The ocean comes for houses. That’s not priced in.


Freddie Mac researchers led by Ajita Atreya found that homes directly exposed to projected sea level rise have no discount over those that are not. There were rebates for homes in designated flood zones, but that’s probably to offset the cost of flood insurance, which they’ll have to bear if they’re funded with a government-backed mortgage rather than future sea-level risk. The results apply to investment properties in addition to those purchased as a primary residence.

All in all, the market’s willingness to look beyond sea level risk amounts to a dangerous oversight. About 40% of the US population lives in coastal counties, according to the National Oceanic and Atmospheric Administration, and NOAA researchers are now predicting an average sea level rise of 10 to 12 inches by 2050, even if the world manages to reduce greenhouse gas emissions before then.

But many buyers are obviously missing important information. Florida and many other states don’t even require sellers to disclose past flooding, let alone tell buyers that a home is at risk of sea rise. In a ranking by the National Resources Defense Council website, Florida is among 21 states to receive an “F” for flood disclosure, meaning there is no legal or regulatory requirement for flood disclosure at the time of sale. Even in states that require disclosure, they often come around the 11th hour when buyers sign stacks of closing documents, according to Michael Gerrard, director of the Sabin Center for Climate Change Law at Columbia Law School. Tenants generally get less protection than buyers.

As Freddie Mac’s study showed, insurance premiums influence behavior: buyers in designated flood zones tend to discount property values. Unfortunately, government flood zones still do not take into account the future impact of sea level rise. Not having forward-looking flood maps “is like driving a car and just looking in the rear-view mirror,” Joel Scata, NRDC water and climate advocate, told me. Understandably, politicians and their constituents often oppose flood zone designations out of concern that they will reduce the value of land in their area. Government leaders in at-risk states and localities should instead think long-term: Accurate, forward-looking maps would fuel needed containment efforts.

There have clearly been some positive developments in dealing with the so-called information asymmetries in real estate flood risk. and Redfin Corp. have partnered with the nonprofit First Street Foundation to provide flood risk assessments for properties on their websites, and First Street founder Matthew Eby said he would like to expand the resource to more government agencies. “We’re just trying to give people the information so everyone’s on the same playing field,” he told me over the phone Thursday. Meanwhile, Hawaii will become the first state to require sea rise disclosures effective May 1. Others should follow this example. Of course, disclosure laws alone are not a solution to the world’s climate problems. “It’s a very low-hanging fruit, and yes, it’s important,” Abigail Fleming, an environmental attorney and professor at the University of Miami School of Law, told me this week. As she pointed out, flood reports can also have a negative impact on house prices for low- and middle-income households, some of whom live in vulnerable areas not by choice but because they have no other options. For this reason, mitigation plans should combine disclosure requirements with mitigation efforts, voluntary home purchases in at-risk areas, relocation assistance, and general flood risk education reaching people before they buy or rent a home.

Even then, parts of the housing market are likely to continue to ignore reality. As a Florida resident, I’ve seen firsthand how many homebuyers conclude (rightly or wrongly) that their investment horizons are short enough that sea level rise doesn’t matter. It’s also possible that near-term supply-demand dynamics are overwhelming analyzes of the region’s long-term prospects. Like other parts of the Sun Belt, Florida is seeing an influx of newcomers seeking year-round warm weather, beautiful beaches, and a vibrant culture. The property taxes they pay can ultimately help communities adapt to the challenge of sea level rise, but it’s important first that everyone acknowledges the size and scale of the problem — and that includes the housing market.

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Jonathan Levin has worked as a Bloomberg journalist in Latin America and the US, covering finance, markets and M&A. Most recently, he was the company’s Miami office manager. He is a CFA charterholder.


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