Will Sea Level Rise Impact my Real Estate Investments?

Chronic flooding impacts real estate investments in the US

How will Rising Sea Level Impact My Property?

According to climate scientists at Virginia Institute of Marine Sciences, 40% of the world population lives within 100km (62 miles) of an ocean. Every one of these properties faces increasing risks such as flooding, storm damage, water contamination, transportation disruptions, permanent inundation, and migrating populations.

The pace is accelerating

The pace of sea level rise is accelerating worldwide.  However, it isn’t rising at an even rate everywhere. Sea levels are rising faster in some areas than others. Do you know how quickly the sea level is rising in your investment area?  Do you understand how rising oceans will impact your personal home or investment properties?

Every real estate investor is being impacted by changes in our weather patterns.  Therefore every real estate investor needs to learn how to keep up to date on the changing patterns and how to think ahead to how this will impact the profits from their investments.

There are some great resources available to us from research centers like the Virginia Institute of Marine Sciences linked above. There is also an abundance of data to guide you in the 4th National Climate Assessment report. And 427 has some very helpful data and insights to guide real estate investors.

But there are two problems with all of these reports. 

First, the reports are out of date almost the minute they are published. 

Along with all the great information about what to expect from climate change, we are inundated with news articles about how it’s speeding up!  So what we read from the data collection experts is just the beginning.

When I read the data they analyze, I pay attention to the trends and then go out and look for how those trends are being reported in my investment area.  I Google things like “flooding in city, state” and hit the News tab.  That will bring up news articles that have been published about that subject in that location.  When you do this pay attention to the notation that tells you how long ago the article was published and watch for very recent news.

If flooding is the issue you are most concerned with Google this topic weekly to stay on top of the trend in your investment area.  If something else is your primary concern – say fires, water quality issues, major storm activity – then Google those topics for your area.

Second, the reports can be so technical and jargon-ridden that they are difficult to distill into actionable information.

This is a bit more problematic.  Sometimes the science behind the data isn’t as important as the conclusions.  For instance, the report from VIMS contains a lot of information about why water is rising at wildly differing rates on the east coast, the gulf coast, the west coast and Alaska.  For the purposes of protecting your investments, why it’s rising is less important than the core information about how quickly it’s rising in your investment area.

This same report has information about how quickly sea level rise is accelerating in each area.  Again, the direct impact of sea level rise is the critical issue you will be concerned with.  So keeping an eye on the news about sea level rise in your area is more important than figuring out the relationship between the rate of sea level rise and the rate of acceleration of sea level rise.

Google Alerts for news

To automate the process, you can start a Google news alert for the items you want to watch.  Here are the steps for setting up a Google news alert:

  1. Go to https://www.google.com/alerts
  2. In the search bar enter the phrase you want to watch.  For instance, “sea level rise city, state.”
  3. If you aren’t signed into Google, you will need to enter an email address so Google can deliver your news.
  4. As you are typing in the search term, Google will give you the option (below the box) to either Create Alert or Show Options.  Click Show Options.
  5. Choose how often you want to watch for news articles.  Then click in the Sources box and choose “news.”
  6. Click Create Alert.

Google will deliver the news alerts to your inbox.

Your own climate alert system

Create your own climate watch alert system in Google by entering multiple news alerts. Enter a separate alert for each climate-related issue you want to use to keep an eye on your investments. 

If you want to protect your investment income from the growing risks associated with climate change, this is as important to your profitability as building maintenance and needs to become a regular task.

Why should you keep a watch on sea level rise?

Starting in 2018, we began seeing honest reporting on the damage to property already being attributed to sea level rise.  In June 2018, the Union of Concerned Scientists published a report linking sea level rise to property damage over the coming decades. Their overall analysis puts 2.5 million properties at risk from chronic flooding by the end of the century.

In the near-term, they put almost 150,000 homes and 7,000 commercial properties (worth a collective $63 billion) at risk of chronic flooding between now and 2033. What is chronic flooding? It’s defined as being inundated by sea water 26 times per year.

By February 2019 we saw reports in major news publications that pointed to actual property losses in coastal areas.  Midyear we began seeing stories about entire cities that are expected to disappear.  By the end of 2019 and beginning of 2020, we started seeing stories about properties destroyed by storm surges, chronic flooding and eroding coastlines.

With these loss projections and realities, real estate investors need to be on their toes to stay ahead of losses that may wipe them out.  And property losses are only one of the risks.  Your tenants, customers, suppliers and vendors may pull out of these areas leaving you with entirely different headaches. 

coastal infrastructure damage from storm surge

Climate migration

Climate migration occurs when average people living in an area pull up stakes and leave.  Your tenants and customers are watching the same things you are watching.  They are deciding how much risk they are willing to assume to stay in place.  And they are deciding to move away from coastal areas in increasing numbers.

So far, the news relays anecdotal stories about people moving away from the coasts as well as a number of other climate-driven disasters.  But projections are that 13 million people will migrate away from the coasts alone over the remainder of this century.

Even FEMA is getting into the act with the FEMA Buyout Program. (To be fair, this program has been in effect since 1993.)  FEMA is, in some circumstances, willing to buy disaster-impacted homes at pre-disaster fair market values. They do this to mitigate against the need to repeatedly rescue homeowners in disaster prone locations. Ultimately, the buyout costs taxpayers less since it’s a one-time expense and it allows homeowners to move to safer venues.

Service disruptions

Naturally, during chronic flooding or storm surges, transportation is massively disrupted.  Smaller vendors and service providers cannot afford to continue business as usual when disruptions become more common. These commercial enterprises will also leave areas and set up shop in safer locations.

How do real estate investors cope with rising sea levels?

The most critical question for every real estate investor to answer is, “How much risk can I afford to take?”  If you think about it, this is one of the first questions real estate investors ask before they buy any property “Do I have the capital to buy and reserves to maintain this property?” 

The risks are most definitely higher now with the newer threat of climate change raising the stakes.  But the question is familiar.  For some real estate investors who are within those 64 miles of a coastal area, there may well come a time when they must sell out and move to higher ground along with the tenant base and business owners. 

For these coastal investors, the question becomes, not “if” but “when.”  The climate science data research company, 427, produced a report in Oct 2018 titled Climate Risk, Real Estate, and the Bottom Line.  The risks outlined were primarily to large Real Estate Investment Trust companies.  The bottom line is that these REITS have been dumping coastal investment properties at a 7% average discount since before this report came out.  They are selling to investors with “lower exposure.”  These selloffs are definitely a “big data” reaction that can inform how long you may be willing to stay invested in one of these areas.

To learn more about how climate change is affecting real estate investing and what real estate investors can do about it, read Fearless: Real Estate Investing In The Era Of Climate Change by B.L. Sheldon.

B.L. Sheldon

B. L. Sheldon is an author, speaker, social entrepreneur, researcher, active real estate investor and a psychotherapist. In her groundbreaking book, Fearless: Real Estate Investing In The Era Of Climate Change, she tackles the intersection of real estate and climate change. In a calm, clear, accessible style, Sheldon provides real estate investors and business owners with actionable steps to climate-proof their investment portfolio.

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