Climate-risk scores displayed on real estate websites could cost homeowners money and diminish their property values, Florida alleged in a lawsuit against the company behind the ratings.
Here's what to know
Nebraska took a similar action in August. Florida's case, filed Oct. 23, named First Street Technology, whose models estimate properties' exposure to floods, wildfires, severe heat, and wind, according to Bloomberg via Claims Journal.
First Street said it helps consumers weigh home purchases by clarifying the climate hazards a property faces. First Street assigns scores from 1 to 10, assessing risks at individual addresses decades into the future.
While seeking another term as Florida's attorney general, Republican James Uthmeier announced the lawsuit on X and challenged the accuracy of First Street's data.
"Homeowners deserve facts, not alarmist scores that hit their property values and their wallets," he said.
More background
Homebuyers gained access to First Street's climate modeling through scores incorporated by Zillow, Redfin, and Realtor.com, according to Bloomberg. The sites began using the ratings after the company's first major report came out in 2020.
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The prospect of lower property values and disrupted sales has prompted concerns among sellers and real estate agents.
A narrow geographic focus may make climate-risk models unreliable. A 2024 Bloomberg comparison of First Street's 2020 Los Angeles flood-risk estimates with an academic team's results found only 25% overlap.
The dispute comes as steep insurance-rate increases contribute to a homeowner affordability crisis, according to Bloomberg.
Florida argues that inaccurate scores could also affect insurance coverage and premiums.
What's being done?
Sellers and agents had challenged the prominent placement of First Street's ratings on Zillow listings. According to Bloomberg, Zillow removed the ratings after the California Regional Multiple Listing Service objected.
In contrast, Connecticut residents were offered no-cost property assessments through a collaboration between First Street and the state's insurance department, according to Bloomberg.
A request for comment went unanswered by MSCI, which acquired First Street.
Madison Condon, a law professor at Boston University who researches regulation, finance, and climate risk, raised concerns about First Street's marketing but said uncertainty in modeling does not necessarily amount to intentional deception.
"And scientific models can disagree without being willfully deceptive," she told Bloomberg.
Condon also warned that the lawsuit's consequences could extend beyond First Street.
"There are also real concerns that a lawsuit of this type could chill the provision of physical climate-risk data in general," she said, according to Bloomberg.
Where can I learn more?
Florida homeowners are contending with rising insurance costs, storm damage, and difficult home sales.
• Florida homeowners say an insurance overhaul benefited insurers while their premiums kept rising.
• Florida's 2023 homebuyers were selling at losses, with those in St. Johns County topping the list.
• As hurricane season peaked, most Florida homeowners' policies wouldn't cover flooding.
• A Florida couple received just $2,279 from insurers after two hurricanes destroyed their home.
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