Climate Change Is Driving More Mortgages Underwater
By Laura Kiesel
In May, the White House released its Third U.S. National Climate Assessment, which asserted that the adverse impacts of climate change are already being felt around the nation. Now a new report attempts to put a price tag on some of those impacts, both current and future, in an appraisal that is particularly grim for real estate.
The report — Risky Business: The Economic Risks of Climate Change to the United States — was chaired by former New York City Mayor Michael Bloomberg, Former U.S. Secretary of the Treasury Hank Paulson and retired founder of Farallon Capital Management Tom Steyer.
Read More: It’s ‘Game Over for the Climate Deniers,’ Scientists Says. All of these men are powerful political players looking to build their legacies, both on the environmental front and beyond. In particular, the report was prompted by Steyer, who reach out to Paulson. Steyer and his advocacy group, NextGen Climate, opposed the Keystone Pipeline and are focusing on seven elections this fall, including the Pennsylvania and Florida gubernatorial races and Senate races in Michigan and Iowa. Risky Business utilizes a standard risk-assessment approach to analyzing the potential consequences of climate change and its projected impacts on certain sectors of the economy; it breaks down much of its analysis by region. Overall, the study concluded that if our economy continues on its current emissions path, we will reduce labor productivity of outdoor workers by up to 3% and reduce agricultural yields by approximately 70% in some regions; to boot, the nation will incur $507 billion in property damages from sea level rise by 2100.
That last point is perhaps the most profound and the one we have already caught a glimpse of back in October 2012, when Hurricane Sandy came rolling in and wreaked an estimated $65 billion in property damage. Hurricane Sandy didn’t only sound warning bells for the Northeast. “From Miami to Boston to San Francisco, sea level rise is a major threat to countless U.S. communities,” Tara DePorte, the executive director of The Human Impacts Institute, told AOL Real Estate last year. Even within the next 15 years, higher sea levels coupled with stronger storm surges are projected to increase the average the cost of coastal storms along the Eastern Seaboard and the Gulf of Mexico by $2 billion to $3.5 billion a year. If hurricane activity also increases in this timeframe, average annual losses can reach up to $7.3 billion. “Damages from storms, flooding and heat waves are already costing local economies billions of dollars—we saw that first hand in New York City with Hurricane Sandy,” says Bloomberg. “With the oceans rising and the climate changing, the Risky Business report details the costs of inaction in ways that are easy to understand in dollars and cents — and impossible to ignore.”
The Northeastern U.S. is perhaps the most vulnerable to damage from coastal flooding in the coming decades if the country stays on its current emissions path, as 88% of the population in the region reside in coastal counties, generating 68% of the region’s Gross Domestic Product (GDP). In New York City alone, sea levels are expected to rise an additional 0.9 feet to 1.6 feet by 2050, and between 2.1 feet and 4.2 feet by 2100.
However, New Jersey is highlighted by the report as an area of particular concern because of its groundwater withdrawal and a likely sea level rise 2.4 feet to 4.5 feet of sea level rise by end of this century. Meanwhile, Boston is expected to a two feet to four feet rise by the end of the century. Altogether, the report predicts average annual property losses from hurricanes and other coastal storms by $6 billion to $9 billion over the course of the century, with hurricanes possibly raising these estimates to $11 billion to $17 billion. Yet, despite the damage caused by Sandy in the Northeast and the serious predictions for the Jersey shore, the real estate market there is still booming. Namely, Sandy seemed to speed up the gentrification process as wealthier buyers are snatching up property for their summer homes. “At the end of the day, we’re going to be in a better spot,” Eric J. Birchler, the owner of Birchler Realtors, which sells properties on the Jersey Shore, told the New York Times in April. “You just stepped…gentrification…forward five years because everything had to be rebuilt.”
The gentrification can be blamed on the steep cost of rebuilding. Not only do the houses that were destroyed by Sandy along coastal Jersey have to adhere to local floodplain requirements in order to be rebuilt, but elective (and more expensive) features such as hurricane-proof windows are often used in the process. Additionally, homeowners with federally backed mortgages must also buy flood insurance, meaning those who can’t afford the premiums are forced to sell. While this might be an exciting opportunity for affluent individuals who like the idea of restructuring an area, it spells bad news for some working class citizens who had lived there year-round. But the Jersey Shore and Northeastern region isn’t the only one that stands to suffer from coastal damage due to climate change.
The Southeast is also very vulnerable to sea levels rises and greater storm surges because of the prevalence of coastal communities where about 36% of residents in the region live. Specifically, sea level rise seriously threatens the Southeast’s coastal infrastructure, especially in major cities like New Orleans and Miami. Miami is perhaps considered the biggest bellwether of the coastal impacts of climate change. “Goodbye, Miami: By century’s end, rising sea levels will turn the nation’s urban fantasyland into an American Atlantis,” said writer Jeff Goodell in a riveting piece in Rolling Stone last year that went viral. “But long before the city is completely underwater, chaos will begin.”
The National Journal also recently declared in a headline that “Miami Will Likely Be Underwater Before Congress Acts on Climate Change.”
–Written by Laura Kiesel for MainStreet