How Does Climate Gentrification Affect The Real Estate Market?
We’ve discussed the numerous ways to stay abreast of the ever-changing real estate market before at Innago, ranging from proximity to retail to shrinking apartment sizes. But it’s doubtful we’ve taken on a topic quite so large as climate change. That global warming will have an effect in nearly all industries is certain, and we’re already starting to see these effects in the real estate industry. Property owners and scientists alike are now discussing “climate gentrification” – the recently coined phrase that will determine housing prices and trends for the foreseeable future. Rising ocean levels are currently one of the most talked-about aspects of climate gentrification and climate change in general, but there are numerous other factors to consider. What you need to look out for and how long until it starts affecting your local markets depends, of course, on your location.
Coastal markets will prove most susceptible.
Rising ocean levels are already well-reported and will likely be the most immediate and noticeable result of global warming. As the polar ice caps melt, the resulting added water will push ocean levels farther and farther up coastlines, but even then, certain coastal areas have reason to worry sooner than others. Using data from the National Oceanic and Atmospheric Association, Zillow estimates that with a 6-foot increase in ocean levels by 2100, one in eight Florida homes will be underwater. Across the nation, 2 percent of homes are at similar risk. A Harvard study established that the link between higher-elevated properties in Miami-Dade County and price appreciation since 1971 was largely due to other market factors, but the correlation has increased in recent years, indicating that climate gentrification is indeed already in motion. Miami is often the focus of such studies simply because due to its low elevation, it’ll be the first major American city to go, but cities along both coasts are all susceptible.
What other areas will be hit hardest?
Rising sea levels are unfortunately not the only manifestation of climate change. Other areas will have separate issues to worry about, and the market will reflect them as such. In fact, the American South, all inland areas included, might face the worst of it. The increase in temperatures and droughts will strain almost every facet of life in these naturally hotter climates, and the resulting hit to the area’s GDP will be much more severe than in northern states. Air conditioning costs will rise, and people will have to dedicate more and more of their income in response to the increasingly inhospitable environment.
Is there any sort of silver lining?
If you’re a property owner in the North, specifically the Great Lakes region, you’ll have relatively less to worry about. Climate forecasts predict that these areas might actually benefit (for a while, at least) from climate change as they become more temperate. Because of this, these areas will become hotspots for people trying to escape any negative effects of global warming. Cleveland, for example, is capitalizing on its unused urban land by starting a Cleveland Climate Resilience & Urban Opportunity Plan, hoping to invite as many relocators as possible and provide an economic boon for the city by increasing “the climate resilience of the city’s neighborhoods.” Climate resilience strategies like this one are sorely needed as we venture into uncharted climate territory. Property owners looking to make long-term investments would be wise to keep such initiatives in mind.
Should you consider relocation?
Climate gentrification will take place on large scales – determining the fate of entire U.S. regions – and smaller scales alike. Many analysts say that the most susceptible areas can see notable changes to the real estate market within 20 years, whether that means a fall in market prices across the area or climate gentrification showing itself with rising prices for elevated properties. In choosing to stay or go, consider how long you plan on having your property investment. Do you plan on handing the property down? Renovating or rebuilding it? The answers to these questions should be your guide moving forwards as you try to negotiate the mysterious (and scary!) effects of global warming.
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