Florida

You might not want to move there.

Why is it still legal to sell a 30-year mortgage in Miami?

Scientists believe that if the current climate trends continue, the lower third of Florida will be underwater by the end of the century. That may sound like a long time from now, but consider someone buying a new home in the lower third of Florida, in say – Miami. By about 2060, it is estimated that about 60 percent of Miami-Dade County will be underwater.

So why is it still legal to sell a 30-year mortgage in Miami?

If you are buying a house in Florida the year I am writing this (2024), you will likely get a 30-year mortgage, the most popular mortgage in the United States. Homeowners prefer it because their monthly payments are lower. Lenders love it because they book more interest revenue from monthly mortgage payments for a longer 30-year mortgage than they do from a 15-year mortgage.

If you are buying a home in Florida in 2024, and have a 30-year mortgage, let’s assume you will live in that house for 30 years and then sell it to someone who gets their 30-year mortgage. That gets us to 2084.

So, if 60 percent of Miami will be underwater in 2060 and all of it will be gone by the end of the century, who the hell is buying, and better yet selling long-term mortgages in Miami in the second half of the century? The people who will be looking to sell those homes that no one will want to buy in 30 years are the ones buying them now. I have a few words for those poor folks. 

It is going to get worse.

Rising sea levels are bad, but it is what’s beneath the ground in Florida that makes it worse. The bedrock underneath much of Florida is limestone. Limestone is made of old reefs and corals, dotted with tiny air pockets that let in seawater. This seawater compromises the strength of the limestone, so structures in Florida near the coast are more likely to sink in the coming decades, weakening their foundations.

Still getting worse.

That ocean water seeping into the limestone has already compromised some aquifers in Florida and will do so at an increasing rate in the coming years. The massive Biscayne Aquifer, which covers about 4,000 square miles in southern Florida, provides water to about 4 million people. That water is increasingly in jeopardy, and at some point in the next few decades – assuming we stay on the path we are on – it just won’t be a viable source of water for 4 million people.

And worse.

About 20 percent of homes in the United States rely on septic systems to take away their waste when they flush the toilet. If these systems are in coastal areas, this could become a big problem. Florida is estimated to have about 2.6 million septic systems, with about 120,000 in Miami-Dade County. Mixing porous limestone in Florida, with increased flooding, is already causing unpleasant conditions in coastal areas where septic systems are increasingly failing, causing human waste to seep up into the soil. This problem will only grow in the coming years.

And worse yet.

If you are talking about climate change, and talking about Florida, you have to talk about hurricanes. Hurricanes get their energy from warm water, and the warmer the water the stronger the hurricane. As oceans off the Atlantic coast of the United States continue to warm, we can expect more and stronger hurricanes. No one can tell you when a hurricane will strike and how much damage it will do, but by warming our oceans we can expect more and more destructive hurricanes and cyclones all around the world. Florida just happens to be in the potential path of many hurricanes in the United States. As we have seen in just the last month with Helene and Milton, hurricanes are likely to be more frequent and more powerful in the future due to climate change.

Many coastal areas of Florida are just a few feet above sea level. The storm surges from Helene and Milton inundated those communities with seawater, ruining thousands of homes. This will only get worse in the coming years.

Still worse.

Living in the state most susceptible to the ravages of climate change is already expensive. It is only going to get more expensive. Florida’s homeowner’s insurance rates are four times the national average. Insurance companies don’t have the luxury of telling themselves climate change isn’t a big deal. They’ve run the numbers. None of the big national homeowner insurance companies in the U.S. have much of a presence in Florida. In July of 2023, Farmers Insurance announced it would stop offering its policies in Florida including home, auto, and umbrella policies, citing increased hurricane risks. Before this announcement, Farmers Insurance covered about 100,000 Floridians.

Most homeowners in Florida now get their insurance from local insurance companies, many of which don’t have the resources of their larger national competitors to absorb what will become ever-increasing liabilities in the state because of climate change. The state offers Citizens Property Insurance Corp. as the last resort insurer in Florida. In the wake of Helene and Milton, there are concerns that Citizens Property Insurance Corp. may become insolvent if they have to pay out too many claims. But Citizens is not structured like a normal insurance company. If things get really bad, Citizens is permitted by the state of Florida to add a surcharge to the bills of its policyholders. So Citizens won’t go insolvent, it will just charge the people of Florida more and more as storm damage gets worse and worse. That does not sound like a sustainable model for the good people of Florida.

At some point, large swaths of the state will become uninsurable. It’s just a matter of when not if. When people can’t insure their homes anymore what will they do? Will they just choose to be uninsured and hope for the best, or will they go somewhere where they can still get insurance? Over time, the latter is more likely.

Image courtesy of NASA.

Florida and Louisiana are going to lose some electoral votes.

It's not just Florida.

Of course, Florida isn’t the only place where sea level rise, extreme flooding, and increased severe weather will put homes at risk. Just look at a map of the United States and go down the coastline on the east coast and west coast. It’s easy to see the cities that will get hit hard by sea-level rise due to climate change. These include but are not limited to, Boston, New York, Washington DC, Norfolk, Charleston, Savannah, Jacksonville, West Palm Beach, Boca Raton, Fort Lauderdale, Miami, Fort Myers, St. Petersburg, Tampa, Pensacola, Mobile, New Orleans, Houston, Corpus Christie, San Diego, Los Angeles, San Francisco, and Seattle.

Let’s look at New Orleans. The land of and around the city of New Orleans is made from the sediment that the Mississippi River has deposited over hundreds of millions of years. This dirt, rocks and other solid material was washed down the Mississippi River and settled as it slowed and settled when the river met the ocean. Gravity has over the millennia flattened out most of this river delta, so the Mississippi River delta will offer little resistance as sea levels rise. In the coming decades, the Gulf of Mexico will methodically make its way up the Mississippi River. If all the glaciers melt, the Gulf of Mexico – which may have to be renamed at that point – will reach southern Missouri. Land in Memphis will become oceanfront property. It may take a century, but it is set to happen if we don’t take action.

For the same reason, eventually, the whole state of Delaware, and parts of Maryland and Virginia that sit on the Delmarva Peninsula, will disappear if climate change goes unabated.

Places like Long Island and Cape Cod were only formed about 20,000 years ago when the last ice age dumped its rocks, boulders, and soil at these places. They aren’t made of solid bedrock and will slowly begin to wash away as sea levels rise.

Current Flood Maps are Trash.

You can throw out most of the historical flood maps in most cities. They are largely worthless, as hundred-year floods begin to happen every ten years and millions of people and millions of homes are projected to become worthless due to the inundation of the sea.

A 2023 paper published in the journal Nature Climate Change states that many homeowners around the United States are ignoring increasing flood risk and paying inflated prices for homes that are more likely to flood due to climate change. The paper, Unpriced climate risk and the potential consequences of overvaluation in US housing markets found that residential properties exposed to flood risks are overvalued by US$121-US$237 billion. The researchers find that these properties tend to be on the coasts in areas with no flood risk disclosure laws, and where there is less concern about climate change. Cities in these areas that are heavily dependent on property taxes for revenue are in a word, fucked. It’s just a matter of when that happens. The report also concludes that about 14.6 million properties in the United States face at least a 1% annual probability of flooding, with expected annual damages to residential properties exceeding US$32 billion. You wouldn’t fly a plane with a 1% chance of crashing, would you? There is a decent chance you live in a house with a 1% chance of flooding each year, with that probability growing each year due to climate change.

Let’s get back to Miami on this one. The city of Miami has invested in a multimillion-dollar stormwater infrastructure program that includes pumps, seawalls, and raised streets. Miami Beach has raised dozens of roads above sea level and built many pumping stations. Where does all this money come from? Well, Florida doesn’t have a state income tax, so the money for this climate change adaptation comes from – you guessed it – Real Estate taxes. So, Miami is a climate change adaptation Ponzi scheme. Ever-rising prices are needed to pay for the ever-rising sea levels. You know how this story will end. At some point, the prices will come down, due to a hurricane, recession, or some other cause, while the sea levels continue to rise. There will be many, many people who will lose everything they put into that Miami house because living there just won’t be viable anymore. It isn’t all millionaires and billionaires who will lose swank Miami condos. There will be hundreds of thousands of people who will lose their only home – and every cent of value in it because no one will ever buy that property again.

It's not only housing. Think of how many schools, hospitals, power stations, restaurants, movie theaters, and other places that make a place a community will be lost, forever, in Miami, in South Florida, and along the coasts of the United States.

People may say they want to stay in these places and will pay any cost to do so. But at some point, the taxpayers will say “no more”. Civic pride can only go so far when the price tag gets too high.

But I will live on the high ground.

Of course, not every neighborhood in more at-risk cities will be hit by climate change. For example, downtown New York City is expected to suffer a great deal of flooding and even lose land due to climate change. Washington Heights at the top of Manhattan Island will still be above the ocean if all the glaciers melt. But there is only so much high ground in these cities, and only so many people can live on it. Also, the economic vitality and cultural livelihood of a city are diminished with each street and each neighborhood lost. As landmarks and neighborhoods in a city is reclaimed by the sea, the value of living in that city will float away.

The 2019 academic paper “Disaster on the Horizon: The price effect of sea level rise,” found that homes exposed to sea level rise sell for approximately 7% less than similar properties not exposed to flooding risk. This discount has undoubtedly grown over time and is likely to grow in the future. Ask the people in Florida who were in the paths of Helene and Milton about their property values.

So, I ask again, why is it legal to sell a thirty-year mortgage in Miami? I haven’t come across a good answer.