Rising seas have already eroded coastal property values from Maine to Mississippi by billions of dollars over the past decade as buyers pay less for homes in neighborhoods where high-tide flooding is creeping in, a new report shows.
The loss in property values points to a compound problem for coastal communities: Just as accelerating sea level rise forces governments to build flood walls and repair infrastructure more often, it may also eat away at the property tax base that provides many cities’ primary revenue stream for funding that very work.
“This is a real negative feedback loop,” said Rob Moore, a senior policy analyst with the Natural Resources Defense Council. “If they don’t start to recognize these issues and reports like this and open their eyes to what is definitely happening, they’re going to find themselves in pretty dire straits.”
The analysis, published Wednesday by First Street Foundation, estimates that property value losses from coastal flooding in 17 states were nearly $16 billion from 2005 to 2017. Florida, New Jersey, New York and South Carolina each saw more than $1 billion in losses.
“This isn’t a forward-facing issue,” said Jeremy Porter, a lecturer at Columbia University, consultant at First Street and an author of the report. “It’s something that’s been occurring. It’s something that’s affecting people’s homes now.”
Warnings from Finance, Credit Rating Agencies
Climate change is accelerating sea level rise and has driven a rapid increase in the frequency of coastal flooding on the Atlantic and Gulf Coasts in recent decades. Residents and local businesses are already feeling the costs.
As the problem has worsened, advocacy groups and some financial institutions have begun warning about the potential for cascading economic impacts from rising seas.
In 2016, Freddie Mac, the federally-backed mortgage company, warned that sea level rise would eventually destroy billions of dollars worth of property. Homes represent many Americans’ largest asset, it noted, and the inevitable decline in coastal property value could ripple throughout local economies. Homeowners might decide to stop paying off their mortgages if their home values drop below the balance they owe the bank.
While these economic losses might happen gradually, the Freddie Mac report said, “they are likely to be greater in total than those experienced in the housing crisis and Great Recession.”
The credit rating agency Moody’s Investors Service warned local governments in 2017 that they could face lower ratings if they fail to adapt to climate change, a decision that would raise the cost of borrowing money through bonds.
“What they essentially laid out was, when you have a disaster and that affects your property tax revenues, that’s going to affect your credit rating,” Moore said. “If you haven’t put the measures in place to weather that storm, you’re going to get impacted right at the moment when you need to borrow.”
Ocean City, Miami Beach Top List by Dollar Value
The First Street report shows that these effects may already be occurring.
While some groups have estimated the value of property at risk in the future, Porter said the new report is the first to provide specific data over such a broad area about the effects on real estate that have already happened.
Porter and Steven McAlpine combined tide gauge data from the National Oceanic and Atmospheric Administration with elevation data from the United States Geological Survey to map tidal flooding parcel by parcel. They then compared sales of similar homes in areas at risk of flooding to homes in dry neighborhoods.
While they found that prices generally increased, even in neighborhoods with recurrent flooding, property values in areas with nuisance flooding were rising much more slowly. That difference accounts for their total estimated loss in value.
The greatest loss from 2005 to 2017 was in Ocean City, New Jersey, a resort town that saw a loss in property value of about $500 million, the analysis estimated. Miami Beach, Florida, was second, with more than $300 million in home value wiped out.
What Can Cities Do?
The rankings skew toward prosperous, densely populated areas, Porter said, because they’re based on value. But a tool on the organization’s website shows that many working class communities are getting hit too, even if it doesn’t translate into as large a dollar figure.
Chesapeake, Virginia, for example, has nearly as many at-risk homes as Ocean City but lost a fraction of the total value. Porter said these losses can be more devastating if they represent a larger proportion of a family’s wealth, or of a town’s total tax revenue.
While governments and residents are already incurring these costs, Moore said there’s a lot they could do to soften the blow.
Towns need to reorient their planning and revenue to discourage coastal development and ease their reliance on the taxes it generates, he said. On the federal level, Moore said, Congress should require that flood risks are disclosed as part of home sales, and that federal flood maps reflect future risks caused by rising seas.
While communities try to adapt to the rising risks and damage from climate change, an increasing number of cities are also taking steps to reduce the greenhouse gas emissions that are driving global warming.
Matthew Eby, First Street’s executive director, said it’s clear from their research that the costs of failing to act are piling up. “We’re going to have a much different conversation over the next five, 10, 15 years about what’s actually happening,” he said. “We’re hoping that this is that market indicator that people can start paying attention to, so that we can react.”