Could Climate Change Really Turn U.S. Real Estate Prices Upside Down
If Florida learned anything from it's experience with Hurricane Andrew that touched Miami-Dade County, leaving behind a trail of destruction 25 years before Hurricane Harvey just plowed into the Texas coastline, it would have been that there is a high cost of living so close to the coast when Mother Nature gets angry.
Until recently it was the most expensive natural disaster to ever hit the U.S., having cost approximately $15 billion in insurance losses in Florida. It subsequently changed how insurance companies managed their exposure to such risks.
As Florida has learned many lessons since it hit in 1992, comparisons can be made with the current disaster in Texas and additional weight will surely be placed on the possibilility of such environmental threats and climate changes when valuing land and property.
Hugh Gladwin, professor of anthropology at Florida International University states that “The question is whether people are going to be basing their real estate decisions on climate change futures,” as research points to higher-standing areas of Miami becoming increasingly gentrified as a result of sea level rising.
“In any coastal area there’s extra value in property, climate change, insofar as it increases risks for those properties from any specific set of hazards — like flooding and storm surge — will decrease value.”
Miami Beach is a prime example of the effects of climate change with some studies making predictions of 5 feet of sea level rising by end of this century and the possibility of $23 billion in existing real estate underwater by 2050.
In an attempt to thrwart such losses, Miami is already working diligently on defensive actions including raising roads, installing new pumps to manage increasing issues with floodwaters.
Albert Slap, president and co-founder of Coastal Risk Consulting, a Florida firm that provides flood risk analysis reports said "Harvey was only the latest natural disaster to expose flaws in the national flood insurance programme allowing property owners in the Federal Emergency Management Agency’s so-called Zone X — areas at risk of a once-in-500-years flood event — not to carry coverage or fully disclose their flood risk when they sell".
“With storm surge and heavy rainfall increasing and climate and sea level rise, the system is just not working,” he said. “Millions more people need flood insurance than have it and the crazy thing about Houston was only 15 percent of those who were flooded had flood insurance. The risk communication is not enough".
“You have thousands of properties in Norfolk, Annapolis, Atlantic City, Savannah, Charleston and Miami Beach where part of the property goes underwater with seawater for days at a time. When you have fish swimming in your driveway, it’s not an amenity, like a swimming pool. It means you’re driving through saltwater to get your kids to school, get to the supermarket, whatever you’re going to do".
“Will there be a massive decline in the property values of the flooded areas in Houston? Common sense would say yes. And if that’s combined with new legislation that’s going to require full disclosure, then wow.”
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