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Climate change could wipe $108 billion from U.S. property market, study finds

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A new report says sea-level rise will submerge large swathes of the country and inundate billions of dollars in land.

An analysis from Climate Central, a nonprofit research group, put a price tag on how much all this land is worth — and how much local governments will lose out when it sinks underwater. The report found that nearly 650,000 privately owned plots of more than 4 million acres will fall below tide lines within the next 30 years. Analysis suggests that sea-level rise could reduce the value of that private land by more than $108 billion by the end of the century.

Since all land below the tide line is, by law, owned by the state, tidal encroachment can essentially evaporate huge amounts of taxable private wealth. This, in turn, will drastically lower property tax revenues in coastal areas, which experts have warned could eventually bankrupt local governments.

For thousands of years, the tides have never really budged. Also, the idea that any submerged land is not public is “an idea that dates back to Roman times,” said Peter Byrne, director of the Environmental Policy and Law Program at Georgetown. “Tide and sea, they are open to the public because they are navigable. They are public in nature.”

But as the planet warms, ancient tide lines are climbing upward. The study found that an area the size of New Jersey that is now above water will be flooded at high tide in 2050.

“Sea level rise will eventually drive people off the land,” said Don Payne, senior advisor at Climate Central, who wrote the report. “That’s something we haven’t come up with yet.”

The loss of such a huge amount of private land over a few years could have far-reaching consequences. Insurers have already started withdrawing from coastal markets or raising their premiums significantly. Banks and other financial institutions are beginning to consider whether it makes sense to lend to homeowners and businesses along the coast.

Finally, the places that are currently livable will become increasingly difficult to live in. Here’s what this might mean for local governments.

Risks are not evenly distributed

Climate Central has found that, unsurprisingly, the effects of sea-level rise are not evenly distributed across the United States. Its effects will be felt by the Atlantic and Gulf coasts more than other parts of the country. In many areas along the coast, sea level will rise faster because the land is sinking as sea level rises.

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

Kyle Harner kayak along a flooded street in Friendswood, Texas, September 22, 2020 (Stuart Villanueva/The Galveston County Daily News via AP file)

Kyle Harner kayak along a flooded street in Friendswood, Texas, September 22, 2020 (Stuart Villanueva/The Galveston County Daily News via AP file)

“Climate impacts will not occur far into the future, but during the mortgage term on your home,” said Anna Weber, a policy analyst at the National Resources Defense Council.

While sea level rise is one of the main effects of the climate crisis, it is not the only one. Hurricanes and severe wildfires will also lead to displacement and erode local tax bases as people move to safer areas. Frequent severe rainstorms are expected to cause more inland flooding in many parts of US coastal counties that won’t be the only places affected.

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

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In many places, coastal property is the most valuable real estate – and a major source of property taxes for local governments. Without it, municipalities could see a massive loss of revenue at a time when the costs of climate change adaptation are expected to rise. The costly measures that municipalities will need to take to adapt to rising sea levels, such as building sea walls or raising roads, may become more difficult to fund.

“When the property tax revenue base shrinks, the problem of adaptation is complex,” said AR Siders, a climate adaptation researcher at the University of Delaware Disaster Research Center. This can create a vicious cycle: “Not being able to protect these homes reduces their value and therefore you have fewer resources to protect those homes.”

This will not only affect the owners of real estate overlooking the sea. Municipalities rely on property taxes to fund roads, schools, and garbage collection – all the basic services that residents depend on.

“It seems likely to me that over time we will have to discover a different financing model for the really flood-prone communities, or the communities along the coast,” Siders added. “They have been counting on the permanent growth of the housing market and that’s not realistic in places that will see the effects of climate change.”

One tool that municipalities use to raise money to fund projects that make them more resilient to climate change is municipal bonds — to do things like build a new bridge, fund the construction of a school, or perhaps to pay for flood control. The city is not overwhelmed by the next big storm.

Huge snow storm hits the mid-Atlantic (Andrew Renneisen file/Getty Images)

Huge snow storm hits the mid-Atlantic (Andrew Renneisen file/Getty Images)

The report noted that flooding poses a threat to crops, transportation routes, utilities, sewage treatment plants and buildings. The way local governments react to these economic hits will have implications for their ability to repay debt and keep their credit ratings steady.

“Before they reach bankruptcy, the tension will reverberate in Money’s bond market,” Keenan said. “What we are going to start to see is more clear [climate] Premium and higher borrowing cost for these counties.”

Choices to be made

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

Other experts suggest that procurement processes, in which the government offers to buy buildings prone to flooding, could help create a natural “buffer zone” along the coasts.

“The issue of losing the tax base is something that comes up a lot when we talk about home buying because in this case, you are intentionally shifting ownership from private to public ownership,” Weber said. “What this report shows is that in some cases, this process will happen whether or not you do it intentionally.”

Besides building codes and keeping people out of harm’s way, there is still plenty of time to change the trajectory of greenhouse gas emissions, Payne emphasized. If the world continues to produce emissions at the current rate, the tides will rise faster; Reducing emissions will now allow crucial time to adapt to the rising tides.

“We may not be able to change much between now and 2050, but we can make a huge difference going forward from that,” Payne said. “There are still choices to be made – between better outcomes and much worse outcomes.”

This article was originally published on NBCNews.com

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