PROVIDENCE — Although the risks of sea level rise to coastal properties are becoming more widely understood, they may not being fully accounted for in the real estate market.

“The price of any asset, be it commodities, gold, stocks, depends fundamentally on people’s beliefs,” said Lint Barrage, assistant professor of economics and environmental studies at Brown University. “If people are excessively optimistic about the future value of an asset, there is potential for mispricing, and bubbles and overinvestment.”

Speaking Friday at a one-day conference at Brown on the political and economic consequences of climate change, Barrage described her research on the coastal property market, which included going door-to-door in Rhode Island and interviewing homeowners about flood risk. People with homes in federally designated flood zones tended to underestimate the risk of flooding when compared with people who lived further inland, she found.

“The reason all this matters is that markets cannot price risks efficiently if people don’t believe in them,” she said.

And if the risks of climate change aren’t being accurately factored into prices now, then it could mean a steep drop in values somewhere down the line.

Part of the reason for the disconnect, at least in Rhode Island and neighboring states, is that the region hasn’t been hit hard or in a widespread manner by a hurricane or other extreme weather event in recent years, said Curt Spalding, former New England regional administrator of the U.S. Environmental Protection Agency who is now a professor at Brown.

“We have not had a shockingly catastrophic climate-connected event,” he said. “It hasn’t hit home yet.”

But when it does, the impact could be profound. Home ownership represents the financial foundation for many people, said Spalding, so if home values erode, it will damage their overall financial well-being. Cities and towns that depend on property taxes will also suffer if home value is lost.

As much of 40 percent of the U.S. population lives in counties adjacent to a shoreline, and the value of real estate within one-eighth of a mile of the coast is estimated to be $1.4 trillion.

Recent studies have found that properties at risk of flooding are starting to see their values affected. Just last week, researchers from Columbia University and the nonprofit First Street Foundation released a study that concluded that Rhode Island lost $44.7 million in home appreciation between 2005 and 2017 because of increased tidal flooding due to sea level rise.

One of the problems in communicating flood risks that Barrage and other speakers raised at the conference was the federal flood mapping program. Flood-risk maps created by the Federal Emergency Management Agency are backward-looking and fail to account for future sea level rise.

In Rhode Island, the Coastal Resources Management Council and the University of Rhode Island have developed maps that do factor in sea level rise. Those maps, through an online program called STORMTOOLS, and flood-damage visualizations for parts of Warwick and South County and, more recently, for the East Bay created as part of a separate initiative called the Coastal Environmental Risk Index aim to educate the public about the increasing risks.

“My guess is that these types of visualizations will be very helpful to people to try and internalize these risks,” Barrage said.

—akuffner@providencejournal.com

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