When Mayor Jim Cason of Coral Gables, one of Florida’s largest seaside cities, first started to consider the most serious issue facing Florida real estate investors, he asked his staff to count not just how much coastline the city had (47 miles) or value of the property along that coast ($3.5 billion), he also told them to find out how many boats dock inland from the bridges that span the city’s canals (302). What matters most, he surmised, will be the first time a mast fails to clear the bottom of one of those bridges because the ocean level was too high.
“These boats are going to be the canary in the mine,” said Cason, who became mayor in 2011 after retiring from the U.S. foreign service. “When the boats can’t go out, the property values go down.”
And if property values start to fall, the ensuing fallout could involve banks no longer writing 30-year mortgages for coastal homes, shrinking the pool of able buyers and sending prices even lower. This is extremely serious for the Miami/Coral Gables government, as those properties make up a quarter of the city’s tax base. If that revenue fell, the city would struggle to meet it’s social obligations and services make it such a desirable place to live, causing MORE real estate sell-offs, and another drop in revenue.
This could happen before the rising sea even consumes one home.
As President Donald Trump proposes reducing and dismantling federal programs charged with cutting greenhouse gas emissions that responsible for rising sea levles, officials and residents in South Florida are grappling with the risk that climate change could drag down housing markets. Relative sea levels in South Florida are roughly four inches higher now than in 1992. The National Oceanic and Atmospheric Administration predicts sea levels will rise as much as three feet in Miami by 2060. By the end of the century, according to projections by Zillow, some 934,000 existing Florida properties, worth more than $400 billion, are at risk of being submerged.
No matter what your politics are, the impact is happening right now, being experienced in South Florida. Tidal flooding now predictably drenches inland streets, even when the sun is out, thanks to the region’s porous limestone bedrock. Saltwater is creeping into the drinking water supply. The area’s drainage canals rely on gravity; as oceans rise, the water utility has had to install giant pumps to push water out to the ocean.
The effects of climate-driven price drops could ripple across the economy, and eventually force the federal government to decide what is owed to people whose home values are ruined by climate change.
Sean Becketti, the chief economist at Freddie Mac, warned in a report last year of a housing crisis for coastal areas more severe than the Great Recession, one that could spread through banks, insurers and other industries. And, unlike the recession, there’s no hope of a bounce back in property values.
Citing Florida as a chief example, he wondered if values would decline gradually or precipitously. Will the catalyst be a bank refusing to issue a mortgage? Will it be an insurer refusing to issue a policy? Or, he asked, “Will the trigger be one or two homeowners who decide to sell defensively?”
“Nobody thinks it’s coming as fast as it is,” said Dan Kipnis, the chairman of Miami Beach’s Marine and Waterfront Protection Authority, who has been trying to find a buyer for his home in Miami Beach for almost a year, and has already lowered his asking price twice.
Since the end of 2010, median home prices in and around Miami rose 120 percent, almost twice the statewide average and three times the national rate. In January, a building in Palm Beach County called The Bristol topped $300 million in units sold, achieving the distinction of the most-expensive condominium in that county’s history. A flyer for the building boasted its hurricane-resistant glass doors; it didn’t note that if seas rise three feet, the road to the front entrance could be underwater.
Marla Martin, a spokeswoman for Florida’s association of realtors, said that while “of course climate change is on the radar for our members,” she hadn’t heard of clients selling homes because of sea-level rise.
“I think the scientists are still trying to get a handle on it,” she wrote in an email.
A short drive through mangrove trees off Highway 1 in Key Largo, Stephanie Russo’s house backs onto a canal that opens into Blackwater Sound, and from there to the ocean; her neighbors lounge in shorts and flip-flops beside their boats.
A few months after Russo, a partner at a law firm in Miami, moved to Key Largo in 2015, the big fall tides brought 18 inches of water onto the road in front of their house. Unlike previous tidal floods, this one lasted 34 days.
“When we bought, there hadn’t been a flood like that for years,” said Russo, who was sitting at a table between the home’s outdoor bar and its pool.
“Ever,” interjected her husband Frank, who was working on the grill.
The saltwater ruined cars around the neighborhood, destroyed landscaping and sparked a mosquito infestation.
But the worst part might have been the trash.
“When people would drive, it creates a wake,” said Russo. “That knocks over all the garbage cans, and then everybody’s garbage is floating in the streets, and in the mangroves. It’s just disgusting.”
Officials in Monroe County agree there’s a problem, and plan to raise some roads in an attempt to reduce future flooding.
Russo says if she knew in 2015 what she knows now, she wouldn’t have purchased the house. People buying in her neighborhood today are probably just as clueless as she once was, she guesses. “I would bet money that the realtors are not telling them.”
Realtors in Florida face no legal requirement to warn potential buyers about those flood risks. Albert Slap, president of Coastal Risk Consulting, which helps homeowners and governments measure their exposure to flooding, said he thinks that will soon change: Just as the public demanded mandatory disclosure of asbestos and lead paint, people will insist on the same disclosure if a house suffers regular floods.
And when that happens, Slap said, many Florida home prices will tumble.
“Anybody in these floody areas, if they disclose to a buyer, the buyer probably won’t buy that property,” said Slap, whose company is doing work for the city of Miami Beach. “That’s going to drive the value down to zero, well before water is up to their front door.”
Slap said the answer isn’t a mass retreat from the coast, at least not yet, but rather a version of battlefield triage: figuring out which homes are worth saving, through elevation or other means, and which can’t be helped.
The National Flood Insurance Program is up for reauthorization this year; fiscal conservatives have said they want to use that opportunity to reduce the program’s subsidies, so that people are paying something closer to the full cost of their risk. A cut in federal subsidies would particularly hurt Florida, which despite its exposure pays the lowest average flood-insurance premiums in the country, according to FEMA data.
Despite rising sea levels, Florida is still a desirable place to live. Climate change is something to account and plan to have success in Florida real estate investment.