Tag: property values

bookmark_borderClimate Ignorance and Insane Real Estate Deals

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An article in Splinter urges Sell Your Florida Property Now. “We all know, in a theoretical way, that climate change is going to turn the state of Florida into a narrow peninsula of watery broken dreams. But I bet you are not scared enough!”

In a Bloomberg article, Lenders Scolded for Climate Ignorance in ‘Insane’ Florida Real Estate Deals, the authors point out the increased risk of purchasing real estate in Florida due to global warming.

That kind of market neglect means the Florida economy can be expected to “go to hell,” warned Spencer Glendon, a senior fellow at the Woods Hole Research Center and a former partner and director of investment research at Wellington Management. “No one should be lending for 30 years in most of Florida,” he said. “During that time frame, insurance will disappear and terminal values” — future resale income — “will shrink. I tell my parents that it’s fine to rent in Florida, but it’s insane to own or to lend.”

“I don’t know whether the right price is half-price or 60% or 20%, but if it’s at 100%, I know it’s the wrong price,” Glendon said.

bookmark_borderClimate Change: Suspension Of Belief

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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.

More About Flood Insurance

bookmark_borderWhen Your Property Goes Underwater

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The right to the free flow of water has long maintained “public right-of-way easements” in the United States. In general, if a waterway is navigable, it is a public right-of-way; however, the results of climate change and rising sea levels have turned people’s private property into navigable waterways.

An article in Bloomberg entitled The Fighting Has Begun Over Who Owns Land Drowned by Climate Change highlights recent disputes over water right-of-ways:

America’s coastal cities are preparing for legal battles over real estate that slips into the ocean.

A decade after the global financial crisis popularized the term “underwater real estate,” parts of the U.S. are grappling with a new, more literal version of that problem.

“There’s no question it will be a huge fight,” says Holly Doremus, a law professor at the University of California at Berkeley who specializes in environmental law. “We don’t exactly know the boundaries of what the state can do.” For centuries, a body of law called the public trust doctrine has stipulated that, when it comes to coastal property, anything below the average high-tide line is owned by the government for the use and benefit of the public. Those rules also cover what happens when the high-tide line moves. If that movement happens suddenly—for example, if a portion of beach is washed away by a storm—the land owner retains title to the property provided he or she restores it to dry land.

More on Flood Insurance and Climate Change