Climate Change Could Sink Two Million Homes: Why Few Take Note
Zillow Svenja Gudell discusses the potential impact of climate change on U.S. housing.
A recent report in The New York Times sounds the warning that havoc wrought by climate change looms closer than many of us think. “Now, those warnings are no longer theoretical: The inundation of the coast has begun,” the Times reported. “The sea has crept up to the point that a high tide and a brisk wind are all it takes to send water pouring into streets and homes.” A recent study by Seattle-based online real estate marketplace Zillow zeroes in on the potential damage: Nationwide, almost 1.9 million homes (or roughly 2% of all U.S. homes) — worth a combined $882 billion – are at risk of being underwater by 2100. But many properties could be heavily affected in as little as 20 years.
Rising sea levels would affect not just predictable places like Florida, California or Hawaii, but also Boston, New York City and many places further away from the coast where rivers and other inland waters would also swell, says Svenja Gudell, chief economist at Zillow. Homeowners, especially those along the coast that have seen some damage during recent disasters such as Superstorm Sandy, and insurance companies are recognizing the threat to some extent and taking protective steps, but not enough, she cautions.
The lure of the oceanfront and the seemingly distant prospect of their homes going underwater in about 100 years are reasons why many people don’t realize the seriousness of the threats posed by climate change, she adds. Gudell discussed the findings of the Zillow report on the [email protected] show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
Climate Change – An edited transcript of the conversation follows.
[email protected]: We have seen a strong recovery in the housing market since the bubble of 2007-2008. Prices have been on the rise in a majority of the metro areas across the U.S. In fact, San Jose, California, just became the first metro area to post a median price of $1 million. But the Zillow report says climate change has the potential to substantially lower the values of nearly two million homes by 2100. This report [built on] a study earlier this year about the rise in sea levels we could see over the next several decades, correct?
Svenja Gudell: Absolutely. There was an article published that estimated that it is very likely that over the next 100 years we would see sea levels rise by roughly six feet, if not more.
[email protected]: Part of that is because of the melting going on in Antarctica.
Gudell: Correct. Those melting ice caps will add water to the oceans, and slowly but surely we will see our coastlines eroding because of that.
[email protected]: A lot of people think about New Orleans, about Miami [and] the Florida coastline, but this is a problem that almost every coastline city [will] have to think about in the years to come.
Gudell: Absolutely, and you’re right that usually we’re focused in on places like Florida and Louisiana, where oftentimes hurricanes are also to blame. But if you’re living in a state that is touching the ocean, this is something you’re going to have to deal with over the next few decades.
“The states that are most likely to be affected are Florida, where one out of eight homes is going to be underwater if sea levels rise by six feet over the next 100 years, but also Louisiana….”
[email protected]: What are the biggest areas of concern?
Gudell: The states that are most likely to be affected are Florida, where one out of eight homes is going to be underwater if sea levels rise by six feet over the next 100 years, but also Louisiana. Even California, where fewer homes [will be] affected, but the total worth of [that] housing stock is quite high. The list goes on — Texas, Pennsylvania [and] Georgia are definitely impacted. Of course, Hawaii [will] lose close to 10% of its housing stock because of rising sea levels.
[email protected]: I guess part of this is not just the rising sea level in the oceans, but [also] a corresponding rise in the levels of the tributaries going into those oceans.
Gudell: Absolutely, and we did map this out. There are certainly lakes that have direct access to oceans, and rivers that will be elevated as well. Along those riverbanks and lakes you would also lose houses affected by rising water levels.
[email protected]: The data [says] that one out of eight homes in Florida could be damaged or gone because of the rising sea level. Part of that is [because] the state itself is pretty much at sea level … but when you think about the width of the state, that’s a stark statement to make.
Gudell: It is, and of the close to $900 billion that we would be losing in value here, roughly half of that is from lost homes in Florida. Almost 13% of the housing stock in Florida [will be affected] by rising sea levels, and given that, on average, a house there that is affected costs $262,000, [it will] add up to $413 billion.
[email protected]: [What] I found amazing in looking at the data [is] that Boston could be affected by this. New York City could be affected by this, in areas where maybe there won’t be as many properties, but the values of [those] properties are much higher than, say, in Florida.
Gudell: That’s right. In general, we did find that homes that are going to be affected by this tend to be more expensive anyway, simply because they are located by the ocean. [Those homes], currently at least, still come with a premium as people enjoy ocean views and very exclusive locations a lot of times.
[email protected]: The insurance industry obviously would feel the effects of this problem in the years to come.
Gudell: Oh, absolutely. This is not something that we focused on with this report, but there is certainly a discussion to be had about flood insurance. Are we underinsuring ourselves given these numbers? If this were to actually happen, would there still be people that are willing to insure homes that are by the ocean? The discussion of FEMA would come up, and rebuilding homes that are so close to the ocean, where they are at risk of being impacted.
[email protected]: On the New Jersey shore, in the wake of Superstorm Sandy, so many people had to repair damages or in some cases rebuild houses along the ocean. Many of them decided to put their homes on stilts because they were worried about potential flooding. This is maybe something that some people [will] have to consider as an option in the next several years.
Gudell: It certainly is. That’s one way of dealing with this, at least in the short term – [to] put your home on stilts. As we see this threat increase in the future,