Climate Change Hits Home Values

• New research shows that real estate properties in areas affected by extreme weather and sea-level rise are losing value relative to less exposed properties.
• Homes that are vulnerable to rising sea levels currently sell for around 7 percent less than similar, unexposed properties, according to a recent study.

Why it matters

By 2100, the homes of 4.7 million Americans could be vulnerable to rising sea levels, posing a threat to nearly one trillion dollars in coastal real estate.

This, along with other climate change impacts, may be giving rise to “climate gentrification.”

Details

In Florida, more than one million homes are at risk of chronic flooding by the turn of the century. In Hilton Head, South Carolina, nearly $1.5 billion worth of property could be lost by 2045. In nearby Charleston, South Carolina, exposed homes have already lost $266 million in value since 2005 due to coastal flooding and impending sea-level rise.

A Harvard study published in April and found that, after accounting for an array of other factors, home prices have appreciated more slowly in lower-lying areas of Florida’s Miami-Dade County, particularly Miami Beach.

The National Flood Insurance Program – the only flood insurance available in many markets – sets rates and risk measures using outdated flood maps, and doesn’t incorporate projections for climate change. The resulting actuarial imbalances have forced the program to run up more than $30 billion in Treasury borrowing as major weather events accelerate.

Climate gentrification

While still emerging and not yet clearly defined, the theory of climate gentrification says:

“[C]limate change impacts arguably make some property more or less valuable by virtue of its capacity to accommodate a certain density of human settlement and its associated infrastructure.”

The implication is that such price volatility:

“is either a primary or a partial driver of the patterns of urban development that lead to displacement (and sometimes entrenchment) of existing populations consistent with conventional framings of gentrification.”

The Harvard study found considerable evidence of climate gentrification, particularly for the “elevation hypothesis,” which argues that real estate at higher elevations in cities at risk for climate change and sea-level rise appreciates at a faster rate than elsewhere.

As many as 13 percent of Americans are still convinced climate change isn’t happening at all, and 30 percent are confident that humans play no role in it, despite overwhelming scientific evidence to the contrary.

What do you think?

What, if anything, should regulators do to address the risks associated with climate change? Hit Take Action to tell your reps what you think, then share your thoughts below.

—Sara E. Murphy

(Photo Credit: iStock.com / rstpierr)