On June 24, 2021, tragedy struck in South Florida when the 12-storey beachside condominium Champlain Towers South collapsed, killing 98 people. The investigation and legal battles about why this happened will continue for some time. For many in Florida, however, this is already part of wider concerns about the viability of building homes and infrastructure by the sea.
Florida is known for its beach lifestyle. Around Miami and other cities, the most valuable homes are often the ones closest to the water. But the coastal environment is being severely challenged by climate change. More than half of Florida’s 1,328-kilometre coastline has seen critical erosion, according to a 2021 report by the Florida Department of Environmental Protection. And the Union of Concerned Scientists (UCS) has warned that more than 300,000 existing coastal homes in the US (most of them in Florida) will see regular flooding by 2045, within the time of a 30-year mortgage started today.
The idea that coastal homes may one day be destroyed by the sea isn’t new or surprising. Now, however, the warnings are having a financial effect. House sales in Florida’s low-lying coastal suburbs, once a lucrative real-estate market, have been falling for nearly ten years, reports The New York Times, while those in “safer” areas continue to rise. More recently, property values in coastal areas have started falling, too.
Home is where the money is
This could be an early sign of a housing crisis caused by climate change — one that will repeat in coastal regions around the world. It’s a crisis not just because houses as shelter may disappear, but because property is often the basis of wealth.
In Australia, for example, a house is both the most important asset owned by most households and an essential investment. Most mortgages and many small-business loans are secured against residential property, so housing forms a big part of the collateral supporting the financial sector’s balance sheets.
About A$25 billion (€16.8 billion) of residential property in Australia is considered at risk of coastal erosion, says CoreLogic, a property data consultancy. “Coastal risk has far-reaching implications for the country’s property market and its supporting financial sector, including property valuations, home-loan viability and insurance premiums,” Pierre Wiart of CoreLogic told The Sydney Morning Herald. The Insurance Council of Australia says A$30 billion of investment is needed in coastal protection and adaptation projects over the next 50 years.
Meanwhile, for many in the developing world, coastal risk is existential. In West Africa, authorities in Liberia’s capital city, Monrovia, are struggling to manage shoreline erosion and save the country’s vital coastal economy. West Point, a city slum built on a peninsula, is being washed away. Local officials say almost 30 metres of shoreline has disappeared in the past ten years, destroying hundreds of homes and putting essential fishery businesses at risk. “The population has fled as a result of the erosion,” Lawrence T. Wreh, a community leader, told BusinessLIVE, a Bloomberg media company in South Africa. “Homes are being taken away every day. It’s a very serious problem.”
Can we hold back the sea?
The UN estimates that some 40 per cent of the world’s population lives within 100 kilometres of a coastline. With the rise of remote working, more people want to move “somewhere near a beach”. And sea-level rise isn’t a problem just for beachfront homes, but also houses in low-lying areas around estuaries or lakes.
As authorities and businesses struggle with questions of where to build and how to protect homes and infrastructure, they must deal with the legacy of urban-planning decisions taken 100 years ago. Today, for example, we know that mean sea level isn’t constant, and many building codes use measurements of elevation that must now be revised.
Florida has already done this, but such a change to the building code can lead to substantial costs for property owners. Ruben Gomez, a Miami-based architect and president of Ai2 Design Corp, told Business Spotlight: “You cannot tear down houses that are considered to be of historic value, but a lot of these old houses are not high enough above sea level, and many of them will have to be raised.”
Considering the risks, many homeowners want engineering solutions that give them a feeling of security. In the northern Sydney suburb of Collaroy, a storm in 2016 swept away much of the shore, leaving houses on the edge of collapse. Since then, construction of a concrete sea wall has begun. However, others say the wall guarantees that the beach will disappear in the next big storm. They see this as sacrificing public space to protect private property. Local resident Brendan Donohoe told Guardian Australia: “Our beach is the thing we should be trying to insure — not in the monetary sense but in the sense of its continued existence.”
Such conflicting demands make the problem highly complex. Other communities in Australia and the US are trying different tactics, such as managed retreat from the shore, or natural barriers like a revetment, a sloping rock structure designed to absorb the energy of waves. In future, enjoying the beach lifestyle while feeling safe from the risks is going to be a difficult balancing act.
Words of interest...
- Important vocabulary for mortgages and borrowing
- Amortization: the gradual reduction of the principal amount of a debt
- Appraisal: an official estimate of the value of a property
- Appreciation: the increase in the value of property over time
- Collateral: an asset (e.g. a car or house) used to guarantee repayment of a loan
- Compound interest: interest paid on the principal and on the interest of a a loan
- Deposit (or down payment): the amount paid towards buying a house, which is the difference between the price and the amount of the loan
- Foreclosure: the legal procedure in which the property is sold by the lender when the borrower cannot repay a loan
- Principal: the amount of money borrowed on a loan