NEW JERSEY - (NewMediaWire) - August 24, 2022 - Climate change is occurring at a significant rate and it affects the real estate industry. The level of the sea is increasing, threatening waterfront property. Likewise, precipitation patterns are changing to cause more house flooding, says Rumson, NJ, native Dennis Lynch, a founder of the Dennis and Marshall Lynch Real Estate Analysis firm.

As more extreme weather events become more common, they are changing how the industry views the risks of damage and destruction of property, Dennis Lynch, says. For example, areas that have previously never flooded are flooding for the first time, and areas that flooded before are flooding more frequently, Lynch says. New Jersey has experienced significant flooding in 10 of the last 21 years, he says.

The climate changes are affecting everything from mortgage rates to insurance to how homes are valued.

Homes built along the waterfront on the East Coast are particularly at risk of destruction because of rising sea levels, according to a New York Times opinion piece. It quotes a Union of Concerned Scientists study that found that more than 300,000 coastal homes are at risk of "chronic inundation" by 2045. Homes on barrier islands are particularly at risk because they are only a few feet above current sea level. Land on the Jersey Shore is also sinking as the water rises. Scientists estimate that the sea will rise more than a foot over the next few decades, taking over large parts of some Jersey waterfront towns.

Waterfront communities, such as Cape May, N.J., and Palm Beach County, Fla., currently deal with the problem by dredging sand offshore and then using it to plump up beaches. The U.S. Army Corps of Engineers typically handles this process, and taxpayers cover most of the expense. However, as climate change continues, re-engineering beaches will be less effective and more expensive, Lynch says.

In addition to accretion and erosion, beachfront properties face flood threats from rising sea levels and storms. Flood insurance is difficult to obtain. FEMA caps the value of its flood insurance at $250,000, which is much lower than the value of most beachfront homes.

Some environmentalists and scientists are urging government programs to relocate vulnerable residences to plots of land that are less at risk.

One suggestion for relocation is a "managed retreat." In a managed retreat, the government offers a property owner money to move away instead of rebuilding at the same site when climate events destroy a home. Governments have used managed retreats before. However, as climate change worsens, whole towns may disappear, making the process much more costly.

New Zealand, for example, has estimated that a planned retreat from Hawke's Bay over the rest of the century might cost as much as $1 billion. The Times believes that wealthy U.S. owners of a beachfront property will persuade their congressional representatives to continue to fund similar retreats with taxpayer money. However, the government may not be able to afford buyouts such as managed retreats on the larger scale that will be necessary for the future, Lynch says.

Florida and Norfolk, Va., have begun experimenting with the concept of life rights and tax incentives. Under this concept, also known as life estates, the government will buy homes in vulnerable areas but allow the occupants to remain in the house until they die. The program aims to promote development on higher ground and better manage floods on vulnerable lands.

The concept of land trusts is similar to the concept of life rights. Nonprofit organizations acquire and manage vulnerable properties and offer rolling easements. They restrict harmful shore protection measures such as seawalls while letting coastal residents know they don't have infinite property rights. Coastal residents would be able to stay only until staying becomes too risky.

Another way to manage coastal flooding and move development inward is to restrict rebuilding once the property is damaged. Maine and South Carolina have both passed rebuilding restrictions for parts of their coasts. Of concern is whether enough inland parcels will continue to exist to provide rebuilding options.

Some states, such as New York, offer landowners in vulnerable areas financial inducements to build further inland. One program gives them the fair market of their coastal property plus an additional 5 percent if they relocate within the same county.

Finally, bold investment in homes and communities built on higher ground is necessary. These higher-ground communities will need to offer amenities and services that will attract those currently living on the coast.

Waterfront homes aren't the only ones at risk for flooding, Lynch says. Homes built further inland also often experience flooding from stormwater runoff from hurricanes and tropical storms.

According to a National Resources Defense Council study, homes that have previously flooded are at a significantly higher risk of flooding again. Indeed, the average New Jersey home with previous flood damage has an average annual flood loss of $1,678 compared with $104 for homes that have not previously experienced flood damage. Losses could be more significant in the future depending upon the level of future climate change, Lynch says.

Most homebuyers aren't aware of the potential for flooding in these homes, and only about 4 percent have flood insurance. Buyers who do buy flood insurance will pay higher premiums for homes with previous flood damage.

Some governments are trying to lower the risks in vulnerable inland areas. In the wake of Tropical Storm Ida in late 2021, New Jersey Gov. Phil Murphy is preparing to implement emergency rules on development in areas at risk of non-tidal inland flooding caused by stormwater runoff. The rules will use current and future rainfall rates instead of older figures to determine which areas are susceptible to inland flooding. Construction in those areas will require higher elevations. However, developers and some municipalities are pushing back against the rules because they believe they will drive up the cost of new construction in these areas.

The emergency rules are technically only valid for 60 days. However, the state Department of Environmental Protection will ask that they remain in place longer.

In the past, real estate experts such as Dennis Lynch would tell you that the key to real estate value was "location, location, location." Climate change is causing that axiom to evolve. For some people, especially those who can work remotely, the driving force in home value is sustainability, sustainability, sustainability. Potential homebuyers are choosing homes in areas that are less vulnerable to climate change.

A key reason for valuing sustainability is that homebuyers want to be able to create wealth through their homes and then leave those homes to their children. Homeowners also fear the disruption to their lives and their children's if their homes are damaged or destroyed. They are opting for homes in places such as Kalamazoo, Mich., and Bozeman, Mont., which are at lower risk of major climate events.

Another reason potential homeowners may increasingly opt for sustainability is insurance. Some companies refuse to cover highly vulnerable properties or require expensive upgrades to protect them.

The mortgage industry is not yet offering lower mortgage rates for less vulnerable properties, but it is considering doing so. The industry is studying questions, such as does flooding increase the likelihood that a homeowner will default? And, what happens to the mortgage if a home is destroyed and insurance will not pay to restore it?

Potential homebuyers who consider climate change in their homebuying choices will be ahead of the curve, according to Dennis Lynch of Rumson NJ.

Buyers contemplating a property should check first with insurance companies to determine whether they'll insure the property and at what rate. They also should check the home's history of flooding. Some brokers are good at researching and disclosing risks to homeowners, but many are not. Prospective buyers should be bold about asking tough climate change questions of their broker and persist until they have full answers.

Dennis and Marshall Lynch are a father and son real estate analysis team based in Rumson, N.J. Dennis, the father, has considerable experience in buying and selling real estate in New Jersey, helping customers in and around Rumson in Monmouth County. He can help potential sellers understand the most advantageous time to put their homes on the market and potential buyers know the best time to buy a home.

Media Contact:

Dennis Lynch

202-555-0185

Email: info@dennisandmarshalllynch.com

Perils of Waterfront Living

Flood Risks

Relocating Vulnerable Residences

Managed Retreat

Life Rights

Land Trusts

Rebuilding Restrictions

Financial Incentives

Investment in Higher Ground

Non-Tidal Inland Flooding

New Proposed Regulations in New Jersey

Sustainability, Sustainability, Sustainability

Leave Something to Children

Ability to Get Insurance Coverage

Lower Mortgage Rates

Tips for Buyers

Do Research, Ask Broker

About Dennis Lynch of Rumson, NJ

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