Climate Change Could Wipe $108 Billion From US Housing Market, Study Finds

Rising sea levels will flood huge swathes of the country and submerge billions of dollars of land, according to a new report.

A Climate Central analysis, a nonprofit research group, has put a price tag on the value of all that land — and how much local governments stand to lose when it’s underwater. The report found that nearly 650,000 private parcels of land on more than 4 million acres will fall below tide lines over the next 30 years. The analysis indicates that sea level rise could reduce the value of these private lands by more than $108 billion by the end of the century.

Since all land below the tide line is legally owned by the state, tidal encroachment could essentially vaporize huge amounts of taxable private wealth. This, in turn, will drastically reduce property tax revenue in coastal areas, which experts say could ultimately bankrupt local governments.

For millennia, the tide lines have not really moved. Nor is the idea that all land under water is public, which is an “idea that dates back to Roman times,” said Peter Byrne, director of the Georgetown Environmental Law and Policy Program. “The tides, the sea, they are open to the public because they are navigable. They are by nature public.

But as the planet warms, the old tide lines rise. The study found that an area the size of the state of New Jersey that is now above water will be submerged at high tide in 2050.

“Sea level rise will ultimately deprive people of land,” said Don Bain, senior adviser to Climate Central, which authored the report. “It’s something we haven’t understood.”

The loss of such an amount of private land in a few years could have considerable consequences. Insurance companies have already begun to withdraw from coastal markets or significantly increase their premiums. Banks and other financial institutions are beginning to question whether it makes sense to lend to owners and coastal shops.

All told, places that are currently habitable will become increasingly difficult to live in. Here’s what it could mean for local governments.

Risk is not evenly distributed

Climate Central found that, unsurprisingly, the effects of sea level rise are not evenly distributed across the United States. The Atlantic and Gulf coasts will feel its effects more than other parts of the country. In many areas along the coast, the sea level will rise much faster as the land sinks as the sea level rises.

By 2050, Climate Central estimates that approximately 75% of Terrebonne Parish, Louisiana will be underwater. In Hudson County, New Jersey, $2.4 billion in taxable property will be submerged. In Galveston County, Texas, more than 4,200 buildings currently above sea level will be at least partially underwater.

Kyle Harner kayaks along a flooded street in Friendswood, Texas on September 22, 2020.
Kyle Harner kayaks along a flooded street in Friendswood, Texas on September 22, 2020.Stuart Villanueva/The Galveston County Daily News via AP File

“Climate impacts won’t occur far into the future, but over the life of your home’s mortgage,” said Anna Weber, policy analyst at the National Resources Defense Council.

While sea level rise is one of the major impacts of the climate crisis, it is not the only one. Supercharged hurricanes and wildfires will also cause displacement and contribute to the erosion of local tax bases as people move to safer areas. More frequent intense thunderstorms expected to cause more inland flooding in many parts of the US coastal counties won’t be the only places affected.

“These numbers are relatively conservative,” said Jesse Keenan, professor of sustainable architecture at Tulane University, who was not involved in the Climate Central study. “That’s what should scare people.”

Do more with less

In many places, coastal property is the most valuable piece of real estate – and a major source of property taxes for local governments. Without it, municipalities could suffer a huge loss of revenue at a time when the costs of adapting to climate change are expected to skyrocket. Costly measures that municipalities will have to take to adapt to rising sea levels, such as building sea walls or raising roads, could become more difficult to finance.

“When that property tax revenue base shrinks, it’s an adaptation problem that gets worse,” said AR Siders, a climate adaptation researcher at the University of Delaware’s Disaster Research Center. This could create a vicious circle: “Not being able to protect these houses lowers their value and therefore you have fewer resources to protect these houses.”

It won’t just affect owners of beachfront properties. Municipalities rely on property taxes to fund roads, schools, garbage collection – all the basic services residents rely on.

“It seems likely to me that over time we will have to find a different funding model for really flood-prone communities or communities along the coastline,” Siders added. “They’re counting on perpetual growth in the housing market and that just doesn’t seem realistic in places that are going to experience the effects of climate change.”

Municipal bonds are a tool that municipalities use to raise funds to finance projects that make them more resilient to climate change. the city won’t be overwhelmed by the next big storm.

Massive snowstorm hits mid-Atlantic states
Power company workers attempt to restore power to a flooded street after a blizzard on January 24, 2016 in North Wildwood, NJFile Andrew Renneisen/Getty Images

Flooding threatens crops, transportation routes, utilities, sewage treatment plants and buildings, the report notes. How local governments react to these economic blows will have implications for their ability to service their debt and keep their credit ratings afloat.

“Even before they reach bankruptcy, the stress is going to ripple through the muni bond market,” Keenan said. “What we’re going to start to see is a [climate] premium and a higher cost of borrowing for these counties.

“Choices to Make”

Some parts of the country are increasing their exposure to climate risks by continuing to build in coastal areas that will soon be underwater. The Climate Central report calls for tighter restrictions on new developments and the construction of new housing outside risk areas.

Buyouts, in which the government offers to buy flood-prone buildings, could help create a natural “buffer zone” along coastlines, other experts suggest.

“This issue of losing the tax base is something that comes up a lot when we talk about home buyouts, because in this case you’re deliberately converting private property into public property,” Weber said. “What this report shows is that, in some cases, this process is going to happen whether you do it deliberately or not.”

Besides building codes and getting people out of harm’s way, there’s still time to change course on greenhouse gas emissions, Bain pointed out. If the world continues to produce emissions at the current rate, the tides will rise faster; cutting emissions now will allow crucial time to adjust to rising tides.

“We may not be able to change much by 2050, but we can make a big difference from there,” Bain said. “There are still choices to be made – between better results and much worse results.”

Penny D. Jackson