Climate Adaptation and Policy-Induced Inflation of Coastal Property Value
Abstract
Human population density in the coastal zone and potential impacts of climate change underscore a growing conflict between coastal development and an encroaching shoreline. Rising sea-levels and increased storminess threaten to accelerate coastal erosion, while growing demand for coastal real estate encourages more spending to hold back the sea in spite of the shrinking federal budget for beach nourishment. As climatic drivers and federal policies for beach nourishment change, the evolution of coastline mitigation and property values is uncertain. We develop an empirically grounded, stochastic dynamic model coupling coastal property markets and shoreline evolution, including beach nourishment, and show that a large share of coastal property value reflects capitalized erosion control. The model is parameterized for coastal properties and physical forcing in North Carolina, U.S.A. and we conduct sensitivity analyses using property values spanning a wide range of sandy coastlines along the U.S. East Coast. The model shows that a sudden removal of federal nourishment subsidies, as has been proposed, could trigger a dramatic downward adjustment in coastal real estate, analogous to the bursting of a bubble. We find that the policy-induced inflation of property value grows with increased erosion from sea level rise or increased storminess, but the effect of background erosion is larger due to human behavioral feedbacks. Our results suggest that if nourishment is not a long-run strategy to manage eroding coastlines, a gradual removal is more likely to smooth the transition to more climate-resilient coastal communities
Introduction
In the United States, the coastline is now the most densely populated region in the country, and population density continues to increase [1]. The coastal region hosts significant economic activity and some of the highest property values in the country. The erosion of coastal land from frequent storms, chronic wave driven currents, and rising sea level threatens coastal economies.
To manage this vulnerability along sandy coastlines, humans nourish beaches—placing sand, typically from offshore sources, onto the beach to widen the beach and combat erosion (Fig. 1). Empirical data in the U.S. suggest that decisions to stabilize the shoreline through beach nourishment are made optimally, to maximize the value of recreation and storm protection benefits, at least from the perspective of local communities [2] (S1 File and S1 Fig.). Some locations along the U. S. East Coast have practiced beach nourishment for nearly 50 years [3]. Between 1995 and 2002, the U.S. federal government spent $787 million on beach nourishment and has historically subsidized two-thirds of total nourishment costs to coastal communities [4]. As humans alter physical coastal dynamics by temporarily reversing erosion, they influence real estate markets and, in turn, future beach management decisions [2, 5, 6]. Property values influence nourishment, nourishment influences beach width, and beach width feeds back on property values. In this way, human-occupied coastlines are strongly coupled systems, and policies that influence shoreline stabilization efforts become intrinsic drivers of economic value in the coastal zone.
