All the value that washes into the sea

In August of this year, the Washington Post published an article by John Tibbets and Chris Mooney that discusses sea level rise and eroding home values. The piece opens with the case of Elizabeth Boineau, who once hoped to sell her home in coastal South Carolina for one million dollars. But because of climate change–and subsequent rising seas–the value of her home dropped so dramatically (she reduced the price eleven times), she has finally decided to just tear it down.

As Tibbets and Mooney explain:

Boineau is one of many homeowners on the front lines of society’s confrontation with climate change, living in houses where rising sea levels have worsened flooding not just in extreme events like hurricanes, but also heavy rains and even high tides. Now, three studies have found evidence that the threat of higher seas is also undermining coastal property values as home buyers — particularly investors — begin the retreat to higher ground.

Boineau demolished the house and moved across the river to safer ground. She’s waiting for her old lot to sell so she can purchase another. So much of this rests upon that strange idea of value as it relates to risk, climate change, and rising sea levels.

Here’s where things get interesting. Tibbets and Mooney cite a joint study from researchers at Penn State and UC Boulder that concludes that vulnerable homes sell for about 6 percent less than “unexposed” homes. But it goes further: “The most vulnerable properties — those that stand to be flooded after seas rise by just one foot ­— were selling at a 14.7 percent discount, according to the study, which is set to be published in the Journal of Financial Economics.”

The researchers from this study argue that these price/value drops are being created mostly by wealthy, more educated buyers who are purchasing “multiple properties or second homes.” These are not buyers who are living in these properties. The study authors gloss these investors as “sophisticated buyers,” arguing that they “demand a discount to bear the risk of future sea level rise.”

Think about that! In essence, this is the financialization of future value losses due to climate change, sea level rise, and flooding. The article cites homes in Charleston, South Carolina that have lost “$266 million in value since 2005 because of coastal flooding and expectations of still higher seas.” But here’s the thing: Despite more awareness and concern about sea level rise and flooding risks, coastal development–and property appreciation–continue.

At least for now, coastal property values aren’t actually declining. Home prices are still going up, just not as fast. As Tibbets and Mooney explain, this isn’t actually a case of lost or declining value, but rather less market appreciation relative to surrounding properties that are exposed to fewer risks (here they cite Jeremy Porter from Columbia University).

Value is a strange thing. I’ve been obsessed with its weirdness for a while now (see this too). Coastal real estate is particularly unwieldy. With the thread of rising seas, erosion, and coastal flooding, the effects on coastal land values are bound to be severe. But when? Real estate values are fickle, yet resilient. There are tools out there, like this one, that try to tell homeowners about potential risks. But I’m not sure if the gravity of the situation has quite sunk in yet.

The complicated thing about value–in real estate or anything else–is that so much of it depends on rather ethereal stuff. Sure, there’s the Marxian Labor Theory of Value, but that’s not some ironclad rule about the value of all things. That was never really the point of it anyway. And as it turns out, people often place value on things for either very idiosyncratic, highly individualistic reasons, or because of larger social and structural conditions that shape hopes, desires, habits, and decisions. There’s nothing naturally valuable about the coast per se, beyond its uses various uses and attractions for people in certain times and places. It’s not necessarily a given that living along the coast has to be luxurious or even remotely desirable in the near future. In many parts of the world, it’s not particularly safe to live on the edge of the sea. In other parts of the world, of course, the coast remains a fairly sought after place to be (despite the warning signs). When will coastal properties slide from desirable to dangerous? When will the hazards and risks shift the equation? Time will tell.