taxes. And it means Houstonians will be paying more for less. It’s almost like…an unnecessary tariff coming out of nowhere for no reason.

Chris Hollins, speaking at The Bond Buyer's Texas Public Finance Conference.* (LinkedIn).

Houston is already facing billions in costs for rebuilding its wastewater system, and Hollins wants the city to rein in overtime spending for the city's sanitation, fire, and police departments. All of this is happening at the same time federal aid is drying up. Houston is facing severe financial headwinds.

At the same time, some parts of Houston are, like Florida, facing both declining real estate prices and severe physical risks associated with climate change. Here is a snapshot of Houston from an article this week in the Washington Post (“Home prices are dropping in some cities. See what it’s like in your neighborhood”).

From the Houston Chronicle a year ago:

The acceleration of extreme climate and weather disasters in the United States has wrought a death toll thousands deep while inflicting billions in economic losses over the past four decades, and data show that Harris County sits at the epicenter of the devastation. . . .

A National Centers for Environmental Information (NCEI) study ranked Harris County as having the highest weather and climate hazard risk after considering its physical exposure to natural disasters, along with the vulnerability and resilience of its population and infrastructure, including homes, businesses, vehicles and crops.

It's not just Houston. Put yourself in a city CFO's shoes. You're trying to plan ahead to avoid building in floodplains, encourage flood mitigation, and generally keep people safer from chronic flooding, extreme weather, extreme heat, wildfires, and all the other harms predictably coming your city's way. Meanwhile, federal aid is evaporating, some of your property values are going down (affecting property tax revenues), insurance is exiting or becoming unaffordable for many (affecting property values), and now reliable federal tenants in your downtowns are pulling up stakes and leaving. Borrowing money may become sharply more expensive at the same time that construction costs—profoundly affected by tariffs as well as inflation generally—are climbing. All of this makes for a truly difficult job, the costs of which will end up on residents' shoulders one way or another.

The current federal administration does not seem to have the interests of ordinary city residents in mind, even though something like 90 percent of the country's GDP comes from cities, with the top 25 metro areas accounting for roughly half of our economic activity.

A cynic would say that the people actually benefiting from these policies must have other plans. Maybe they are hoping to hire private security forces and ride out the ruckus, then snap up distressed but beautiful city properties at lower prices.

Buying the city dip. It's an unthinkable thought.

*More from Hollins's remarks last week:

And let me be even more direct—Houston doesn’t have the luxury of inaction. We must invest in public safety. We must repair our aging infrastructure. These aren’t optional. They’re essential to our residents’ safety, quality of life, and the long-term economic growth of the city I call home.

At a time when families and businesses are already grappling with rising costs—from groceries to housing—the last thing we need is for government to make things worse by increasing the cost of critical services and investments.