by Daniel Brouse
In the 1990’s, a team of real estate professionals, property management specialists, and climate change scientists starting working on a plan to mitigate the effects of global warming on residential real estate.
There are two major problems with developing a plan:
1) Unintended Consequences
The impact of climate change is wide reaching and compounded by feedback loops. For instance, it is easy to forecast rising sea levels will impact coastal communities; however, it is less obvious that wildfires in California will render the air quality unfit for breathing. If coastal homeowners relocate to areas affected by air quality, their pollution will only exacerbate the air quality and wildfire problems.
2) Suspension Of Belief
People don’t want to believe climate change will ruin their lives. Because they don’t want to believe it, they do not prepare nor take action to prevent global warming. The result is — by the time people believe it, their property has become a liability instead of an asset. How can you sell your property at a loss and afford to move? The answer is you cannot. Instead, you will become a climate refugee.
Florida could be the “wake-up call” for the U.S. population. In 2017, Zillow published a research report entitled, “Climate Change and Housing: Will a Rising Tide Sink All Homes?“. The report forecasts that by 2100, “one in eight Florida homes would be under water.” There are already people who can not afford to pay taxes on submerged land where they can no longer live.
The most immediate threat to property values is flood insurance. Did you know flood insurance and flood insurance risk has been a burden on the federal government since 1950? Flood insurance has become an unsustainable FEMA program. Many of the private partners of the program, such as State Farm and Nationwide, have stopped underwriting flood insurance policies. The National Flood Insurance Program was $24 billion in debt at the beginning of 2014. According to the National Flood Insurance Program (NFIP) Borrowing Authority, “On September 22, 2017, FEMA borrowed the remaining $5.825 billion from the Treasury, reaching the NFIP’s authorized borrowing limit of $30.425 billion. On October 26, 2017, $16 billion of NFIP debt was cancelled to make it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria.”
NFIP offers two types of coverage for homeowners: building property coverage up to $250,000 and contents coverage up to $100,000. Many people in Florida have already found out their flood insurance didn’t cover their losses. Now, many are finding they can not obtain any insurance.
Rob DePiazza, a St. Augustine artist, is re-building his home out of shipping containers after Hurricane Irma destroyed his property. He said, “We actually stayed in the house for Irma because I felt comfortable with the tree not coming down, and then, at like five in the morning, it fell. My biggest problem was insurance. I didn’t have enough coverage because the thing that you don’t anticipate is when you have storms like two hurricanes back to back. Make sure your insurance is up-to-date and enough to cover rebuilding in this kind of climate.” Now, he is unable to obtain any insurance.
If a property is uninsurable, it is likely worthless.