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Seeking Higher Ground: Beach front property going cheap

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By Nicolette Toussaint 


Psst, wanna buy some coastal property?

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Despite the news of Harvey and Irma, I was surprised to learn that the husbands of two of my friends do—in Florida no less!

Perhaps I shouldn’t be surprised. The Yale Program on Climate Communication has found that nationally, while 69 percent of Americans think that global warming is real and dangerous, only 42 percent think it will harm them personally.

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Personally, I think that buying property in Florida would hike the odds of personal harm considerably.

Real estate appraiser Orell Anderson, who works for Strategic Property Analytics in Laguna Beach, California, says that people “pay significant premiums to be on the water” but notes that most home-buyers arrive at the conclusion that storm-surge flooding “only happens to other people and not me.”

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If you’re among them, you’d do well to visit the website coastalriskconsulting.com, owned by attorney Albert Slap, who lives in Snowmass Village, high and dry at 8,209 feet. Many of Slap’s clients are in Florida. Although cities and utilities form a large portion of his clientele, any potential property owner can plug an address into CRC’s website to discover its risk for storm-surge flooding and high winds. CRC mashes up scientific data from NOAA, USGS, USACE and other sources to create a comprehensive assessment of current and future flood risk to the property’s location.

Those risks are no secret. In April 2016, Sean Becketti, chief economist for government-backed mortgage giant Freddie Mac, issued a (largely unpublicized) warning that owners ditching their coastal properties could trigger another nationwide mortgage meltdown.

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Even so, neither sellers nor realtors in Florida (or most other coastal states) are required to warn potential buyers of climate-change risks.

Those risks are many and interrelated: rising insurance costs, the eventual likelihood that mortgage companies will refuse to write 30-year loans in low-lying areas, enormous spikes in real estate taxes as cities and struggle to relocate utilities, roads, bridges, even airports. And not just in Florida. In the San Francisco Bay Area, all three airports are at risk from rising oceans. New York’s La Guardia could be swamped with as little as five feet of rising water.

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Although few owners have so far sold coastal property due to these woes — the longer-term recovery pattern in New Orleans after Katrina and in New York after Sandy saw property values dropping in badly impacted neighborhoods but rising in those that were less affected and thus seen as “safer”— Albert Slap thinks that sell-offs are inevitably coming. In an interview with Bloomberg News, he opined that people will eventually insist on disclosure for homes that suffer regular floods, just as they have for the risks of asbestos and lead paint. Then dominoes will fall. “There will be a large number of homes that will lose substantial value, and [owners] will default on mortgages, if nothing is done to help them.”

That brings us to politics.

Right now, your right to build or buy in a flood zone is underwritten by the U.S. government. As the editorial board of the Chicago Tribune wrote recently, “Let’s all acknowledge one reason for the vulnerability of Americans who live in low-lying coastal regions of the Sun Belt: The federal government has been paying people to locate there.” The payment isn’t explicit, the newspaper explains, but comes in the form of flood insurance underwritten by the National Flood Insurance Program (NFIP).

Under that program, private companies insure the homes, but the bills are ultimately paid by the Feds. After Sandy, Katrina and a rush of local floods, NFIP racked up a $25 billion deficit. Right now, the program, which was up for re-authorization this year, needs an infusion of cash.

House Financial Services Committee Chairman Jeb Hensarling, a Republican from Texas, is making a push for reform. “The NFIP in its current form is unsustainable and perverse,” he said. “It is a government monopoly that subsidizes people to live in harm’s way. With pricing structures that do not reflect the reality of risk, it actually encourages the building and re-building — and re-building again — of homes and businesses in flood-prone areas.”

Truly evaluating that risk would include projecting the impact of ocean rise and global warming. That’s something that the current climate-change denying administration is not likely to do, despite the fact that Florida property-owners Rush Limbaugh and Donald Trump were both personally impacted by evacuations during Hurricane Harvey.

If you’re actually considering buying property in Florida — taking a risk this fixed-income senior would never consider! — I’d advise consulting Albert Slap’s website first.

Either that, or rent a beach house. And travel light.

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