Coastal communities around the world are struggling to adapt to rising sea levels and increasingly severe coastal storms. In the United States, local governments are making investments to reduce those risks, such as protecting shorelines with seawalls, “nourishing” eroded beaches by adding sand and rerouting or redesigning roads and bridges.

In the short run, spending public money this way is economically rational. But in the long run, many people who live near coastlines will probably have to relocate as seas continue to rise.

We have studied this problem by combining insights from our work in economics, coastal geomorphology and engineering. As we have explained elsewhere, short-term actions to adapt to coastal flooding can actually increase risks to lives and property. By raising the value of coastal properties, these steps encourage people to stay in place and delay decisions about more drastic solutions, such as moving inland.

Keeping millions in harm’s way

According to recent estimates, a 1-foot increase in sea levels will put about 1 million people in the United States at risk, and 3 feet will threaten about 4 million people. Global sea levels currently are projected to rise0.5 to 2.1 feet by 2050 and 1.0 to 8.2 feet by 2100.

As we see it, market forces and public risk reduction policies interact in unexpected ways, reducing incentives for communities to make long-term plans for retreating from the shore. Nourishing beaches and building seawalls signal to individuals and businesses that their risks are lower. This makes them more likely to build long-lasting structures in risky areas and renovate and maintain existing structures. As a result, their property values increase, which reinforces economic and political arguments for more risk-reduction engineering.

To illustrate this pattern, we compared a sample of houses in Nags Head and Kitty Hawk, North Carolina, two popular beach towns less than 10 miles apart on North Carolina’s Outer Banks. When we consulted county tax appraisal values, Nags Head beaches had routinely received sand from beach nourishment, whereas Kitty Hawk beaches had not. On average, homes in our Nags Head sample were worth over US$1 million, while homes in the Kitty Hawk sample were worth about $200,000.

Other researchers have found that in some locations, the threat of rising seas is eroding coastal property values. But this tends to be true for properties that are viewed as highly vulnerable–for example, homes that have already flooded. In contrast, homes that are elevated or have other flood-proofing features tend to have much higher values, so they are perceived as assets.