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After the devastating 2021 floods in B.C. ravaged their homes, homeowners have struggled against the rising tide of pricier debt

More than a year after floods devastated much of the area surrounding Abbotsford, B.C., in November, 2021, Hester Mulder’s fields are bright green, the scent of fertilizer is strong in the air, and farm equipment busily rumbles around.

But take a closer look and you’ll find a messy patch of dirt where her home was before floodwater destroyed it. The cost of borrowing money and a lack of government support have brought their rebuild to a standstill, so Ms. Mulder and her family live in a large storage shed on their property.

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Hester and Ed Mulder play with their dog in front of the only remaining part of their home: the patio. The rest of the structure was destroyed in the widespread floods of 2021.Salmaan Farooqui/The Globe and Mail

It’s a familiar scene throughout low-lying areas of the Fraser Valley, where the lush pastoral landscape of fields and farms is still scarred by gutted homes, unfinished construction sites and patches of dirt where homes used to be.

While some newly restored homes stand tall, other buildings lay damaged and abandoned. In many cases, what’s keeping their owners from rebuilding is high interest rates.

For years, low borrowing costs softened the financial hit of natural disasters to Canadians’ household balance sheets, says John Haralovich, a licensed insolvency trustee. The senior vice-president at MNP is based in the Ottawa-Gatineau region, which went through two so-called one-in-100-year floods in 2017 and 2019.

But for survivors of the 2021 flood in British Columbia there has been no such silver lining, he notes. “The difference between the floods in B.C. and what happened in the Ottawa region was interest rates.”

In the 14 months after the deluge that ravaged the Fraser Valley, interest rates soared, as high inflation prompted both financial markets and the Bank of Canada to push up borrowing costs. Today, pricier debt is preventing many from rebuilding their homes and businesses while saddling others with a heavy financial burden.

Natural disaster survivors often need to load up on debt because money from insurance payouts and government assistance can take months to arrive and cover only a small portion of the financial losses when the funds do land.

In Abbotsford, Ms. Mulder and her husband, both egg farmers, are waiting for interest rates to come down before they borrow funds to start rebuilding their one-storey home, which was ruined by the flood.

In the meantime, the couple and one of their children are living in a one-bedroom suite in a parking shed on their farm. Another child lives in an RV parked inside the shed. They were able to hastily build a comfortable suite in an existing shed that they rent out for parking space and storage, but it’s cramped.

Hester and Ed Mulder walk through the patch of dirt where their home used to stand. High interest rates and a lack of support from the government means they don't expect to rebuild for two more years. Salmaan Farooqui/The Globe and Mail
The couple and two of theri children currently live in a parking shed on the farm. The upstairs portion has a one-bedroom suite, while one of their kids lives in an RV. Salmaan Farooqui/The Globe and Mail

“We took our house down last summer, and we just can’t afford to rebuild at this point,” said Ms. Mulder, who said they had also just finished renovating before the flood.

Higher borrowing costs are also weighing on those who have nothing to rebuild. Graham Zillwood had just $62,000 left on his mortgage, which had an interest rate of around 2 per cent, when the flood wiped away his home on the edge of Coquihalla River along with much of the 1.6 acres of property that used to surround it. Now the retired 68-year-old, who’s been on disability since 1991, has a $90,000 30-year mortgage at around 5.5 per cent on a new house.

The 30-year amortization means he can keep the mortgage installments to around $500, an amount he can manage on his modest pension. But it also means he will likely have to keep making those payments for the rest of his life.

“I will never see a clear title on this land,” he said of the new property, a ranch nestled on a hill in Yale, B.C.

Floods often deal a particularly severe financial blow to Canadians because many households – especially those who live in high-risk areas – have limited or no insurance coverage for that kind of water damage. Only between 40 and 60 per cent of homeowners have home insurance coverage that includes losses from flooding, according to a recent report by Public Safety Canada.

That residential flood insurance is available at all is an improvement compared to a not-so-distant past. Private insurers began offering the coverage – often sold as an optional add-on to a standard home insurance policy – in 2015, the result of an industry reckoning after destructive floods in southern Alberta and Toronto in 2013.

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Teri McMillan surveys flood damage in her daughter’s gutted mobile home in Merritt, B.C. in early June. The catastrophic flooding of the Coldwater River in November 2021 caused a mass eacuation of the area as hundreds of properties flooded.Melissa Tait/The Globe and Mail

But of the Canadians that have since bought some amount of coverage for flood damage, most live in medium- to low-risk areas. That’s because “generally speaking, homeowners in high-risk areas are unlikely to be offered coverage by insurers, and, if available, the cost is likely to be prohibitive,” the study notes.

In regions that are prone to flooding, insurance premiums can reach $10,000 to $15,000 a year for flood coverage alone, according to the report.

To address the issue, the federal government announced in the 2023 budget it is considering an insurance program that would provide affordable coverage to high-risk households. But the budget did not say when Ottawa expects such a plan to be running.

The much older government safety net for survivors of floods and other natural calamities is disaster financial assistance, which, for large-scale events, is administered by provincial and territorial governments but largely funded from federal coffers. That money, too, though, often falls far short of what Canadians need to rebuild.

In B.C., government financial assistance for households is supposed to cover 80 per cent of eligible uninsurable damages, up to a maximum of $400,000 (a ceiling the province raised from $300,000 in September).

But many who’ve received the aid say it covers far less than 80 per cent of their losses. Ms. Mulder, who didn’t have flood insurance coverage, calculated that the funds her family has been awarded so far would cover just 17 per cent of the cost of rebuilding their home. The money is enough to pay for the cost of demolition, laying a new foundation and possibly framing a new structure, she said, adding that she is appealing the government’s funding assessment.

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Graham Zillwood walks around his former property in Hope, B.C., where his home was destroyed in the province's 2021 floods. A staircase used to extend to the river.Salmaan Farooqui/The Globe and Mail

Mr. Zillwood said he received $30,000 from his insurance, which reflected his policy’s coverage limit for overland flooding, and around $100,000 in financial aid, an amount he is challenging in an appeal. With no land on which to rebuild, the total payout amounted to much less than what he would need to buy a new home, he said.

Ms. Mulder and Mr. Zillwood applied for disaster assistance in November and didn’t get the funds until March and June, respectively. Both said they are still waiting to hear back about their appeals.

So is Sam Perera, whose request for government aid was denied. The flood struck roughly a month after Mr. Perera had gotten the keys to his first home in Princeton, B.C., a property he’d bought after years of renting in Surrey.

Mr. Perera said he was in the process of moving to Princeton when the town flooded. At the time, all of his belongings were stored in the new property’s garage, and he’d been spending two days a week making a few repairs on his new property, he said. But because Mr. Perera hadn’t changed the residency associated with his driver’s licence, the province found him ineligible for disaster assistance. (In the same letter, the government also said Mr. Perera stated he did not have an occupancy permit for the home, something he attributes to a misunderstanding.)

Without government help, Mr. Perera, who didn’t have flood insurance, turned to his line of credit to pay for much of the rebuilding. While the Mennonite Disaster Service, a faith-based organization that assists survivors of natural calamities, put in new flooring and drywall for free, he still had to pay out of pocket for anything from plumbing and electrical work to new doors and appliances. To date, his balance on the line of credit has grown to around $62,000.

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The widespread flooding of Merritt, B.C. in November 2021 destroyed many homes near the Coldwater River. In June 2022, seven months after flooding forced the evacuation of the town, the signs of destruction are still visible in the low-lying area along the river.Melissa Tait/The Globe and Mail

Lines of credit have variable interest rates that generally move in tandem with changes in the Bank of Canada’s benchmark interest rate. The central bank has raised its key rate by 4.25 percentage points since March, 2022. But Mr. Perera, who was a bus driver in Surrey and now works on contract as a haul truck driver at Copper Mountain Mining Corp., said he doesn’t know how much interest he’s currently paying on his line of credit. He’s too nervous to look, he said.

What he does know all too well is the size of his variable-rate mortgage payment, which rose from $480 to around $700 bi-weekly. Mr. Perera said he’s waiting to hear about the outcome of his appeal before making a decision about how to tackle the oppressive mountain of debt.

“The minute I try to look at my financial side, I get a headache,” he said.

Of the nearly 2,300 applications for disaster financial assistance that the B.C. government received for the November, 2021 flood from individuals, small businesses, farms and charitable organizations, around 45 per cent were rejected or withdrawn, according to the province’s Ministry of Emergency Management and Climate Readiness. The ministry is currently reviewing 163 appeals.

In Abbotsford, Marni Brechin is among the applicants who were rejected. She received a roughly $50,000 payout from her insurance, which reflected the maximum coverage she could afford. The government only valued potential aid at $19,000, and since insurance already paid more than that, she received nothing.

The government’s estimate is based on the fact that the flood had only reached the first floor of her home. But Ms. Brechin said the damage has been so severe she will have to rebuild the whole house, which her insurance valued at $364,000 for the structure.

Now Ms. Brechin and her husband are stuck. She estimates the real cost to rebuild will be $300,000, which the couple simply can’t afford to add to their mortgage. She appealed the government’s decision in November but has yet to hear anything back.

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Workers vacuum out a small apartment complex in Merritt B.C. in early June 2022. Property owners and the municipality continue clean-up work and consider whether to stay and rebuild as climate disaster frequency increases in the B.C. Interior.Melissa Tait/The Globe and Mail

“I honestly just feel like I’m numb now,” said Ms. Brechin, whose house remains in a rotted-out state on the prairie. “I’ve gone through so many hoops, I’ve written so many letters, I’ve beaten on doors, and I don’t know.”

In the weeks and months after the flood, before insurance and government payouts started to come in, many people rushed to borrow in what Zach de Boer, an assurance services manager at MNP, calls “not the most efficient” way.

There was no shopping around, no inquiring at the bank about borrowing against the home or through the mortgage, a kind of debt that typically carries lower rates. Instead, many ran up their credit card balances or signed up for high-interest loans in an effort to get quick access to cash, said Mr. de Boer, who wasn’t directly affected by the flood but participated in the relief efforts through his local church in Abbotsford, the largest urban centre hit by the disaster.

What Mr. de Boer describes is similar to the post-disaster borrowing that Mr. Haralovich, also at MNP, has observed twice in the Ottawa-Gatineau area. At first, people borrow in whichever way allows them to get cash fast. Then, “when the pressure is off, you revisit your debt load and see if consolidation of the debt is a viable alternative,” Mr. Haralovich said.

That at least, was the case when a good five-year fixed mortgage rate was in the neighbourhood of 3 per cent, if not lower. But with mortgage rates now in the 4 to 5 per cent range, debt consolidation just doesn’t provide the payment relief it used to.

Experts have been worried about the personal financial impact of natural disasters for some time. Climate change, which is increasing the frequency and severity of extreme weather events, and real estate development in high-risk areas are among the main reasons the financial cost of these calamities has soared in the past two decades.

Of the top 10 years in which extreme weather caused the highest insured losses since 1983, nine date after 2010, according to the Insurance Bureau of Canada. In 2022 alone, the tally from insured damages reached $3.1-billion – the third-highest on record – because of what an IBC report calls “disasters from nearly every part of the country.”

“Canada is increasingly a riskier place to live, work and insure,” Craig Stewart, vice-president of Climate Change and Federal Issues at IBC, said in the study, adding that “we’re seeing early signs that property insurance may become less affordable or even unavailable.”

The bill has been even larger for taxpayers. The B.C. government has pegged the response and recovery costs for the November, 2021 flood alone at $3-billion.

The impact of increasingly frequent and violent disasters on household budgets, though, is harder to quantify. Insurance and climate change experts have long feared that ever-larger losses and out-of-pocket costs from extreme weather could push a growing number of households into insolvency. That, however, hasn’t been the case so far, said Blair Feltmate, head of the Intact Centre on Climate Adaptation at the University of Waterloo.

The evidence so far is that “people can absorb one flood and still be able to make their mortgage payments,” he said.

The question, though, is whether household budgets will be able to withstand more than one disaster in the span of a few years, a prospect that’s becoming more likely.

Higher borrowing costs add to that financial risk. In the Ottawa-Gatineau area, where survivors have been able to ride out two major floods Mr. Haralovich worries about what will happen when their mortgage comes up for renewal at considerably higher interest rates.

Mr. Zillwood, for his part, is determined not to let his 30-year mortgage spoil his outlook on life. At the beginning of April, he took possession of his new home, which he was able to buy thanks to a $385,000 buyout from the government, which will now reroute a local road through what used to be his land.

After months of living at his daughter’s home, house-sitting and then renting, he’ll be master of his domain again.

“It will just be so nice to have my own place again and feel like I belong here,” he said.

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