Study Finds Billions of Dollars in Home Value Lost to Rising Sea Levels

Houston. Charleston. Most of Florida. The South seems to bear the brunt of flooding and hurricane damage.

But the Northeast isn’t staying entirely above water, and neither is its housing market. New data released by First Street Foundation, a technology non-profit, shows that with rising sea levels and increased flooding, home values in the coastal tri-state area—encompassing Connecticut, New York, and New Jersey—have decreased by $6.5 billion since 2005.

“So much attention is paid to Florida and the southeastern states around this issue,” said Steven McAlpine, head of data science at First Street Foundation. “We wanted to quantify the impact it’s having here, and to draw attention to the fact that this is a national issue.”

A screenshot of FloodiQ

The project began with a case study of Miami-Dade County, published in June, that found over $465 million dollars in property value had been lost between 2005 and 2016. The new data, released to their Flood iQ site, now joins existing data on five southern coastal states: Florida, Georgia, South Carolina, North Carolina, and Virginia. Across all eight states, a total of $14.1 billion has been lost in home value between 2005 and 2017.

To see this decrease in home values, you just have to look at the prices at which homes are sold. “It’s [a trend] that you could probably observe if you were looking at Zillow,” said Jesse Keenan, lecturer in architecture at Harvard Graduate School of Design who was not involved in the study.

The team at First Street Foundation based their model of home values on almost 10 million real estate transactions. After seeing how much of the price variability could be explained by other factors (like the size of the house, amenities, and general market trends), they incorporated flooding and sea level data from the National Oceanic and Atmospheric Administration (NOAA). NOAA has been tracking sea level rise, finding an increase of about one-eighth of an inch per year.

Rather than looking at the neighborhood as a whole, flooding was measured on the basis of individual properties. They offer predictions for future flood risk and home value change up to 2033—which shows that some properties with no history of flooding are at risk, and homeowners stand to lose millions of dollars.

Previous studies have forecasted changes in home values in the future, but by using historical records and taking such a fine-grained approach, the team was able to show for the first time that housing markets have already started showing the effects of rising sea levels.

“This is the very beginning indicator that sea level rise and flooding is having an economic impact, and that the market is responding to it,” said Matthew Eby, executive director of First Street Foundation.

And the decline in home values doesn’t just come from houses getting flooded. In addition to house lots, they also looked at the elevation of each road and its exposure to nearby bodies of water. Nearby flooding of roads can impact house prices because it affects commutes and mobility, said Jeremy Porter, professor of sociology at the City University of New York, lecturer in environmental health sciences at Columbia University Mailman School of Public Health, and academic data consultant at First Street Foundation.

The Northeast data has been consistent with previous data from the South, a surprise for the team. Over half of the top 20 affected cities and zip codes are in the Northeast. “The exposure of the New Jersey shore is incredible,” McAlpine said. “It takes you back a little bit when you look at Ocean City and see how many homes are regularly dealing with flooding.”

For their initial study of Miami-Dade County, the team actually travelled there, armed with a GPS, boots, and rulers to measure the flooding themselves and to see if their model was accurate.

But that trip offered more than just a chance to validate their data—they could see the actual impact that flooding has had on people.

“A lot of people were interested in talking to us about how this has become the new norm,” said Jeremy Porter, professor of sociology at the City University of New York, lecturer in environmental health sciences at Columbia University Mailman School of Public Health, and academic data consultant at First Street Foundation. “There’s always water in the streets. They deal with water all the time. People said they had trouble selling their home, or that they didn’t know it flooded like that when they bought their home.”

People in the tri-state area share these experiences. Clint Andrews, professor of urban planning, director of the Rutgers Center for Green Building, and associate dean for faculty at Rutgers University’s Bloustein School of Planning and Public Policy, studies how homeowners think about flood risk information. He focuses on neighboring county of Monmouth, New Jersey, which Hurricane Sandy swept through in 2012, and his fieldwork backs up what the First Street Foundation data says. If people know that flooding has happened in an area, they’re not willing to pay as much for houses. Flood risk also increases the cost of flood insurance, an added expense for homeowners.

Perception is key, Keenan said, because a lot of home buyers gauge risk based on reputation rather than evidence. Andrews thinks that may even be a potential blind spot of First Street Foundation’s model. If a house in a neighborhood that has a reputation for flooding, or has been designated as high risk by a government agency, home buyers may drive prices down even without proof.

But perceptions can vary based on the buyer. People buying a second home or investing in a property are more cautious because they have more experience with real estate and know what to check. To Andrews, it seems like these are the buyers that are bringing home prices down, because once they know a house’s flood risk, they are less willing to pay the asking price.

On the other hand, he has noticed that people who are purchasing a house to live in as their primary residence tend to be less aware of the flood risks. “They don’t go around buying houses often,” he said. “They are more typically drawn by the constant allure of the seashore and are not thinking very probabilistically to apply a future flood risk discount.”

These buyers also don’t have access to a lot of reliable sources of information on flood risk. In focus groups, Andrews hears people wonder whether the sea level rise is going to affect them within the term of their current mortgage, a hundred years later.

This information gap compound existing segregation in the real estate market. Keenan studies the concept of “climate gentrification:” As the climate-related calamities become more frequent, certain homes—areas at a higher elevation, weather-proofed neighborhoods—will become more desirable because they are adapted to changing climates. But this may be to the detriment of their coastal counterparts.

“Those folks are going to slowly see their property value dwindle away to nothing, and then they’ll walk away,” Andrews said. “That doesn’t feel like an elegant or nice solution.”

First Street Foundation has seen this exact phenomenon occur in their data: For example, in Suffolk County on Long Island, wealthier residents have moved away from the coast, leaving behind a lower income population with lower home values.

This inequity is part of the issue that First Street Foundation is trying to address. They plan on taking a closer look at how home values are impacted in neighborhoods that have adapted to the rising sea levels with new drainage systems or sea walls.

“The bigger issue is the people who don’t necessarily have the means to move or to elevate their homes,” McAlpine said. “Lower income towns with less adaptation capabilities are generally the ones that are going to have to deal with this issue more regularly because it’s harder for them to fix it.”

By putting the data online through Flood iQ, it’s accessible to everyone, not just more-experienced home buyers. Since its initial launch, there have been over 170,000 unique users, and numbers have grown as they’ve added the home value feature and increased the number of states, Eby said. The team plans on extending their analysis to cover the entire east coast, including other major coastal metropolitan areas, like Boston, that have seen their own effects of rising sea levels.