Insight and inspiration in turbulent times.
resilience
By Kurt Cobb, originally published by Resource Insights
July 14, 2024
A reader of mine asked the following question in a recent email: If climate change is such a threat, how come U.S. coastal properties continue to rise in value? This seems like a conundrum unless you know what is actually driving the trend. And, it’s worth noting that coastal home prices in certain instances have suddenly collapsed along with the shoreline next to those homes due to coastal erosion—which, not surprisingly, increases with rising sea level. A Nantucket seaside home assessed for tax purposes just this year at $1.9 million recently sold for $200,000. Expect more stories like this one to start appearing in the news.
So, what about other homes that continue to hold their value and even rise in value? Here are some of the drivers of what will some day be considered an insane bubble in coastal real estate prices:
Where owners don’t bear the risks and true costs of insuring and rebuilding, they have an incentive to keep engaging in risky behavior since all of the upside accrues to owners and nearly all of the downside is handed to taxpayers via subsidies and government-funded insurance and disaster recovery. If tomorrow coastal property owners were forced to bear all the risks and costs associated with such property, the bull market in coastal real estate would almost certainly halt and probably reverse. People would find safer and less costly alternatives.
Even with all the subsidies and public backstops for coastal development, there will almost certainly come a time in the decades ahead when climate-change-induced destruction of coastal property will overwhelm the ability of governments to respond by subsidizing rebuilding in order to set up yet another round of destruction. One way that could happen is that taxpayers living in the interior of America will tire of paying for the losses of coastal real estate owners and demand that those owners shoulder the risks and losses themselves.
Tags: climate change
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Resilience is a program of Post Carbon Institute, a nonprofit organization dedicated to helping the world transition away from fossil fuels and build sustainable, resilient communities.
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