Climate change has taken hold here in New England. From the White Mountains to Narragansett Bay, there have been more frequent heat waves; native wildlife and plants are shifting north; and there have been troubling upticks in climate-related ailments like tick-borne diseases and asthma.
But nowhere is climate change more apparent than along the coast, where warming and acidifying waters and rising sea levels are taking a toll, disrupting fisheries and eroding coastal marshes and beaches. These changes, in turn, erode the value of coastal homes and businesses. The warnings are clear: the region faces a crash in coastal property values and a devastating economic fallout.
These numbers, alarming as they are, foreshadow a much bigger economic threat. Plummeting coastal property values are what financial experts call a systemic risk — a threat to the entire economic system. In 2016, the top economist for Freddie Mac, America’s mortgage giant, warned that climate-driven flooding along US coasts — and even inland, as climate change spurs flooding there — will lead to economic losses “greater . . . than those experienced in the housing crisis and the Great Recession.”
As a result, consumers are finding coastal properties harder to finance and insure. Lenders are requiring larger and larger down payments, sometimes as much as 40 percent of a home’s value. Federally backed flood insurance premiums continue to rise. And flood insurance doesn’t cover the full worth of a home, leaving sea-side property owners exposed. If coastal property values are uninsurable, they’re unmortgageable; and if they’re unmortgageable, they are all but worthless. Rating agencies are now evaluating coastal communities’ bonds for this risk.
New questions are cropping up about whether the 30-year mortgage on coastal property is headed for extinction, and banks are already shedding the risk. New research from Harvard and Tulane University suggests that in recent years banks have offloaded 30-year mortgages on coastal properties, off their own books and on to large taxpayer-backed lenders like Fannie Mac and Freddie Mac. The study points to climate change as the root cause. The researchers note that smaller banks, close to the risks facing their communities, are offloading coastal mortgages more rapidly than larger national banks. Those local banks “have their ears to the ground,” said Jesse Keenan, one of the Tulane researchers.
We are keenly attuned to our region’s economic pain as we weather the COVID-19 economic recession. We remember the last recession, when mortgage markets collapsed, the stock market dived, housing values plunged, retirement savings vanished, and Americans lost nearly $10 trillion in wealth. A property value crash at “systemic” levels is a loss coastal communities cannot afford.
So we must fight climate change much more aggressively and begin serious work to defend our coasts.
Step one is Congress passing comprehensive climate legislation that reduces carbon pollution by at least 50 percent by 2030 and gets us to net zero emissions at the latest by 2050. That is what the science tells us we must do to avoid the worst effects of climate change, including incalculable damage to the coasts and economy.
A good place for Congress to start is our legislation, the International Climate Accountability Act, to help achieve emissions reduction obligations under the 2015 Paris Climate Agreement and lay the groundwork for a more ambitious emissions reduction strategy. Our bill would slam the brakes on the Trump administration’s anti-climate agenda and help develop a strategic plan for meeting our commitments and standards under Paris.
Federal support for adapting to climate change along the coast must also be strengthened. That will mean a steady source of funding for coastal states to help address sea level rise, flooding, erosion, and stronger storms. We have introduced bipartisan legislation to help share the revenue generated from offshore wind development with coastal states for coastal restoration and resiliency projects, hurricane protection, and infrastructure improvements. With over 20 gigawatts of offshore wind projects scheduled for future development in the United States, our proposal would help set an important baseline of funding to protect coastal property.
Finally, coastal mortgage risk among lenders must be addressed. That means government sponsored enterprises like Fannie Mac and Freddie Mac need to assess and prepare for the effects of climate change on their business and on American communities, homeowners, and renters. We’ve called on Fannie and Freddie to treat climate risk with the utmost seriousness – beginning with an in-depth audit of the steps they are taking to assess climate risks to mortgage assets – and to help us prepare our entire financial system for the effect of those risks on our economy.
Jeanne Shaheen is a US senator from New Hampshire. Sheldon Whitehouse is a US senator from Rhode Island.
