Category: Housing, Community

USA Today

Florida’s coastal homes may lose value as climate-fueled storms intensify insurance risk

Kate Cimini, USA TODAY- Florida – September 25, 2023

Climate-fueled disasters like Hurricane Ian are wreaking havoc on home values across the nation, but Florida’s messy insurance market makes it one of the most stressed, new research out of a nonprofit climate modeling group indicates.

High insurance premiums and a state-backed requirement that homeowners covered by the state-backed insurer of last resort enroll in the National Flood Insurance Program over the next three years could drop home values up to 40% in Florida in the next 30 years, data provided by First Street Foundation shows. And climate and insurance experts say that may further gentrify Florida’s coastal regions and barrier islands.

Using what First Street representatives described as a typical institutional-investing calculation, First Street Foundation found some homes, adjusting for 2023 insurance costs, have already lost up to 19% of their value.

The News-Press reported earlier this month on middle-class families being forced off Fort Myers Beach due to the rising costs associated with living on a barrier island in a time of stronger storms, including more stringent, expensive building requirements and a high demand for Beach property.

Experts say this trend will likely continue in coastal communities as high-income buyers who can afford to go without insurance rebuild and repair out of pocket. They say it will take a concerted effort among state and federal officials, as well as insurance and reinsurance companies to avoid climate-spurred migration and subsequent gentrification of Florida’s coast.

Do property values go down after a hurricane in Florida?

Geographer Zac Taylor, a professor with the Delft University of Technology in Norway, studies the connection between climate change and the insurance industry in Florida. Taylor uses they/them pronouns.

They urged caution in reassessing home values but agreed that this was a possible outcome based on current climate models.

Some of Florida’s more vulnerable coastline may even see corporations purchasing homes with the intent to rent them out, Taylor said, though real estate investor purchases of single-family homes dropped 45% in the second quarter of 2023, compared to a year ago, per realty company Redfin.

Soon, “only wealthy people will be able to afford to remain in coastal areas,” said Taylor.

What areas are being gentrified in Florida?

Gentrification of Florida’s coastline may have already begun in areas hardest-hit by Ian.

This is likely to continue as a number of factors drive up the costs associated with living along the Sunshine State’s coast thanks to sea level rise, a 2022 study out of Florida State University predicted.

“Eventually, people are likely to start moving inland from coastal areas as the costs of staying become too great,” the report reads. “Those that are further inland are more likely to be displaced by higher income residents who eventually move inland in the process of relocating to higher ground.”

On Pine Island, a community whose year-round residents are largely working-class, people are cutting back their monthly budgets and searching desperately for cheaper insurance after rates rose in response to Hurricane Ian’s devastation of the barrier island. Some are leaving the island after too many problems with insurance, said nonprofit civic group Matlacha Hookers president Joanne Correia.

Guylinda DeMyers and her husband have lived in Pine Island’s St. James City for 20 years, she estimates, but after this most recent hurricane, she said they plan to sell their home and leave for safer climes − once their insurance company pays their claim.

They’ve yet to see a penny of their claim from People’s Trust, she said, even though it’s been almost a year. In fact, it’s been so long, their policy has expired. They haven’t pursued a new one because “there’s nothing to insure,” DeMeyers said. “It’s broken.”

She doesn’t think they’ll get what the home was worth before the storm, but says her realtor has told her the property itself – an ocean-front lot ‒ is valuable enough by itself.

But DeMeyers is determined to see her claim through – if not for her, then for her husband, who has Alzheimer’s. She’s lived through three major hurricanes and subsequent rising insurance costs.

“It’s not safe here anymore,” DeMeyers said.  “We need a stable place.”

On Fort Myers Beach, another one of Florida’s vulnerable barrier islands, coastal gentrification is already underway. Renters and low-income homeowners are finding there’s nothing in their budget on the island anymore. The island is home to just 5,700 residents year-round, and the loss of even a few is significant.

“I feel like I’ve lost my community,” former Fort Myers Beach resident Cheri Warren told Chad Gillis of The News-Press in early September. Warren’s one-story home was destroyed during Hurricane Ian; now, she and her husband found it was too costly to repair it and have left the barrier island for the mainland. They plan to sell their lot at a later date, when the market has stabilized.

Has home insurance gone up in Florida?

For its new study, released in September, First Street Foundation founder and CEO Matthew Eby said the nonprofit, like institutional investors, calculated home values by dividing the amount of what a property would rent for over the course of a year, minus operating costs (which includes insurance costs), by 5%, an average risk amount.

While most homeowners look at the prices their neighbors homes are selling for in order to figure out how much theirs could be worth, this approach can take a while to show fluctuations in real home value, said First Street Foundation’s head of climate implications Jeremy Porter. Institutional investors use a standard calculation that First Street Foundation employed to “take the uncertainty out of the equation,” he said.

But with the cost of insurance rising due to both inflation and natural disasters like hurricanes and fires, risks increase as well. That means that operating costs have increased, particularly for Floridians who have no option for insurance other than state-created nonprofit Citizens Property Insurance Corporation. Citizens was created to insure homes that all other carriers refused to insure − the riskiest properties.

Not only is Citizens often more expensive than other carriers, as state law allows them to charge an actuarially-sound amount, but Florida legislators recently passed a law requiring homeowners who get their insurance through Citizens also enroll their homes in the National Flood Insurance Program, a federal insurance program.

That increases a homeowner’s operating costs even further.

“When … you don’t have anywhere else to go and you are beholden to whatever increase in prices that they just decide to put on you, there’s no way out,” Eby said.

Since 2017, Citizens’ number of policies have increased 168%, while the average premium has also increased from roughly $2,000 to more than $3,000 annually.

Citizens spokesman Michael Peltier said Citizens is held to a policy premium increase of 12% annually, and increases are subject to state approval.

Although California and Louisiana are facing rocketing insurance costs as well, according to First Street Foundation’s data, Eby said, “Florida has the biggest problem.”

The nonprofit examined the number of policies Citizens holds in Florida going back to 2017, when Citizens held roughly 500,000 policies. Eby noted that increased over time, and dramatically grew in 2021 as private insurance companies began to pull out of the state. After Ian, it shot up once again.

Citizens currently holds 1.5 million policies in force, and, Peltier said, expects that to increase to 1.7 million by the end of 2023.

“The major insurance companies have all been pulling out of Florida, leaving Citizens the largest insurer in the state,” said Eby. “The insurance company of last resort, the very last one that you want to go to for your insurance, is now the insurer for the entire state.”

‘Not all doom and gloom’: How this Florida Gen Z homebuyer bought in an uncertain market

Insurance and natural disasters: How billion-dollar hurricanes, other disasters are starting to reshape your insurance bill

Are Florida property values going up?

Rising homeowners’ insurance bill have yet to translate that to loss of equity, Porter said.

“When you go to sell it, that’s when the property devaluation becomes realized – at the closing table,” Porter said. But even those who hang on to their homes may feel it the next time Florida gets hit by another major weather event like Ian, he cautioned.

Then, he said, taxpayers will be the ones hurting.

“At some point, the amount of exposure on Citizens is too much, relative to its premiums,” said Porter. “If it’s not accounted for properly there has to be some kind of a subsidy from Florida taxpayers one way or another.”

Eventually, Porter predicted, “the state of Florida is going to have to ask the federal government for a bailout if they if they end up getting hit by a disaster that empties the coffers.”

According to Peltier, Citizens has a number of backstops to keep itself solvent. First, he said, if the state-created nonprofit goes through its premium-driven surplus, like all other insurers in the state it has access to the Florida hurricane catastrophe fund. It also purchases reinsurance to cover the possibility that the catastrophe fund is exhausted. Finally, Peltier said, Citizens is required by law to levy assessments on policyholders to make up any deficits.

This article originally appeared on Fort Myers News-Press: Florida home insurance risk intensified by climate-fueled storms

Good Morning America

Climate Week NYC: Large cities are at the forefront of climate change, experts say

Julia Jacobo – September 18, 2023

America’s largest cities are at the forefront of climate change.

About 80% of the U.S. population live in urban settings, according to the U.S. Census Bureau. Some of the country’s most densely populated cities, like New York City, are already at the frontlines of global warming, according to experts.

“This particular section of the population is very vulnerable to a range of climate impacts,” Rachel Cleetus, policy director for the Climate and Energy Program at the Union of Concerned Scientists, told ABC News.

MORE: One urban heat island has a plan to bring residents some relief

Hotter temperatures are posing threats to city dwellers

Heat is one of the two major impacts expected to plague cities as climate change continues to worsen, the experts told ABC News.

“Extreme heat is one of the most clearly recognized signals of climate change,” Cleetus said.

Not only are residents and infrastructure experiencing a steady rise in average temperatures, but when the extreme heat waves come, they pose an even greater danger, Malgosia Madajewicz, an associate research scientist for Columbia University’s Center for Climate Systems Research, told ABC News.

One of the biggest concerns for residents of large cities when a heat wave arrives are for those living in disadvantaged communities who do not have access to air conditioning or can not afford to run it all the time, Madajewicz said.

Extreme summertime heat overburdens vulnerable populations, especially communities of color living with low incomes, Cleetus said, citing mapping research the Union of Concerned Scientists has done to show the inequities of keeping cool in cities.

Heat illness is the number one weather-related killer in the world, according to the Centers for Disease Control and Prevention. And while cooling centers are available during business hours, they do not help people stay cool at night, which tends to be the most dangerous time for people in vulnerable populations or with preexisting conditions to succumb to heat illness, Madajewicz said.

Urban environments are prone to overheating because of the lack of greenery and abundance of concrete, which absorbs the heat and does not release it easily, creating the phenomenon known as an urban heat island. Heavy traffic also contributes to air pollution, which helps to trap the heat even more.

“There’s a very inequitable impact of extreme heat and cities because of these urban heat islands,” Cleetus said.

MORE: Some of the ways extreme heat will change life as we know it

Several consequences of climate change are causing increased flooding in cities

Historically, large cities all over the world have been built on coasts, which allowed for easy access to transportation and trade. But the convenience of location has also left these cities vulnerable to sea level rise and high tide flooding, the experts said.

As sea levels continue to rise about 3.5 millimeters per year, mostly due to melting in the Arctic, the additional water is contributing to chronic flooding in metropolitan regions, Cleetus said.

High-tide flooding, or “sunny day flooding,” is becoming increasingly common due to decades of sea level rise, the National Oceanic and Atmospheric Administration said in a report released last year.

Changing storm patterns, with an increase of stronger storms that contain more moisture, are also partly responsible for increased flooding. In 2021, more than 50 people in the Northeast died after the remnants of Hurricane Ida caused flash flooding in major cities along the East Coast.

In some New York City neighborhoods, the chronic flooding has become so regular that it is occurring on a weekly basis, Madajewicz said.

“There are areas in New York City that are going to be difficult to sustain neighborhoods in in the long term,” she said.

The prevalence of concrete also contributes to the flooding, as there is no soil to help absorb the excess water, Madajewicz said. The lack of wetlands and dunes in coastal areas that have been heavily developed, such as the Rockaways in Queens, make those neighborhoods more susceptible to flooding, especially when a major storm comes in, like Tropical Storm Sandy in 2012.

About 1.3 million residents of New York City live within or directly adjacent to the floodplain, according to Rebuild by Design, a climate research and development group. As sea levels continue to rise, that number could increase to 2.2 million New Yorkers.

Both heat waves and flooding can have an impact on people’s health, their livelihoods as well as the economy, Madajewicz said. They can also have these impacts of various channels like water quality, air quality and infrastructure, such as roads and the power grid, Cleetus said.

Once that infrastructure starts to get affected, a domino affect of threats to public health ensues, which includes a potential rise in energy and food prices, Cleetus said.

The food supply could even be interrupted because there are only so many access points in which sustenance can be shipped in, Madajewicz said.

“If those access points are disrupted, with flooding or effects of heat, that affects a very large population,” she said.

Rising groundwater is also being pushed to the surface — both due to rising sea levels, but also due to human consumption and waste, Madajewicz said. Then, when the rain and storm surge comes, there’s nowhere for the extra water to go, and there is potential for polluted water or raw sewage to also rise to the surface.

MORE: How rising sea levels will affect New York City, America’s most populous city

The suburbs are also in danger

People living in the suburbs will also acutely feel the affects of climate change, according to a new study by JW Surety Bonds, an insurance brokerage and consulting firm.

The paper, which used artificial intelligence to project climate change effects on major U.S. cities by 2123, found that homes in cities like New York City, Oakland, California, Miami and Cape Coral, Florida would be underwater in 100 years.

Conversely, places like Phoenix will be even more dry and deserted, due to an increase of drought, the researchers found.

People who live in the suburbs are more likely to settle there with a family and therefore pure for permanent solutions to create environmentally friendly homes and infrastructure that will withstand future threats from climate change, including green spacing, urban farming and sustainable water management, James Campigotto, a data journalist for JW Surety Bonds and researcher for the study, told ABC News.

MORE: How climate change, rising sea levels are transforming coastlines around the world

What cities need to do to combat climate change

Big cities are “engines of solutions,” and are tasked with implementing climate resiliency strategies to protect its citizens from future threats, Cleetus said.

The Big Apple has already started implementing infrastructure improvements that will protect its residents from future extreme events, but the work is nowhere near finished, Madajewicz said.

New York City enacted new building regulations in 2021 that take climate change into account, such as requiring all new construction to be above base flood elevation and take various other flood considerations into account.

There are also efforts being made to raise subway entrances, make the electricity grid and telecommunications more resilient and improve the infrastructure for public transportation, which can shut down when inundated with water — especially certain subway and train lines as well as New York City’s airports, which are located right on the coast in extremely flood-prone areas, Madajewicz said. After Superstorm Sandy, Con Edison, the utility company that serves that majority of New Yorkers, upgraded the infrastructure to the power grid.

“Right now, even a city like New York, which has considerable resources, does not have enough for the scale of investments that are needed,” Cleetus said.

But other large cities may not have the same resources or as sizeable a budget as New York, and the challenge will be to prioritize those transformations before it’s too late, Madajewicz said. In Miami and other costal cities in Florida, city planners have prioritized the installation of stormwater pumps, for instance.

“There is more to be done, and it’s important to recognize the gaps as well as the need for more funding going forward to fill those gaps,” Cleetus said.

If not, people may need to move further inland — a budding trend of climate migration that experts expect to see more often in the coming years.

“There’s going to be huge issue with availability of housing for the people who need to live,” Madajewicz said.