Could Climate Change Erode Real Estate Markets in Coastal New Jersey?

Tom Johnson | June 18, 2018 | Energy & Environment
If chronic flooding inundates New Jersey communities, homes could take a big hit, according to new report, as well as property taxes that fund schools and roads

Credit: FEMA
Coastal flooding
Rising sea levels threaten hundreds of thousands of homes and structures nationwide, with New Jersey ranking second only to Florida as the state most at risk for chronic flooding, according to a new study.

In an analysis of the implications of three different scenarios involving sea-level rise, a study by the Union of Concerned Scientist concluded many coastal real estate markets will be strained by tidal flooding within the next three decades, a prospect that could shrink property-tax bases and spell decline for many these communities.

The conclusions of the study echo similar analyses done over the past few years that chart possible outcomes of climate change and how it could impact coastal areas in the state, with a focus on real estate markets.

The most dire scenario assumes that sea levels in New Jersey rise by an average of 2.1 feet in 2045 and 7.3 feet in 2100. The analysis used data developed by the National Oceanic and Atmospheric Administration and localized for the UCS study.

By 2045, more than 62,000 of today’s residential properties, currently home to about 80,000 people, are at risk of chronic inundation — defined as flooding 26 times a year. Ten New Jersey beach towns are projected to have at least 1,500 homes at risk, with Ocean City topping the list at more than 7,200. By the end of the century, the total number of residential properties at risk jumps to 251,000.

Ignoring the past

The study seems to suggest, as have other reports, that New Jersey has yet to learn lessons from building so close to the shoreline. Some of the greatest consequences of this overdevelopment will be along the New Jersey and Florida coasts, the report said.

Nearly 20 percent of the at-risk New Jersey homes in the 2045 and 2100 scenarios were built after 2000, which speaks to the ongoing development in flood-prone locations. In fact, roughly 2,600 at-risk homes in the 2045 projection were built or rebuilt after Hurricane Sandy devastated the state in 2012.

New Jersey’s at-risk properties have the second-highest value of any state. About $27 billion worth of residential properties (based on today’s market) are at risk of chronic flooding by 2045.

The outlook is even grimmer for commercial properties, according to the report. New Jersey ranks first and second in the nation for the most commercial properties — nearly all of them retail establishments — at risk by 2045 and 2100, respectively.

“What’s striking as we look along our coast is that significant risks of sea-level rise to properties identified in our study often aren’t reflected in current market values in coastal real estate communities,’’ said Rachel Cleetus, an economist and policy director for the Climate and Energy program at UCS, as well as a co-author of the report.

An eroding tax base

The consequences of chronic flooding of properties in coastal communities could translate not just into eroding property values, but also unlivable homes and falling tax revenues that fund schools, roads, and emergency services, the report noted.

“For some communities, the potential hit could be staggering,’’ said Kristy Dahl, senior climate scientist at UCS, and a co-author of the report. In New Jersey, the annual loss in property-tax revenue could approach $1.7 billion, the report found. In Ocean City, nearly 40 percent of homes are at risk and one-third of the local property-tax base.

Ironically, many federal, state, and local policies, while well-intentioned, mask risk and create incentives that reinforce the status quo and even expose more property to danger, the report argued.

As other studies have concluded, the risks of chronic flooding could be reduced by more aggressive actions to combat climate change and by curbing emissions contributing to global warming.

“Actions today — especially the amount of global warming emissions we release — will help determine what our coast will look like at the end of the century,’’ said Astrid Caldas, a senior climate scientist at UCS and another co-author.