More Hurricanes, More Fires: Multifamily Managers Cope With Heightened Risk

As Hurricane Ida made landfall on the Louisiana coast on Monday, half a continent away, residents of South Lake Tahoe, California, were leaving under a mandatory evacuation order in response to the massive Caldor Fire, one of a number of large fires bedeviling the West. 

Disasters happen every year, but their frequency has been edging upward in recent years. For multifamily property managers, preparing for the worst is a more critical part of their job than ever, even if the worst never happens in most places.

Real estate investment companies, which are quite keen on multifamily as an asset class these days, are also taking a much closer look at climate risk, Amli Management Co. East Region President Dan Gladden said. That isn't keeping investors away from places with hurricane or fire risk, but the risk is being reflected in planning that is specific to the circumstances.

"I tell people that the key is to plan ahead and be prepared, but also understand that every community is different and what that means for preparedness," Gladden said. "We hold meetings at the beginning of each hurricane season to walk through procedures and plans."

Amli has properties in Houston and Florida, places with exposure to hurricanes, and in Southern California, with its risk of earthquakes and fires. Although many of the company's frontline property managers are very familiar with the risks to their communities, it isn't safe to assume everyone knows everything they need to every year. And, of course, some members of the team are still new at their jobs, Gladden said.

It is much easier to educate the team ahead of time rather than when a storm is bearing down on them, he said, and easier to confirm that the properties are ready by noting that the right supplies are stocked, shutters are in working order, drains are clear and other details.

"You always need to work at maintaining your relationships," Gladden said. "Such as those third-party vendors and contractors that you've used over the years. Long before hurricane or fire season is the time to give them a call and say, 'You and I have worked together for a long time. You're going to be the first one I call to come out and help if I have damage.'"

Though the hurricane season officially begins in June, it tends to peak in early September. This year, the National Oceanic and Atmospheric Administration predicted a total of 13 to 20 named storms, six to 10 hurricanes and three to five major hurricanes, defined as Category 3 and higher. So far, there have been 11 named storms and four hurricanes.

In the 2020 hurricane season, the U.S. was the ultimate destination for a record 30 named storms. The Louisiana coast took hits from three of those storms, and Hurricanes Laura and Delta made landfall at roughly the same place less than six weeks apart.

Last year wasn't an anomaly. Hurricane frequency and intensity has edged upward in recent decades, though separating the effects of human-influenced climate change from natural variability of hurricanes is difficult. Even so, the rise in hurricane activity poses an increased threat to the U.S. coasts and well into the interior.

Besides increases in the number and strength of storms, other factors are at work making their damage more costly. Over the past four decades, there has been a 70% to 90% increase every decade in total inflation-adjusted losses from weather events in the United States, according to CoreLogic's 2021 Hurricane Report, citing the NOAA National Centers for Environmental Information.

"Many of the increases are driven by population migrations from expensive metropolitan areas to high-risk, more affordable coastal areas," the report said.

"I would argue that Hurricane Katrina escalated the national conversation about readiness and preparedness," National Multifamily Housing Council Vice President, Government Affairs, Technology and Strategic Initiatives Kevin Donnelly said. "The aftermath of the storm in particular shifted the multifamily industry to a more ready footing when it comes to natural disasters."

Communications among staff and between staff and tenants have improved in the years since Katrina with the ubiquity of cellphones, though service can be interrupted by a storm. 

Even with some advancements, the coronavirus pandemic has shown the industry is still coming up short in its approach to emergency planning, regardless of what the potential disaster is, Donnelly said. In short, there is much room for improvement.

"By and large, institutional owners are certainly better prepared," Donnelly said. "They have more resources dedicated to it, and in the years since Katrina, preparedness has been baked into their operational plans, from the C-suite down to the leasing office. Smaller players have a harder time when it comes to preparedness, but there are resources available to them."

For both large and small apartment owners, the single best resource in times of crisis or disaster is the Federal Emergency Management Agency, Donnelly said. Just as importantly, apartment owners and managers need to build relationships with local public health and safety officials well in advance so that they have the ability to tap into their resources for help in a crisis.

CKR Property Management CEO Caroline Kane stresses communication between staff and residents before an emergency. Property managers and supervisors make sure that all contact numbers for employees are up to date, Kane said. CKR is a Houston-area apartment management specialist.

"Residents should be made aware ahead of the storm how the property will be communicating with them," Kane said. "Establish a means of communication with the residents should staff not be able to make it to the property. A text software or even Facebook and FB messenger is sufficient."

Brandon, Florida-based PMI Arrico Realty & Property Management owner Paul Arrington said one change over the years has been a more proactive approach.

"We try to make sure that they are aware of their surroundings here in Florida," said Arrington, whose company manages Florida single-family properties and townhouse units as well as properties for homeowners associations. "A lot of times we have people moving from up North, and they're not quite sure what to expect." 

Electronics have facilitated improved communication with his residents, a key consideration in passing along information from official sources, such as the American Red Cross or the National Hurricane Center, he said.

"It can be simple things like put away your patio furniture," Arrington said. They don't understand that a hundred mile per hour wind can take that grill and put it through somebody else's house."

During his career in the armed forces, Arrington was stationed at Homestead Air Force Base in South Florida in 1992 when it was evacuated ahead of Hurricane Andrew, which severely damaged the base.

"The devastation there was just — I mean, I saw a motor home on top of a house," Arrington said. "I've experienced some of the worst, and of course, you can't convey that to people exactly. But you know what can happen."

During a hurricane that affected some of its properties, Dania Beach, Florida-based FirstService Residential used a customer service center across the continent to handle all customer service calls for its customers in the Southeast, according to FirstService Vice President of Strategy and Operations Stephanie Parker. Having that resource available meant that, even while local offices were without power, tenants were still taken care of.

“I found that it’s important to see who is staying behind at the property and if they are OK with management checking in with them regarding the status of the community,” FirstService Regional Director May Mokdad said. “This helped us prepare for after the storm.”

Mokdad said that during one storm, winds broke a property's generator exhaust fan, and the fumes from the generator set off the property's fire alarm at the height of the storm. 

“Because I had a copy of the maintenance manual handy, I was able to talk one of the board members through how to reset the alarm from Orlando," Mokdad said, adding that she was also able to contact the fire alarm monitoring company so they didn’t call the fire department.

Preparedness plans should also include what to do before an event. Kane said that CKR preps its offices and properties a day ahead of landfall. 

"We secure all pool furniture, potted plants, board up offices, and unplug and move all electronics onto an elevated surface," she said. "Notices are sent to residents to secure all patio furniture and potted plants."

Afterward, the company uses a spreadsheet to track reports of damage as they come in and maintains the spreadsheet as repairs are completed. It is also used to track insurance claims.

As Ida rolled through Louisiana and onward, hurricane risk was at the top of the news cycle, but major storms aren't the only kind of disaster that multifamily faces. Vicious wildfires are burning in the western United States, and the likelihood of future fires is increasing, according to a report by Climate Central.

“As wildfire weather becomes more prevalent, there are more days when extreme conditions can blow small blazes up into big ones or fuel the continued growth of large wildfires,” the report says. 

The report details the change in the number of "fire-prone days" in 17 Western states from 1973 to 2020, which are days when temperatures are at least 45 or 55 degrees Fahrenheit (depending on the season) with winds higher than 15 mph and low humidity. Such conditions don't guarantee wildfire ignition but represent conditions under which it is more likely.

Since 1973, some parts of California, Oregon, Texas and Washington have seen their fire-prone days roughly double, and other parts of the West have seen increases in the number of such days.

Big events such as hurricanes or massive wildfires might grab headlines, but they aren't the only risks posed by a wilder climate. This year, a heat dome baked parts of the Pacific Northwest that weren't used to such temperatures, an ice storm took Texas and its electric grid by surprise and a freak set of inland storms flooded part of Tennessee without much warning, among other disasters.

Climate change and urban sprawl are driving such losses, Swiss Re Head Cat Perils EMEA Tamara Soyka told The Wall Street Journal. Insurers, who tended to focus on big weather events, are increasingly incorporating secondary peril into their models.

"The increased risk posed by extreme weather events, whether it's a hurricane like we've seen this week or the wildfires out West, is something that the multifamily industry has to take into account," Donnelly said.