Denial in Miami and Other Threatened Areas

The Guardian has an article on sea level rise with a focus on the reality-defying real estate boom in Miami and coastal Florida.

We covered sea level rise denial in Miami once before, as well as comparable phenomena in North Carolina and in Galveston.

People seem puzzled about the prevalence of denial in coastal regions in some countries. I think you will find that these countries have notions about real estate as entirely private property with little or no public obligation or warrantee. In such countries, it is economically rational for owners of threatened property to promote denial, and other interests benefiting from high real estate values are comparably motivated. That is, the value of their real estate depends not so much on a lack of sea level rise as the value depends on a lack of perception that sea level rise is real within the relevant markets.

Another problem is that insurance will never “total” your property the way it will your car. The coverage is traditionally designed to allow you, in the worst case, to rebuild on the same property. It isn’t designed to protect you in the event your property becomes uninhabitable. So after a disaster you can be “under water” in more senses than one – even after the value of the construction is paid to you, you may own or even owe on a property whose value is effectively zero or negative.

Accordingly, when Katrina flooded New Orleans, there was talk about “whether to rebuild” below sea level. But the choice was never available at the collective level. Each individual had the choice whether to rebuild or not. The property remained in private hands, and there was no plausible mechanism to relocate the population.

A good thing, as this is New Orleans, after all. And New Orleans seems to have shrugged off the blow and to remain as strange and creative and unique as ever. But the point is, unlike elsewhere, in America we have set things up so we have no realistic choice but to rebuild in place. What happens when the place ceases to exist.

Comments:

  1. "That is, the value of their real estate depends not so much on a lack of sea level rise as the value depends on a lack of perception that sea level rise is real within the relevant markets."

    You seem to be wanting to make a "look, isn't economic rationality dumb" argument. I don't get it. I don't know how things work in the US but in the UK, you get surveys done for any property you're buying that look, as far as possible, at the full range of factors that will affect its value. The seller doesn't have the option of pulling the wool over the buyers' eyes (which of course would be in the sellers' economic interest!) The buyer, of course, wants to know if any problem at all is lurking - whether in the physical building itself or in any upcoming planning law changes / specific planning applications, etc.

    In this case, how would the sellers be able to build this hegemonic view of denial? It can't just be them doing it. And it's no more economically rational for buyers to ignore it than if they were buying on a quickly eroding cliff side (which people do!)

  2. I'm not making an argument against economic rationality. I'm making an argument against the concept of "real estate" as construed in the most market-oriented economies.

    The hegemony of climate denial is obvious in seaside communities, at least here in America.

    I don't know as sea level rise is listed in property surveys in your country. I'm pretty sure it isn't here, and I'm pretty sure the real estate industry wants it that way.

    The buyer, having been hornswoggled into believing that there is no sea level rise problem (or any undisclosed problem) is financially motivated to maintain that belief las long as they own that property.

  3. I know Joe Romm isn't MT's favorite blogger, but he posted on this in March:

    http://thinkprogress.org/climate/2014/05/23/2967411/coastal-property-values-crash-climate-science-denier

    Googling "insurance coastal property climate change" turned up this:

    http://www.bankrate.com/finance/insurance/insurers-climate-change.aspx

    You won't find many climate change doubters these days within the property insurance business, says David Kodama, senior director of research and policy analysis for the Property Casualty Insurers Association of America, or PCI.
    ...
    So far, climate change hasn't put too much heat on home insurance premiums.

    "Far from signaling a crisis, we're seeing some stability of pricing," says Kodama. That's being aided, says [president of the Reinsurance Association of America Frank] Nutter, by the competitive global reinsurance market, where prices are down 10 percent to 15 percent despite a horrible climatic year overseas.

  4. "...financially motivated to maintain that belief las long as they own that property." Well, really they're only motivated to act as if they have that belief when discussing selling it. Heck, they're financially motivated to act as if they believe that there is a sea level rise problem when they're buying it.

  5. The latter point is true in principle but I wonder how it would work in practice. "Please shave 25% off your cost because I believe that there's a 50% chance of damage and a 5% chance of total write-off in the next fifty years due to sea level rise". "Go away, a**hole, there's no such thing as sea level rise (as long as I can find buyers who don't believe in it.)" Is this sort of belief that the property is at risk driving property values down already? Sure. But that's close to my point which is that the entire coastal community is motivated to prevent that idea from taking hold.

    As to acting as if you believe vs believing, that depends on how good of a dissembler you are. Most people can do a better job of taking a position when they believe it. There are some exceptions, of course, as anyone in the climate wars knows.

  6. We all know that for many years Joe has been the best source for "all the news that's fit to print."

    Marc Roberts puts it well:

    love him or hate him (and I’m a lover), Joe Romm is not exactly a slick media spin artist. He doesn’t seem to know any way of communicating other than by stating, in the strongest possible terms, what he believes to be correct. He doesn’t couch his criticism in the sort of soothing, this-side, that-side, we’re-all-reasonable-people throat clearing that attracts the admiration of Serious People. He just blasts away, all guns blazing; he can’t help it.

    In fact, Dave Roberts, a couple years back, is going after Breakthrough's slick manipulations (this is not addressing the comment, sorry, just providing background, though I agree with him on that. Source:

    http://grist.org/climate-change/2011-04-26-why-ive-avoided-commenting-on-nisbets-climate-shift-report/

  7. mt: That is, the value of their real estate depends not so much on a lack of sea level rise as the value depends on a lack of perception that sea level rise is real within the relevant markets.

    Benjamin Graham, the legendary investor (Warren Buffett named one of his sons after him) said ...the stock market behaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will in the long run be reflected in its stock price). So it will be for coastal real estate.

    Although the property owners of Miami have few options--living as they do on highly permeable bedrock--in most other places there is the choice of limiting damage by building defences or, if that does not work economically, abandonment. Abandonment is not necessarily as bad as it sounds because owners will have the opportunity to enjoy their property for a few decades, while being able to avoid making capital investments in the property and, perhaps, investing that saved money in different property on higher or impermeable ground. In a simplistic scenario it is possible that the newly purchased property could become more valuable as the coastline approaches it. So, losses will be less than the current real-estate price would suggest and there may even be modest offsetting gains elsewhere.

    Of course, to take advantage of these loss-limitation strategies, you need to use the best possible information on future sea-level trends. Coastal dwellers who reject consensus science will tend to lose more money than those who accept it. Perhaps there is some justice in the world after all.

  8. Hmm, somewhat, but I don't think this helps much.

    One thing people seem to miss is that a drowned coastline is millennia away from being a pleasant beach. And a drowned and ever-further encroaching coastline is even worse. And whether there is high ground at all in South Florida is debatable.

    No, I don't think there is much silver lining at all. But I only say this because my parents' condo in Miami Beach is long since sold. If it weren't, I'd be motivated not to make a big deal of it.

  9. Miami-Dade County planning has produced a report on sea level rise impacts timely to this post, requiring only a year from the inception of the Sea Level Rise Task Force to produce a report (rather remarkably speedy, given the circumstances).

    The report is interesting inasmuch as it shares with other similar projects the feature of skipping attribution for causes of rapid climate change while accepting that rapid climate change is a reality. By avoiding attribution, the report avoids entering the quagmire of artificial controversy. At the same time, by adopting that tactic the report sidesteps mitigation and focuses entirely on adaptation. In fairness, of course, the board's task in producing the report was to examine impacts of sea level rise on Miami-Dade, not solve the underlying problem driving that challenge.

    Full report is here (pdf). It's an interesting read, if nothing else as an example of desperate futility on a grand scale.


Leave a Reply

Your email address will not be published.