Will Sea-Level Rise Kill Coastal Florida’s Housing Market?

The sub-prime and foreclosure crises of 2008 have been long forgotten by many, especially in Florida. The Sunshine State’s population has surged over 20 million since then. And for those who have spent most of their lives in a Northern climate, the reasons are obvious: year-round sun, gorgeous beaches and a reasonable cost of living.

With those new arrivals came a renewed surge in both housing prices and construction. A bullish stock market, an awareness that interest rates are inching up, and the growth of personal income in Florida have combined to boost housing values in markets such as Tampa and Orlando.

But the rush to build in Florida, especially along the coasts, ignores a stubborn fact: Sea-level rise threatens the long-term viability of the state’s cities. Last summer, the online real estate database company Zillow estimated that 1 in 8 Florida houses could be under water by the end of this century, which could wipe out at least $400 billion in property values statewide.

Furthermore, a recent Bloomberg profile of Florida’s real estate market suggests that property values could crater sooner than believed, even before sea-level rise affects a single home.

As reporter Christopher Flavelle pointed out, homes in affluent towns such as Coral Gables are coveted because of ample space to moor docks along canals and marinas. But if sea-level rise continues along Florida’s shores – and data suggests it is already up four inches since 1992, the year Hurricane Andrew savaged South Florida – homeowners will increasingly start looking to sell while mortgage lenders become more hesitant to underwrite loans.

Tidal flooding has already become a regular occurrence across much of South Florida, and the results include ruined cars, threats to local drinking supplies, mosquito infestations and more expensive infrastructure. But all the water pumps and elevated roadways cannot stop the fact that flooding will wreak havoc more frequently and with more intensity.

The pull to live near the beach is a strong one, but climate change risks are already testing the real estate, construction and insurance industries.

Last year, Sean Becketti, an economist with Freddie Mac, said that any trigger could cause a run on coastal properties: More banks could decline to underwrite mortgages; insurers could avoid these housing markets; or a bad spell of flooding could suddenly cause a burst of housing sales, which in turn would spook the markets.

Furthermore, the highest seawalls and most elevated roadways cannot confront the stubborn truth about South Florida’s geology: The coast sits atop a layer of porous limestone that behaves like a sponge, which is great for storing water. The problem is that sea-level rise and storm surges will further contaminate the region’s fresh water supplies, making less habitable -- even if a huge influx of infrastructure keeps both the classic art deco hotels and modern high-rise condos of Miami Beach intact.

Do not expect the real estate industry, long a sector resistant to transparency and consumer protection, to take action any time soon. Real estate companies and their agents rely on a cycle of cashing in during housing booms, and they are accustomed to waiting out the storm during times of bust.

But in an era of increased flooding, the dominoes could start falling at any moment. Florida has no law that requires home sellers to disclose potential flooding risks to buyers, with the Pew Charitable Trust being one organization arguing that such disclosures must become standard practice. Just as it has become routine to disclose asbestos or lead-based paint, there should be a national standard mandating the disclosure of a property’s potential flood risk. Such a move could protect more families – and taxpayers – from potential ruin.

Image credit: Wyn Van Devanter/Flickr