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That Sinking Feeling

Why is Miami—America’s most vulnerable metropolis to sea-level rise—having yet another beachfront development boom?

By Nathalie Baptiste

That Sinking Feeling

Why is Miami—America’s most vulnerable metropolis to sea-level rise—having yet another beachfront development boom?

By Nathalie Baptiste

That Sinking Feeling

Why is Miami—America’s most vulnerable metropolis to sea-level rise—having yet another beachfront development boom?

By Nathalie Baptiste

Subsidized Federal flood insurance and disaster relief outlays promote otherwise irrational investment in low-lying areas.
Today, people in Florida are buying homes that are likely to face regular flooding within 30 years—the lifetime of a mortgage.

Even from thousands of feet in the air, it’s obvious that Miami is disturbingly low-lying. Luxury sky-high buildings, bridges, and cranes tower over swampy marshlands and the slowly rising sea. The latest development has resulted in a sprawling metropolis on sinking land. Rising seas combine with porous limestone—which is like Swiss cheese—to allow saltwater to infiltrate under the land during floods, and makes the greater Miami area the most climate-vulnerable place in the United States. 

In Southeast Florida, the sea could rise three feet by 2060, and that doesn’t count temporary storm surges from increasingly intense hurricanes. Seventy-five percent of Florida’s population lives in coastal counties that generate 79 percent of the state’s total annual economy. The infrastructure in these coastal counties had a replacement value of $2 trillion in 2010 and is estimated to increase to $3 trillion by 2030.

Of the 2.6 million people who live in Miami-Dade County, nearly 129,000 of them are living less than three feet above sea level. The county alone has more people living less than four feet above sea level than in any other state except Louisiana. The county’s estimated beachfront property value is more than $14.7 billion—not including infrastructure. 

You might think, therefore, that developers, investors, and homebuyers would be very gun-shy about putting more money into Miami real estate. One good-sized hurricane, or another decade of relentless sea-level rise, and their investment will be washed away. At the very least, values are likely to fall because escalating climate threats will scare off other investors and falling demand will depress property values. 

But you’d be wrong on both counts. Miami is enjoying yet another real-estate boom, one in a long series of boom-and-bust cycles that date back to the first Florida real-estate craze in the 1920s. The previous boom halted briefly after the 2008 collapse, but by 2011 it was on again. As of June 2015, more than 355 new towers have been proposed in South Florida. More than 70 of those will be in the greater downtown Miami area. The popular and wealthy Brickell neighborhood, the heart of the region’s financial sector and a place where one can work and play, is the site of extensive construction. At 500 Brickell Condos, a 46-floor skyscraper completed in 2008, a 754-square-foot apartment with one bedroom and one bathroom rents at $2,050. The same tiny apartment can also be purchased for $300,000. 

Florida International University’s “Eyes on the Rise” web application lets users input addresses and see how much sea-level rise it would take before their homes become part of the sea. At three feet, which could happen by 2060, multiple roads in Brickell are underwater. At six feet, which is projected to occur at the end of the century, the neighborhood is completely submerged.

Real estate is famously cyclical, yet this boom is harder to explain, given the new and very real physical threat. So what explains the seeming irrationality of investors who added a staggering $2.7 billion worth of new construction into Miami real estate in 2014 alone?


A series of interviews and some background research suggest five major reasons.  One is the short time horizons and magical thinking of homeowners. All seem to believe in their ability to anticipate the precise moment when the reality of climate disaster sinks in, so to speak, and to sell just before the market collapses. 

For homebuyers, “the risk of sea-level rise 60 years from now is just small potatoes,” says University of Pennsylvania Professor Robert Meyer, who is co-director of Wharton’s Risk Management and Decision Processes Center. “When you buy in real estate,” Meyer explains, “you care about location, amenities, and investment risk. … Sea-level rise is in the distant future. They’re more concerned about what happens if [they] try to sell this week.”

Secondly, developers have even shorter time horizons than homebuyers. Once the property is sold, they are gone and the climate risk is somebody else’s problem. A third reason is the close linkage among Miami’s huge real-estate industry, the local economy, and the behavior of politicians. Bigger floods are surely coming, but few politicians want to rain on the real-estate parade. 

To compound this trend, some Florida politicians are climate-change deniers, a posture reinforced by their affiliation with developers. In 2010, Governor Rick Scott told the Tampa Bay Times that he didn’t believe in climate change. Republican senator and presidential hopeful Marco Rubio says he doesn’t believe that human activity is the main cause of climate change. Politicians also have relatively short time horizons. If the big flood comes in 2030, most will have moved on.

Further, a huge influx of money from Latin Americans who want to live in Miami, maybe now, maybe later, or want to stash money in the U.S. rather than in shaky economies at home, adds to the overheated demand. And finally, federal flood-insurance policy and disaster-relief outlays create the moral hazard of promoting investment in disaster-prone areas. The federal government shelled out more than $136 billion on disaster relief from fiscal year 2011 to fiscal year 2013. An effort that began in 2012 to increase flood-insurance premiums to align them more accurately with risks was postponed by Congress in 2014 after a huge political backlash.

So despite increasing risks, property values in prime neighborhoods of Miami are actually rising. The median value of a home in Miami was $286,700 as of November 2015, up from $269,000 the previous year. In neighboring Miami Beach, the median value rose from $373,000 to $406,800 in the same period of time. In popular neighborhoods overlooking the ocean or Biscayne Bay, the median home prices are closer to $1 million and higher.

“Contrary to popular belief, the development industry is one of the most heavily subsidized,” says Florida land-use attorney Richard Grosso. The government builds the roads, the seawalls, and the bridges that protect buildings from the encroaching sea. The federal government also offers subsidized beach-nourishment projects for coastal communities.  

Beach erosion is exacerbated by storms and rising sea levels. To combat this problem, nourishment projects take new sand from inlets or the sea floor to widen the beach. Between 1995 and 2002, the government spent $787 million on beach nourishment and has historically subsidized two-thirds of the costs. And the idea that the government will save the day persists in Miami.

“There’s an awful lot of expectation that government won’t let it happen,” explains Grosso, “and that those folks who own prime real estate will be able to influence government to fund the infrastructure and other measures that will protect their investments.”

One major culprit is the federal government’s National Flood Insurance Program. Created by Congress in 1968 and administered by the Federal Emergency Management Agency, NFIP enables renters, homeowners, and businesses in communities that are participating in the program to purchase discounted flood insurance. Rates are set nationally and depend on when the building was built, and on its level of risk—which has been consistently understated. 

By 2012, the NFIP was $24 billion in debt, which comes as no surprise. The discounted flood insurance created incentives for building in climate-vulnerable areas; repeated payouts after major disasters allow people to continue living and building in these vulnerable low-lying places, like Miami.

For communities that participate in the National Flood Insurance Program, there’s a voluntary rating program that provides communities with discounts on flood insurance. The Community Rating System runs on a class scheme; each class obtained comes with a 5 percent discount. Miami-Dade County is a Class 5, meaning they’re receiving a 25 percent discount on their flood insurance. 

The NFIP has essentially become the sole provider of flood insurance for most homeowners and small businesses across the nation. Many private insurance companies have canceled flood insurance for areas repeatedly devastated by flooding. In 2007, climate change prompted Allstate to cancel or not renew policies in Florida, Louisiana, and Mississippi because recent hurricanes had decimated all of the profits the company had made in its 75 years.

And because the NFIP establishes taxpayer-backed subsidized insurance options, taxpayers are on the hook for major disasters. In response to the NFIP’s mounting debt, Representatives Maxine Waters of California and Judy Biggert of Illinois co-authored the Biggert-Waters Act in 2012. 

The act was an attempt to keep the NFIP soluble and sustainable by eliminating low rates and discounts. According to FEMA, one out of five NFIP policies receive discounts. The Biggert-Waters Act increased insurance rates of subsidized policies for business properties in Special Flood Hazard Areas and for properties that experience severe or repeated flooding. The rate increases set by FEMA ended up being 25 percent each year until they reflect the true risk of flooding.

The backlash was severe. Members of Congress, including Waters, were outraged at the premium increases that would happen seemingly overnight. She released a statement saying that she was “outraged by the increased costs of flood insurance premiums that have resulted from the Biggert-Waters Act. I certainly did not intend for these types of outrageous premiums to occur for any homeowner.” In a rare form of bipartisanship, Congress passed the Homeowner Flood Insurance Affordability Act of 2014, which delays the reforms for four years.

Grosso can sympathize with those experiencing the skyrocketing premium increases. For many middle-class families, flood insurance would become wildly expensive. “I would have liked to see the reaction be more surgical,” he says. Since the NFIP remains frozen, the same old problems remain. A gradual increase, and perhaps increases that focus on the value of the home, could have been more effective. “There is no private-property right to a taxpayer subsidy,” says Grosso. “There is zero legal reason why we should continue to fund our own problem.”

Not surprisingly, Miami-Dade County officials speak kindly of developers, a key industry in the regional economy. “We have to assume they have looked into the same risks,” says James Murley, the county’s chief resilience officer. Since Hurricane Andrew blew through Florida in 1992, he says, codes have changed. “They’re building quality buildings that go 50 feet into the bedrock and can withstand 150-mile-per-hour winds.” 

Even if new buildings are built to withstand the effects of climate change, what about the surrounding infrastructure? If you can’t drive to your home or new office building, what’s the point of building climate-ready buildings? “A flood is an event, and it recedes,” says Murley. But the porous limestone underneath Southeast Florida is making it harder for floodwaters to recede—and the intrusion of saltwater is already poisoning Florida’s drinking water. 

“We’re looking at implementing a pilot project to identify an area that’s more vulnerable to flooding,” Murley says, “and what we can do to reduce that vulnerability.” The project aims to educate the public about what they can do to protect their homes, such as elevation. “We think we’ll be able to stay on top of these events and protect our people and our property values.” And protecting property values is of the utmost importance. Because the state of Florida doesn’t tax individual income, the state relies heavily on property and sales taxes for funding. In 2010, nearly 43 percent of the state’s revenue came from property taxes. 

Others are highly skeptical. “I’m not sure what a climate-ready building is,” says Harold Wanless, a professor of geological sciences at the University of Miami. “At lower elevations, the only climate-ready building would be a boat.”


Just how serious is the threat of sea-level rise for South Florida? Hurricanes have always been a menace to the Florida coastline. In 1926, Miami took a direct hit resulting in 372 deaths and, after adjusting for inflation, $165 billion in damage. In 1992, Hurricane Andrew—which was mainly a wind event—devastated the community of Homestead, just south of Miami. Because of Andrew’s size and the location of its landfall, Miami was spared. Hurricane Wilma slammed into the state in 2005. Since then, one million more people have moved to the state, and Florida is currently in a hurricane drought.

Scientists don’t believe climate change will make hurricanes more frequent, but they do calculate that the ones that do come ashore will be stronger—and more devastating. Stronger hurricanes coupled with rising seas will also produce dangerous storm surges. Sooner or later, Miami will take a direct hit, the way New York City did with Superstorm Sandy, but with even more lethal effects.

Storms aren’t the only events that flood Miami. High-tide flooding, exacerbated by sea-level rise and heavily developed coastlines, is only expected to get worse in the coming decades. Miami is currently experiencing about six tidal floods annually; by 2030 that number will have skyrocketed to more than 45. 

By 2045, the city can expect an average of 230 minor floods every year, according to the Union of Concerned Scientists. Coastal residents aren’t the only ones who will face flooding, as the waters will be reaching farther inland. Today, people in Florida are buying homes that are likely to face regular flooding within 30 years—the lifetime of a mortgage.

Wanless thinks that six feet isn’t even in the ballpark. “That’s probably low,” he says. “The models don’t include the accelerating we’re seeing with ice melt.” 

Dozens of new condominiums have been built in Miami-Dade County. “I don’t believe they’re designed to handle sea-level rise,” Wanless says. “They’re not designed for storm surges on top of three-to-four-foot sea-level rise, but builders are trying to get away with whatever they can before the bomb drops.”

Some states and locations threatened with rising seas have drawn up resiliency plans, but Wanless doesn’t put much faith in climate-ready infrastructure. 

“We’re pouring all our FEMA money into helping people rebuild. We have to get more practical,” he says. “We should be setting aside money for helping people to relocate; that would be one of the more responsible things to do.” But even after storms like Sandy devastate coastal communities and cost the government billions, “the sense of ‘you have to rebuild’ sets in,” Wanless says. “People seem to want to stay where they are. Even if it becomes inconvenient.”

“Don’t let anybody tell you it’ll be okay,” he warns. “Global warming is heating up the ocean and that is something we can’t turn around. … I think people are going to be fleeing from the coast.”


The great cliché of the real-estate business is that location is everything. That’s especially the case with buildings vulnerable to climate change. A truly green building is structurally sound, energy-efficient, low-cost, and in an area that isn’t vulnerable to sea-level rise and climate-change impacts. So a green building in a bad place is a bad building. In a place like greater Miami, the problem is both too many buildings in the wrong places, and standards that aren’t stringent enough. 

There’s an eco-village being proposed in western Miami-Dade County called Green City. “But it’s in a low-lying area close to the Everglades, where we shouldn’t even be building any new development,” says Richard Grosso.

Developers can build climate-ready buildings—or not—but realtors are not currently required to disclose any information about sea-level rise to potential homebuyers. Mitchell Chester is a South Florida–based lawyer who wants to change that. “I’ve heard this one story of a realtor who is refusing to sell if [the potential buyers] don’t understand sea-level rise,” he says. But for the most part, realtors don’t want to lose sales and commission. 

One realtor, Valerie Amor, says she’s atypical when it comes to the real-estate industry. “I am forthcoming and perform a feasibility study before I assist in either buying or selling property,” she says. The reactions she gets from potential homebuyers are not always positive when what they want does not align with reality. Like Chester, she does not know of any regulations that require realtors to disclose climate-change and sea-level impacts. “At this point, it seems to be both a moral and ethical decision.”

Saving South Florida from becoming part of the Atlantic Ocean would cost billions of dollars, and would require strict zoning as well as shifts in federal spending priorities to incentivize prudent construction rather than high-risk development. The real-estate industry doesn’t “want to scream too loudly” about sea-level rise, explains Meyer. “People would stop moving in; property values and the tax base would plummet.” The state would be left with no money for fixes. “If people become afraid and move, you have collapse of the local economy,” he adds, hypothetically, “and the place would be empty before the sea came up.”

The inevitability of a coastal property crash in South Florida doesn’t seem to deter many people. “It’s all about money,” says William Hardin, the director of Florida International University’s Tibor & Sheila Hollo School of Real Estate. “If somebody is going to buy it, they’re going to build it.”

Hardin doesn’t think that potential buyers are unaware of the risks. “Flood insurance shows you the probability of flooding,” he explains. But people still buy homes in known flood zones.


Continuing to subsidize flood insurance and incentivizing developers to build in risky and vulnerable areas can eventually lead to a major economic disaster if Florida’s hurricane drought comes to an end. Philip Stoddard is a biology professor at Florida International University and the mayor of South Miami. He is the rare Florida elected official who takes climate change very seriously. He bases his predictions of what could happen to coastal property values on hurricane behavior. 

Stoddard’s goal is to explain to people what’s happening so that instead of a market crash, there’s a slow slide. “A lot of people ask me, ‘How much time do I have?’” he says. He tells them they don’t have to sell this year, but if it’s their intention to sell, they shouldn’t wait ten more. He also considers the homeowner’s financial situation. “It depends on if your financial well-being is dependent on your home equity. If so, your time horizon should be short—I would suggest you sell.” 

“As the reality of seawater rise sinks in, mortgage companies may conclude that 30 years is too long of a time to gamble on,” says Stoddard. “Maybe they’ll only issue 15-year mortgages.” If that were to cause people planning to sell later to change their minds and try to sell now, the result would be a run on the market.

Stoddard offers a scenario in which an event leads to an overnight crash. “If you owe $250,000 on your house, but you can only get $50,000, what do you do then?” When properties lose value, underwater homeowners end up with no resources to relocate, essentially becoming refugees.

“After a storm,” Stoddard explains, “it’s harder to sell your house.” If a devastating storm comes through and decimates South Florida and people move out, the city ends up with a lot of vacancies. A drop in the property taxes would erode city and county coffers. The first thing to go would be municipal services, Stoddard adds. With limited sanitation and maintenance services, cities and towns begin falling apart. 

Despite this threat looming on the horizon, there doesn’t seem to be enough planning for how to handle the impending crash. “We know it’s coming—but nobody is taking preparations,” says Stoddard. “The federal government hasn’t developed a legal framework on how to help people deal with it.” Stoddard’s goal is to try to explain to people that the crash is coming. “My goal is to make it a slow slide, rather than a crash. … The slower the change happens, the more people are able to adapt to it. It can be bad or it can be really, really, really bad—take your choice.”