MIAMI -- Flooding due to climate change-related sea level rising, the erosion of natural barriers and long-periods of rain pose substantial economic risks to Florida, particularly to the value of South Florida real estate, according to two new reports released last week.
For years, Florida lawmakers mostly ignored climate change under then-Gov. Rick Scott, who is now a U.S. Senator. But GOP Gov. Ron DeSantis has taken a more aggressive stance at tackling the issue, although environmentalists want him to do more.
Based on past trends, losses from flooding in Florida could devalue vulnerable homes by $30 billion to $80 billion, or about 15% to 35%, by 2050, according to a report from McKinsey Global Institute.
Average annual losses for residential real estate due to storm surge from hurricanes amount to $2 billion today, but that projection could increase to about $3 billion to $4.5 billion by 2050, the McKinsey report said.
“Flooding in Florida could not only damage housing but also raise insurance costs, affect property values of exposed homes, and in turn reduce property tax revenues for communities,” the McKinsey report said.
Furthermore, the impact of a 100-year-storm event could be even more devastating over time, going from $35 billion today to between $50 billion and $75 billion by 2050, the McKinsey report said.
A separate report from the climate-risk analytics firm Jupiter Intelligence said the percentage of vulnerable oceanfront properties affected by extreme flooding will rise in Miami-Dade County from 5% in 2019 to 98% by 2050.
By 2050, annual flooding damage county-wide in Miami-Dade County is expected to roughly double, leading to shortages in affordable insurance coverage and real estate market instability, according to the Jupiter Intelligence report.
“Ignoring, or underestimating, the actual economic risk posed by moderate flooding is common to other geographies in the U.S. and around the world,” said Rich Sorkin, CEO of Jupiter in a statement. “Almost none of this risk is reflected in prices. Most of this dynamic is not yet understood, nor is it implemented into the decision-making of financial institutions.”
The short-term impacts of flooding will be felt within the next decade, according to the Jupiter report.
The impact from moderate flooding of up to one foot in an oceanfront city in Miami-Dade County will increase from 13% of total properties to 48% of total properties. Properties at risk from extreme flooding will jump from 5% to 86% of the total, according to the Jupiter report.
The increased risks of flooding could leave lenders exposed to greater losses and insurers in need of adjusting their pricing to include the greater risks, the Jupiter report said.
“Homes, livelihoods, and the viability of financial institutions and the economy as a whole may find themselves under a Sword of Damocles, unaware of the extent of risk they bear, and without time to prepare,” said Sorkin, referencing the ancient parable about living under imminent peril.