A new NOAA report states that the average sea level rise along America’s coast will be 10-12 inches (0.25 to 0.30 meters) over the next 30 year (2020-050). According to the NOAA, this will “be as high as the 100-year rise (1920-202020). Although the agency does not explicitly state this, it is an excellent argument to end subsidizing coastal living.
The sea level rises faster due to thermal expansion and the added water from melting glaciers. This is a result of man-made global temperature increases that are a consequence of accumulating greenhouse gases in our atmosphere. Incredibly, extrapolating current data suggests that sea level will increase by less than 15 inches in 2050.
No matter how low the sea level rises, more homes and infrastructure along coastal areas are exposed to storm surge and tide waves.
However, the U.S. government has subsidized a substantial number of its policyholders since 1968 to help them build or live in flood-prone places. The NFIP is now $20.5 million in debt because its losses have outpaced its premiums. An article from the recent issue of In RegulationPeter Van Doren is a senior Cato Institute fellow and points out the fact that floods are often concentrated. Private insurers will need to be able to collect premiums equal to between 5 and 9 times the average claim to maintain their viability. This is a policy that few would ever buy.
Last fall, the NFIP introduced its Risk Rating 2.0 program that raises rates for approximately 75 percent its policyholders. Owner-occupied properties may see premiums rise by 18% per annum, and second homes could see premiums increase by 25 percent. These premium increases over time will encourage residents to relocate from coastal areas.
Research is showing that some Americans may be beginning to consider sea level rise when purchasing beachfront properties.
One example is a study published in 2019 by the Journal Financial Economics found that houses “exposed to sea level rise sell for approximately 7% less than observably equivalent unexposed properties equidistant from the beach.” A 2021 study showed that Long Island residential property that was “exposed to sea level rise” experienced an average annual increase in price of 1% compared with unexposed properties. Georgia Southern University researchers found that Savannah homes are most at risk of sea level rise. They were associated with a 3.1 percent discount in their prices in 2020.
A fascinating article from 2021 The Professional GeographerResearch shows that there is a clear distinction in how rising sea levels impact the price of Miami’s single family homes. The researchers found that homes below 2ft above the sea level have a significant 15 percent discount for those whose owners are full-time residents, while vacation homes do not receive a similar discount. The researchers suggest that wealthier buyers for Miami vacation homes are more financially flexible, more mobile, and less socially invested in the community and so have a higher risk tolerance when it comes to sea level rise.
An article for 2021 The Review of Financial StudiesAccording to Rhode Island survey data, residents underestimated flood risk. This led to coastal property prices being 6-13 percent higher than the actual flood risks. A 2021 study that examined coastal housing trends found contradictory evidence regarding the effect of rising sea levels on housing prices. But, they suggested that higher flood insurance premiums might reduce property demand in coastal areas most at risk due to sea level rise.