For years climate scientists have been trying to develop models for the real estate market impacted by rising sea levels. Florida is proving to be a microcosm of coastal real estate.
"Everybody thinks this is a God-given sea level," Harold Wanless, who heads the University of Miami's geology department told the Miami Herald. "There's nothing special about where the sea level is right now."
In fact, almost all scientists agree there is going to be significant sea level rise within the next century. Miami-Dade County has developed extremely detailed elevation maps because the county is only about 6 feet above sea level with the highest elevations under 25 feet. So far, sea levels have risen about 6 inches in Miami-Dade. The rate of rise is increasing at an exponential rate. The Southeast Florida Regional Climate Compact expects sea levels to rise 3 to 8 feet over the next century. NOAA's extreme worst-case climate projections show sea levels rising by 14 feet in Southern Florida. Some leading climate scientists expect sea levels to rise even higher and faster. "Once we have destabilized these ice sheets, there will be no stable coastline for centuries. I repeat: There will be no stable coastline for centuries. I apologize to the children," said Sidd Mukherjee in his paper Longthaw.
It is certain that much of the coastline will not have to wait decades to see extreme sea level rise. In 2022, the West Coast of Florida saw a sudden sea level rise of up to 20 feet that destroyed 5,000 houses and damaged 35,000 additional homes. Insured damages were between $50 billion and 65 billion after Hurricane Ian made landfall with extreme winds, torrential rain, and storm surge. Uninsured damages were estimated at an additional $50 billion.
As sea levels rise, it is unclear if real estate built on higher ground will be able to retain any value. Florida real estate located at the higher elevations is still dependent on low-lying infrastructure. "You're not going to have roads to get around on. You're not going to have sewage treatment facilities. You won't have garbage pickup. You won't have a source of fresh water," said Wanless. "All those things are the unfortunate reality of the future, and it won't wait until sea levels have risen 20 feet."
The inability to obtain flood insurance will likely be a leading driver in climate displacement out of Florida. If residents wait too long, they will likely become indigent climate refugees fleeing after letting their property values plunge to zero. Standard flood insurance only covers up to $250,000 of property damage, nothing below the first floor, and is cumulative for the life of the property. (That is to say, if a previous homeowner made a claim of $100,000, the new homeowner is only covered for $150,000.) In the event a homeowner is able to obtain a flood insurance policy, the cost of the insurance has been increasing yearly. In 2022, FEMA announced its new pricing policy: "FEMA is updating the National Flood Insurance Program's (NFIP) risk rating methodology through the implementation of a new pricing methodology called Risk Rating 2.0. The methodology leverages industry best practices and cutting-edge technology to enable FEMA to deliver rates that are actuarily sound, equitable, easier to understand and better reflect a property's flood risk." Flood insurance rates have quadrupled in Miami-Dade County.
FEMA also has the 50% rule -- the 50% Rule is a regulation of the National Flood Insurance Program (NFIP) that prohibits improvements to a structure exceeding 50% of its market value unless the entire structure is brought into full compliance with current flood regulations. Many existing structures cannot be rebuilt to their previous size, or for structures like trailers, they cannot be rebuilt at all.
Five Florida insurance companies have already pulled out of Florida altogether. In addition, these private insurers are in liquidation: AMERICAN CAPITAL ASSURANCE CORPORATION, AVATAR PROPERTY AND CASUALTY INSURANCE COMPANY, FEDNAT INSURANCE COMPANY, FLORIDA SPECIALTY INSURANCE COMPANY, GUARANTEE INSURANCE COMPANY, GULFSTREAM PROPERTY AND CASUALTY INSURANCE COMPANY, PHYSICIANS UNITED PLAN, INC., SOUTHERN FIDELITY INSURANCE COMPANY, ST. JOHNS INSURANCE COMPANY, INC., SUNSHINE STATE INSURANCE COMPANY, UNIVERSAL HEALTH CARE INSURANCE COMPANY, INC., UNIVERSAL HEALTH CARE, INC., WESTON PROPERTY & CASUALTY INSURANCE COMPANY, WINDHAVEN INSURANCE COMPANY
The Florida Office of Insurance Regulation has had to step in and provide state assistance for reinsurance coverage through state-run Citizens Property Insurance. The St. Lucie News Tribune reports, "The dramatic decision to assume financial responsibility for a raft of struggling insurers underscores the dire circumstances Florida is facing as a large portion of its homeowners insurance market teeters on the brink of collapse."
Most mortgages require homeowner's insurance in addition to flood insurance for properties located in a flood zone. Washington, D.C. is finally addressing the concept of some areas being too vulnerable to insure and addressing a "Managed Retreat".
Some Florida residents have already glimpsed the future and are moving out now. The Insider reports:
The Faasts had lived the kind of life you can only live in the Keys: Connie worked on commercial fishing boats and in a local aquarium, while Glenn owned a boat maintenance company and raced Jet Skis in his spare time. They had stuck it out in the Keys through several major storms, including 2005's Hurricane Wilma, which brought five feet of water to their little island and totaled three of their cars; Connie still shudders when she remembers the image of her husband wading through the water around their house with snakes climbing all over him, clinging to him for shelter from the flood. The Faasts had second thoughts after that storm, but the Keys were paradise, and besides, they didn't know where else they would go.
When Irma came 12 years later, though, the choice was much easier. During the evacuation, it took the Faasts a week to find a decaying hotel in Orlando where they could wait out the storm. As the hurricane passed over the center of the state, it knocked out their power, leaving them and their pets to spend the night in 100-degree heat without air conditioning. "That was it for us," she said. They had to get out -- not just out of the Keys, but out of Florida altogether.
Do not buy real estate on or near floodplain. You can avoid being a climate refuge due to economic climate displacement. Make sure your property has land ingress and egress from the closest 1,000-year-floodplain. Do not invest in any property located near a coast. Do not invest in a property that is below sea level. Do not invest in real estate located in Florida.
"Mostly stay away from the coasts because of both wind and rain issues from weather systems spinning inland. Even if you are not in a floodplain, a couple feet of rain in a day will cut off roads and overwhelm your sump pumps. Not to speak of wind taking power and telecom down." -- Sidd Mukerhjee (February 5, 2018)