Is the tide turning on waterfront property? An interview with Dr. Ian Miller

Here’s a question: with sea levels on the rise, would you be comfortable investing your money in a home by the beach? Dr. Ian Miller of the Washington Sea Grant program, based at the University of Washington, isn’t sure it’s such a wise idea.

Waterfront property in the USA has long been a desirable investment, with many Americans wanting to live on the shoreline or find a second home away from busy urban centres.

Climate change could be about to change all of that in the coming decades, however, with McKinsey forecasting that tidal flooding could wipe $30 billion from the Florida housing market in the next 10 years, many people are fearing a widespread movement away from areas at risk of flooding.

To understand the factors involved and their potential impact on the US housing market, our news team at Invezz spoke to Dr. Ian Miller, a specialist in coastal hazards focusing on coastal management and planning in Washington State. He sees a potentially seismic shift ahead in terms of attitudes to coastal living, with broad implications for our attitudes to living near the water.

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A shift in the coming decades

Predicting the future is never a simple task, though Dr. Miller is confident in his belief that attitudes to living by the water are likely to shift in the coming years to decades – with the shoreline reverting back to an area where the poorest in society live, rather than the richest. 

His experience observing the coastal areas of Washington has led him to the opinion that “a significant switch in the cultural value we assign to living right on the beach” is something to be discussed as a “when” rather than an “if,” as rising sea levels and the increased frequency of extreme weather make having a house on the coast a riskier proposition. 

For prospective investors, it’s important to consider these factors as such a shift in societal attitudes to coastal living could have a significant impact on the value of waterfront property. The McKinsey projections mentioned above are just one example, and it’s not hard to see that coastal homes across the USA might start to lose value fast if buyers start to prefer safer inland properties.

With up to a third of Americans now living in coastal areas, the number of people affected when such a shift occurs could lead to a further supply-side shrinking of prices. This leaves the distinct possibility that some people could be trapped in unsellable properties at risk of flooding. 

Uncertainty muddying the waters

A topic that featured prominently in our interview was the way in which the USA currently defines and assesses floodplains, and how this is unlikely to be compatible with a changing climate.

Currently, areas are mapped as flood zones if they have a 1% (or higher) chance of an annual flood event; however, the actual risk for homes within the mapped zone varies based on their location and associated weather events, and the lines are updated very infrequently.

This poses problems to potential investors assessing risk. A small flood caused by an abnormally high tide is not going to cause as much damage as a severe hurricane, and if the floodplains are not mapped accurately and often, especially as sea levels rise, you could be buying an at-risk property without knowing it.

Dr. Miller talked about how the flood zone had recently been re-mapped in Washington for the first time in roughly 30 years. While he thought this was probably about appropriate for a state that has seen 4-5 inches of sea-level rise over the past 100 years, he had this to say about the impact climate change could have on people looking to take out mortgages:

“if we get projected acceleration in sea level, then an update every 30 years probably isn’t going to cut it. People who have homes that are delineated outside the floodplain at the beginning of their mortgage may in actuality be well inside of it by the end of the lifespan of a 30-year mortgage”

The possibility of buying a home that is not on the inside of a mapped floodplain, but becomes incorporated into one during the repayment of a mortgage is “very possible” according to Dr. Miller. All markets abhor uncertainty, and a solution will need to be found to this problem to give prospective buyers some security and allow them to carry out accurate risk assessments.

What can be done to protect homes at risk of flooding?

Dr. Miller was keen to emphasise that there are ways in which investors can mitigate the flood risk of their properties – with the most common being to build walls and flood defences:

“We tend to default to something that’s large, grey, and built out of concrete”. 

In his work, however, he is also keen on more natural solutions. These include salt-marsh and kelp restoration which can reduce the threat of coastal flooding, and the use of materials such as wood in construction rather than boulders and concrete. All of these can help reduce flood risk and to help conserve natural habitats.

We also asked him about the USA’s National Flood Insurance Program (set to be updated later this year), and how this could help mitigate the financial effects of flooding. He was concerned that the legislation is ineffective, however, pointing out that rich people who buy houses outright don’t have to participate, and how the very presence of the scheme in some way “subsidises and incentivises” building in at-risk areas in the first place.

Dr. Miller described how it would be possible for rich homeowners to adapt their properties to become “flood-tolerant,” but that when it comes down to it, most will probably see it as too much work and relocate away from the coast. That is all very well for those who can afford it, but concern still remains for those without the necessary capital to make such a choice.

There is still a certain romance to living by the lapping waves of the sea, but Dr. Miller’s answer to whether he would buy a shoreline property serves as an indication of which way the tide will go in the future:

“I certainly wouldn’t buy it as an investment, or with the expectation that I was going to pass it down to my grandchildren.”