Up to a third of citizens across the States live in coastal areas, with many more owning a second home on the coast away from the bustle and clamour of urban centres.
However, thanks to rising sea levels, these once-coveted properties now find themselves facing a difficult reality: they may no longer be viable long-term investments. Financial website Invezz sat down with Dr. Ian Miller of the University of Washington – an expert in the field of coastal hazards – as he heralded a future that could see the wealthy moving away from the shore within a generation.
A Seismic Shift?
With McKinsey & Company forecasting that $30 billion could be wiped from the Florida housing market in the next decade, the headline here is that Dr. Miller’s sentiments are largely similar.
He predicts a dramatic shift in attitudes to living by the sea in the USA, as many rich individuals – many of whom currently reside by the shoreline – are forced inland by the increasing damages and inconveniences associated with flooding. Meanwhile, poorer people living inland are pushed towards the now cheaper flood-prone coastline.
Miller didn’t denote a date for this shift, though such an exodus would be transformative for the entire housing market. Moreover, he does expect some rich individuals to become “flood-tolerant” and maintain their waterfront properties despite difficulties with increased flooding. This could see the shoreline become a largely poor area occasionally dotted with the exclusive mansion or two fitted with flood barriers and other preventative measures.
For Miller, this shift is a “when” rather than an “if”; so, for both prospective investors and existing homeowners, it would seem wise to take heed of this prescient warning. Otherwise, they could find themselves stuck in a devalued or even unsellable flood-prone property.
Certain administrative errors have contributed to this state of affairs. Foremost, Miller was keen to point out the flawed manner in which the USA currently defines floodplains, stating that areas are only delineated as a floodplain if they have a 1% (or greater) chance of experiencing a flood event. Both the severity of these events and the impacts of climate change are not factored into the delineation, meaning that hazard lines are likely to move within the lifespan of a mortgage, making risk is difficult to calculate for many properties.
For example, the floodplain in Miller’s home state, Washington, has only recently been re-mapped for the first time in three decades. While this may have been sufficient based on the 5-inch rise of sea levels in the last century, as this rise accelerates this timespan is simply “(not) going to cut it.” Miller sees a world on the horizon in which individuals could experience drastic changes during the lifespan of their mortgage.
Additionally, imminent changes to the USA’s National Flood Insurance Program will only apply to people with mortgages, so those who are rich will be unaffected by increased premiums. Moreover, Miller believes that flood insurance actually incentivizes the purchase of homes that people could eventually be unable to afford to maintain.
An Unavoidable Fate for Floodplain Properties?
The appeal of living on the waterfront remains obvious, and Dr. Miller was keen to explain that for those who can afford the hefty maintenance and repair costs, the party may not be over just yet. Artificial solutions such as flood barriers and natural solutions such as salt-marsh and kelp restoration were touted by Miller as potential solutions that could render coastal living more feasible for longer.
However, the fate of these properties appears inevitable, and Miller didn’t mince his words, stating “I certainly wouldn’t buy it as an investment, or with the expectation that I was going to pass it down to my grandchildren.”
You can read Invezz’s full interview with Dr. Ian Miller here.