At a normal tide on a normal day on the Southern California coast, ankle-high waves glide over a narrow strip of gold sand. On one side sits the largest body of water in the world. On the other, a row of houses with a cumulative value in the hundreds of millions of dollars, propped on water-stained stilts.
Property value ebbs and flows, but when it comes to coastal real estate "the trend lines are pretty clear," says California state Sen. Ben Allen, squinting in the sun. "And they're not pretty."
Within the span of a 30-year mortgage, more than $100 billion worth of American homes is expected to be at risk of chronic flooding. As the climate warms and oceans rise, narrow strips of sand such as the one Allen is standing on, will be submerged, leaving coastal communities — affluent and not — with the torturous question of how to adjust. Build sea walls? Dump sand? For how long and at what cost?
"It's becoming a really serious resource question for a lot of local governments," says Allen, who represents coastal communities in the greater Los Angeles area that are spending millions to keep their beaches intact.
It's expensive to fight the sea. It's expensive not to do so. When property values plummet, so do property taxes. But right now property values here are still high, and Allen wants to put that value to use before it's gone.
That's why the 43-year-old Democrat has proposed legislation to create a revolving loan program, allowing California counties and communities to purchase vulnerable coastal properties. The goal would then be to rent those properties out, either to the original homeowner or someone else, and use that money to pay off the loan until the property is no longer safe to live in.
Think of it like a city-run Airbnb, where the profits go to making sure nobody is left picking up the full tab when the Pacific comes to collect.
It's a strategy that's never been tried at such a large scale, and its implementation would come with plenty of questions, policy experts say. But there's hope in various parts of the country that the legislation passes, putting to test a buy-to-rent strategy that could offer a more permanent solution to a growing problem.
"Not a conversation ... communities want to have"
At its core, Allen's proposal is a buyout program — a government-subsidized effort to limit the state's longer-term exposure to sea level rise.
Within the next 30 years $8 billion to $10 billion of existing property in California is expected to be underwater, according to the state's nonpartisan Legislative Analyst's Office. An additional $6 billion to $10 billion will be at risk during high tide.
"The magnitude of the potential impacts mean that the state cannot afford to indefinitely delay taking steps to prepare," the report warns. "Waiting too long to initiate adaptation efforts likely will make responding effectively more difficult and costly."
Communities have three options for dealing with that threat: They can defend those properties using sea walls and buffering beaches; they can learn to live with higher waters; or they can retreat, moving to higher ground.
The last option is often the least popular, says Julia Stein, a project director at the Emmett Institute on Climate Change and the Environment at UCLA School of Law.
"That's just not a conversation that a lot of coastal communities want to have," she says.
And when the conversation does come up, one of the first questions to arise is cost.
Take Del Mar, a low-lying, upscale community north of San Diego. Residents there have been in a years-long fight with the state over the term "managed retreat." The state wants the city to consider retreating from a particularly vulnerable area. Problem is: The combined market value of the homes in that area is more than $1.5 billion.
"There's a whole lot of research out there that indicates the market value of coastal property just really doesn't account for sea level rise in a meaningful way right now, and in the ways that it maybe should," Stein says. "But at some point, the market is going to realize the problem. And at that point, it may be too late."
That's why Stein helped Allen draft his novel legislation. She thinks the state needs to get ahead of the problem before it becomes another money pit like wildfires. Thousands of California homes are becoming uninsurable due to wildfire risk despite expensive, ever-expanding efforts to fight them.
"I think that's kind of a vision of the future for some coastal properties," she says.
Rent out now, save money later
Over the last 30 years, the Federal Emergency Management Agency has supported buyouts of more than 43,000 U.S. homes, according to an analysis by the Natural Resources Defense Council. Most are in the more flood-prone East. A few patterns have emerged.
"It's usually homeowners who are in good standing on their mortgage, after a disaster, who probably can speak pretty good English and are well-off enough to navigate a really complicated, bureaucratic process for three to five years," says Miyuki Hino, an assistant professor of city and regional planning at the University of North Carolina at Chapel Hill.
Just because a property owner is willing to sell a home doesn't mean the resources exist to carry it out. Demand already exceeds supply, and demand is only going to grow.
"We are facing some really unprecedented difficulties, and we need to be willing to experiment and try new things and see what works and what doesn't," Hino says. The California proposal fits that bill, even if she has questions about how it would work.
Governments have long played landlord for public housing projects, but coastal real estate would be another beast altogether. There's no guarantee that homeowners would want to participate. And there are questions of equity. Who would get prioritized for buyouts? Is potentially spending public money to buy multimillion-dollar homes the best use of those funds?
Andy Keeler, an economist at East Carolina University's Department of Coastal Studies, believes the answer is yes.
Keeler has spent years studying buy-to-rent strategies similar to that proposed in California, and he thinks they could be a useful tool for disrupting a pervasive problem when it comes to coastal real estate.
The value of a coastal home is hugely dependent on the public sector, he says. If a city or state invests in protecting properties by building sea walls or nourishing beaches, it signals to homeowners that their property values will stay intact, so they continue to invest in their property. More investment means more reason to protect down the road.
"It's a positive feedback loop that strings out how much longer you're going to be there," Keeler says. "All it buys you, which is really valuable, is time."
From a purely economic perspective though, it doesn't add up. A community pays on the front end, pays again, and again, and then is left with the cleanup and emergency response in the end.
Keeler says that link can be broken by taking properties out of the hands of private homeowners, who are getting mixed messages about the value of their homes, and putting them in the hands of the public, which has an interest in not being stuck with all of those bills.
Communities can then plan for the eventual phasing out of those properties as sea levels rise. They can plan for the decline in property taxes, and the cleanup costs associated with homes falling into the sea.
"We're going to be looking at really massive relocation sometime in the next couple of hundred years and probably much sooner," Keeler says. If we don't manage the timing of that, he fears, it will manage us.
Nothing is forever
His eyes shadowed from the bright California sun by the brim of his blue Dodgers cap, Allen pulls out his phone and opens the Zillow app.
The $8.3 million house just up the beach has a monthly rental estimate of $12,500. Assuming the house could be rented at that rate, it would take about 55 years to pay off — 55 years to make back the money he's proposing the state loans to local communities.
It's the most expensive house on this stretch of beach though, and Allen says it may not be worth investing in. But it's also the kind of property that a homeowner would fight to protect, lobbying for public investment in sea walls and other defenses.
Allen's bill passed unanimously through the state's Senate Natural Resources and Water Committee last week, and he says he's hopeful it will receive similar support in the broader Legislature.
"Nobody wants to come to terms with what's happening," he says, watching as people stroll the beach barefoot and smiling. "We want this to be here forever. We want to be able to walk along this beach and enjoy these beautiful houses and this beautiful view forever."
But, he says, "you can't beat the sea."
ARI SHAPIRO, HOST:
Within the span of a 30-year mortgage, sea level rise is expected to put more than $100 billion worth of U.S. property at risk. How communities will pay to address that is a huge question. NPR's Nathan Rott has the story of a proposal in California that may offer an option by buying and then renting out coastal properties.
(SOUNDBITE OF WAVES CRASHING)
NATHAN ROTT, BYLINE: On a normal day at a normal tide on the Southern California coast, knee-high waves glide over a narrow strip of gold sand - ocean on one side, raised houses the other. No. Mansions might be a better descriptor.
BEN ALLEN: I don't know. We should Zillow, shouldn't we? Let's see. It'll be interesting.
ROTT: Ben Allen pulls out his cell phone and opens up the surprising.
ALLEN: Yeah. These are pricey.
ROTT: Allen is a state legislator. He represents a coastal district a bit south of where we are now. And he's not kidding about the price - 6.3 million, 3.1...
ALLEN: Eight point three.
ROTT: Eight point three million?
ALLEN: Yeah. Let's go look at that one.
ROTT: Now, not all coastal properties are million-dollar mansions, but Zillow estimates that by 2050, more than $40 billion in California real estate will be at risk from sea level rise. And when you have that much value at stake, Allen says, government has to do something about it. They can use taxpayer money to try and defend property - building seawalls, dredging sand - or they can use taxpayer money to try to reduce the amount of property that's at risk by buying people out of their coastal homes. Neither of which is cheap, which is where Allen comes in. He pulls up the Zillow profile for that $8 million house.
ALLEN: Yeah. So the rent estimate is that it would be $12,500 a month.
ROTT: Money that Allen wants to put to use. He's proposed legislation that would allow California communities to buy at-risk property along the coast with the goal of then renting those beachfront properties out, either to the original homeowner or through something like Airbnb to recoup over time the upfront cost.
ALLEN: This is a way of taking advantage of the value of these properties and the rental value over the next couple decades.
ROTT: Before it's gone.
ALLEN: Before it's gone.
ROTT: The federal government, states and even some nonprofits have been funding buyouts around the country for years, mostly in the flood-prone east. But those programs have limitations. Miyuki Hino studies buyouts at the University of North Carolina.
MIYUKI HINO: One of the lessons that's come through really clearly from research on retreat in the U.S. is that our tools right now for doing it are so rigid and so inflexible that they really only work for a very narrow subset of the population.
ROTT: Your house likely has to have just been flooded, she says. It has to be valuable enough to be bought out, but not so valuable that it's too expensive. It helps if you speak English, she says. And you have to be willing to deal with years of bureaucracy. So, yeah, it doesn't work well. Meanwhile, homeowners are being incentivized to stay in their homes. Take any beachside property, says Andy Keeler, an economist at East Carolina University.
ANDY KEELER: The value of the house is hugely a function of what the public sector does.
ROTT: That's why there's a lot of political pressure to use taxpayer money to build seawalls and nourish beaches with imported sand. Keeler calls this a positive feedback loop.
KEELER: You nourish the beach, right? And once you nourish the beach, property owners have a new view of what risk is, and they reinvest in property. Once they reinvest in property, you have more wealth and real estate. And so you have more of a reason to then, six years later, keep investing.
ROTT: It's a runaway train, Keeler says - more sand gets dumped, seawalls get higher, property values stay high until seawater is spraying over the wall. From an economics perspective, Keeler says, defending property doesn't always add up. It just means spending money now and later and later again until the property is underwater and worth nothing. That's why Keeler has been advocating for more places to look at buy-to-rent strategies similar to the one that's been proposed in California.
KEELER: This can break the positive feedback loop. If these homeowners can sell their houses and still have the ability to rent them back for a time, or they can produce income by renting to other people, then you've broken that link.
ROTT: Likely saving the public money down the road.
JULIA STEIN: That's a really interesting and novel approach, so there's very little to compare it to.
ROTT: Julia Stein works on climate issues at the University of California, Los Angeles, and she helped Ben Allen draft the proposed legislation. She thinks there are still a lot of questions about how exactly it would play out if this bill passed. Who would manage the rental properties? Would homeowners even choose to participate? Is spending taxpayer money on $8 million homes the best use when we know that that property's value is likely going to decrease in the future? Stein says there's a lot of research showing that real estate values now do a poor job accounting for climate change.
STEIN: But at some point, the market is going to realize the problem. And at that point, it may be too late.
ROTT: All the more reason, she says, to try and get ahead now.
Nathan Rott, NPR News. Transcript provided by NPR, Copyright NPR.