Experts: Displacement From Climate Change May Alter Industry
October 16, 2020
Climate change and its effect on the planet have created decades of debate. However, the impact of rising global temperatures and surging storm seasons on real estate isn’t examined as often. In two sessions at the Urban Land Institute’s virtual 2020 fall conference, experts from a variety of fields discussed how population shifts brought on by natural disasters and climate change can affect both residential and commercial real estate.
Carlos Martin, senior fellow at the Urban Institute, a social and economic policy research organization, gave an overview of the issue of climate migration Wednesday at ULI’s seminar, “What’s Next? Climate Migration and the Cities and Neighborhoods of the Future.” Martin broke down climate migration into two major categories: displacement caused by climate-related disasters, such as hurricanes and wildfires, and that caused by chronic climate effects, such as heat, sea-level rise, and drought.
In 2019, Martin said, 23.9 million people were displaced worldwide due to weather-related disasters.
Such relocations are often meant to be temporary, Martin said, but sometimes they become permanent. Of the nearly 250,000 people who evacuated to Houston from New Orleans in the midst of Hurricane Katrina in 2005, an estimated 100,000 were still living in Houston 10 years later, he said.
In addition, Martin pointed to research that shows that long-term changes such as sea-level rise can also cause population shifts. By the end of this century, he said, 2.5 million Florida residents are projected to move away from Miami, Fort Lauderdale, and West Palm Beach because of rising sea levels. During the same period, Texas could see an influx of 1.5 million additional residents, also due to rising sea levels.
Real estate markets in both “source” communities and “recipient” communities need to be prepared, Martin said. “There are opportunities for many places,” he said. “Areas losing people will have a chance to rebuild and grow healthier. Centers of receipt can gain housing and jobs.”
Source communities, said Fawn McGee, bureau chief of state land acquisition at the New Jersey Department of Environmental Protection, need to be ready to help residents who are in danger of losing their homes to rising sea levels and increasing storm intensity. In New Jersey, two-thirds of the population live in Special Flood Hazard Areas, which require homeowners to purchase flood insurance, she said, and which also puts them at risk of a flood event that could substantially damage their homes. It‘s imperative to identify at-risk homes and help homeowners see that it’s in their best interests to move before disaster strikes, she said. McGee runs a buyout initiative, the Blue Acres Program, that helps homeowners to do just that.
The key, McGee said, is getting buy-in from the community and helping them to see the benefits. “Flood damage hurts the value of all the homes in the neighborhood,” she said. “It hurts the tax base. Moving people increases value for everyone long term.”
Chris Castro, director of sustainability for Orlando, Fla., finds himself on the other end of the equation as a member of a recipient community. Despite Florida’s reputation for both extreme storms and climate vulnerability, Castro said his city is preparing for a long-term influx of people from neighboring areas fleeing weather-related disasters. He cites his city’s relatively sheltered location as the cause: “Orlando is a hot spot for climate refugees.”
The challenge for real estate in a recipient community, Castro said, is preparing for a steady increase in housing demand. Solutions his city has employed include developing vacant lots and modifying zoning laws to allow for construction of mother-in-law suites or cottages on the lots of existing single-family homes. “We’re providing affordable housing for those who might come,” he said. “And as we increase in population, it’s good for business and the real estate market.”
Climate change can also affect the bottom line of commercial real estate, said Spencer Glendon, senior fellow at the Woodwell Climate Research Center. In the Oct. 15 session “Climate Change Will Wreck Your Spreadsheet,” Glendon argued that climate change could profoundly affect insurance. As the average temperature rises, he said, and there are more storms and wildfires as a result, previously desirable locations in California, Florida, and the Gulf Coast will become more disaster-prone—and a less attractive option for insurers. “If I were a lender, I would not invest in Florida or in Marin County, Calif., right now,” he said. “Once faith in the future safety of an area erodes, then business also erodes.”
The solution, Glendon argued, is for all members of the real estate industry to work together to create better, more sustainable practices in construction, design, and building codes to reduce carbon emissions and potentially reverse rising global temperature trends. “As real estate professionals, you must demand better regulation,” Glendon said. “You can do a world of good in the flow of your regular work.”