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Within the span of a 30-year mortgage, sea level rise is expected to put more than $100 billion worth of U.S. property at risk. How communities will pay to address that is a huge question. NPR's Nathan Rott has the story of a proposal in California that may offer an option by buying and then renting out coastal properties.
(SOUNDBITE OF WAVES CRASHING)
NATHAN ROTT, BYLINE: On a normal day at a normal tide on the Southern California coast, knee-high waves glide over a narrow strip of gold sand - ocean on one side, raised houses the other. No. Mansions might be a better descriptor.
BEN ALLEN: I don't know. We should Zillow, shouldn't we? Let's see. It'll be interesting.
ROTT: Ben Allen pulls out his cell phone and opens up the surprising.
ALLEN: Yeah. These are pricey.
ROTT: Allen is a state legislator. He represents a coastal district a bit south of where we are now. And he's not kidding about the price - 6.3 million, 3.1...
ALLEN: Eight point three.
ROTT: Eight point three million?
ALLEN: Yeah. Let's go look at that one.
ROTT: Now, not all coastal properties are million-dollar mansions, but Zillow estimates that by 2050, more than $40 billion in California real estate will be at risk from sea level rise. And when you have that much value at stake, Allen says, government has to do something about it. They can use taxpayer money to try and defend property - building seawalls, dredging sand - or they can use taxpayer money to try to reduce the amount of property that's at risk by buying people out of their coastal homes. Neither of which is cheap, which is where Allen comes in. He pulls up the Zillow profile for that $8 million house.
ALLEN: Yeah. So the rent estimate is that it would be $12,500 a month.
ROTT: Money that Allen wants to put to use. He's proposed legislation that would allow California communities to buy at-risk property along the coast with the goal of then renting those beachfront properties out, either to the original homeowner or through something like Airbnb to recoup over time the upfront cost.
ALLEN: This is a way of taking advantage of the value of these properties and the rental value over the next couple decades.
ROTT: Before it's gone.
ALLEN: Before it's gone.
ROTT: The federal government, states and even some nonprofits have been funding buyouts around the country for years, mostly in the flood-prone east. But those programs have limitations. Miyuki Hino studies buyouts at the University of North Carolina.
MIYUKI HINO: One of the lessons that's come through really clearly from research on retreat in the U.S. is that our tools right now for doing it are so rigid and so inflexible that they really only work for a very narrow subset of the population.
ROTT: Your house likely has to have just been flooded, she says. It has to be valuable enough to be bought out, but not so valuable that it's too expensive. It helps if you speak English, she says. And you have to be willing to deal with years of bureaucracy. So, yeah, it doesn't work well. Meanwhile, homeowners are being incentivized to stay in their homes. Take any beachside property, says Andy Keeler, an economist at East Carolina University.
ANDY KEELER: The value of the house is hugely a function of what the public sector does.
ROTT: That's why there's a lot of political pressure to use taxpayer money to build seawalls and nourish beaches with imported sand. Keeler calls this a positive feedback loop.
KEELER: You nourish the beach, right? And once you nourish the beach, property owners have a new view of what risk is, and they reinvest in property. Once they reinvest in property, you have more wealth and real estate. And so you have more of a reason to then, six years later, keep investing.
ROTT: It's a runaway train, Keeler says - more sand gets dumped, seawalls get higher, property values stay high until seawater is spraying over the wall. From an economics perspective, Keeler says, defending property doesn't always add up. It just means spending money now and later and later again until the property is underwater and worth nothing. That's why Keeler has been advocating for more places to look at buy-to-rent strategies similar to the one that's been proposed in California.
KEELER: This can break the positive feedback loop. If these homeowners can sell their houses and still have the ability to rent them back for a time, or they can produce income by renting to other people, then you've broken that link.
ROTT: Likely saving the public money down the road.
JULIA STEIN: That's a really interesting and novel approach, so there's very little to compare it to.
ROTT: Julia Stein works on climate issues at the University of California, Los Angeles, and she helped Ben Allen draft the proposed legislation. She thinks there are still a lot of questions about how exactly it would play out if this bill passed. Who would manage the rental properties? Would homeowners even choose to participate? Is spending taxpayer money on $8 million homes the best use when we know that that property's value is likely going to decrease in the future? Stein says there's a lot of research showing that real estate values now do a poor job accounting for climate change.
STEIN: But at some point, the market is going to realize the problem. And at that point, it may be too late.
ROTT: All the more reason, she says, to try and get ahead now.
Nathan Rott, NPR News.
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