This paper presents empirical data on household perceptions of capability to adapt to climate hazards and associated capacity needs. Households play an important role in responding to the impact of a changing climate by creating a functional link between individual and community responses to change. However, household perspectives on their capacity needs are rarely sought in programs seeking to provide incentives for household action—despite the influence of normative values and perceptions on household action. Rather, interventions are often informed by quantitative measures of adaptive capacity, such as access to financial or social capital. An alternative approach involves analysis of social narratives of capability that reflect normative perceptions of climate risk and capacity needs. Implementation of this approach reveals that a significant number of households in vulnerable locations consider existing capacities sufficient to manage familiar climate hazards, regardless of socio-economic circumstance. Our comparative study of two Australian coastal communities also suggests that a dominant narrative of capability to manage climate hazards reduces the likelihood of household investments in adaptive actions. While socio-political influences on narratives are often deeply embedded and difficult to change in the short term, identifying perceived risk and response capacity is pivotal in determining the likely utility of adaptive capacity stocks as measured through quantitative means.