Global Warming Could Sink Coastal Real Estate Market
Rising sea levels are changing the way market considers waterfront real estate.
According to the Seattle Times, rising sea levels are altering the way mortgage lenders, insurers, and budding buyers view coastal and waterfront real estate, as the risk of potential catastrophic damage as a result of climate change becoming increasingly too great to ignore. Once at the vanguard of high-end real estate, waterfront properties now face growing scrutiny as economists warn that developers, insurers, and banks need to do more to protect their collateral from the effects of climate change. And significantly, this shift in the market could have a powerful effect on the American real estate market.
In the past five years, home sales in flood-prone areas grew approximately 25 percent slower than in counties that do habitually flood, according to Attom Data Solutions. Many coastal residents are selling up and moving to safer ground, as buyers become wary of purchasing homes in areas vulnerable to rising sea levels and flooding.
On initial inspection, one might not consider waterfront properties to make up a sufficiently sizable segment of the U.S. real estate market that shifts in its foundations could warrant such drastic economic warnings. And yet, a staggering 40 percent of Americans live and work in coastal areas, dramatically amplifying the effects of the waterfront property market on the rest of the U.S. And with notorious global warming skeptic President Elect Donald Trump planning to take office imminently—and his selection of Myron Ebell to lead the Environmental Protection Agency transition team, a man who has helped lead the charge against the scientific consensus that global warming exists—economists are offering intensifying warnings to the real estate industry to factor in risk-damage to new deals.
In April 2016, Sean Becketti, Chief Economist for the government-backed mortgage giant Freddie Mac, issued a doom-laden prediction: It would only be a matter of time before sea levels rise and storm surges become so unbearable in coastal areas that residents will leave in droves, ditching their existing mortgage and triggering another financial meltdown.
Indeed, says Ian Urbana of the Seattle Times, “Some analysts say the economic impact of a collapse in the waterfront-property market could surpass that of the bursting dot-com and real-estate bubbles of 2000 and 2008. The fallout would be felt by property owners, developers, real-estate lenders and the financial institutions that bundle and resell mortgages.”
So, how can individuals who own existing waterfront property protect their investment, and brace the market to ward off imminent collapse? For those who can afford it, building private bulkheads is an expensive but tenable option, as is the logistically terrifying choice of elevating homes onto permanent stilts. And yet, in spite of these entirely plausible preventative measures, the cost of flood insurance is rising faster than the water itself. Even worse, as premiums rise, property values fall, putting homeowners in increasingly difficult positions where they can no longer afford to remain in their homes, but are unlikely to be able to sell—a pattern already visible in places like Atlantic City, NJ.
In fact, it would seem the New York area is at significant risk of succumbing to this environmental down-turn, as a report from the Regional Plan Association outlines the impact that one, three, and six feet of sea level rise could have on the region’s 3,700 miles of tidal coastline. Beach communities along Long Island and the Jersey Shore would find themselves particularly vulnerable, but flooding could also impact areas throughout greater New York, including the Rockaways, Jamaica Bay, and Coney Island.
In fact, according to the report, “With six feet of sea level rise, a possibility as soon as early next century, much of the Rockaway Peninsula could be underwater,” effectively making homeless a population of 13,449. Furthermore, this level of water rise would see 50 percent of Coney Island’s current population at risk of permanent flooding. JFK airport would be mostly protected from flooding, but La Guardia’s runways are vulnerable to even three feet of sea level rise. With the estimation that the New York metropolitan area will see one feet of sea level rise in the next 15-20 years, these predictions take on a particularly urgent tone.
So, is there anything that can be done? Well, the RPA report outlines some immediate calls to action, including implementing the 2015 Paris agreement to limit future greenhouse gas emissions—planning and funding for seal level rises in federal, state, and local efforts to promote resilience; and begin a dialog in vulnerable communities about how best to adapt to sea level rise.
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