Climate gentrification and affordable housing policies

Climate change is here to stay. Global mean temperatures have already risen more than 1.5 degrees Fahrenheit, and sea levels have risen 2.8 inches in the last 25 years alone. Coastal communities are seeing increased storm surge, king tides and flooding. For example, Miami’s Virginia Key experienced a record nine high-tide floods in 2019.

With 40 percent of the world living near the coast and sea level rise unlikely to abate in the near term, coastal communities across the world are adapting and becoming more resilient through coastal infrastructure investments. These efforts include deploying sea walls, elevating roads, improving drainage and installing pumping stations. The city of Miami Beach has already allocated $1 billion to infrastructure to protect against sea level rise, and Miami-Dade County devoted $705 million of the fiscal year 2020-2021 budget to resilience investments. How can coastal communities become more resilient while at same time ensuring that disadvantaged communities are not disparately impacted by sea level rise? We advocate a two-pronged approach combining private partnerships to increase resilience investments, combined with zoning and regulatory changes to increase affordability. 

Coastal communities are finding a sudden need for expensive resilience infrastructure. Funds for these projects are scarce, which means that wealthier municipalities often make larger investments. For example, Hialeah and Miami Beach are both in Miami-Dade County. The total amount of tax-payer-funded adaptation, however, is about 12 times larger in Miami Beach. This is not necessarily a bad policy, since Miami Beach has more valuable property at risk and is closer to the ocean. Indeed, prioritizing Miami Beach may be the best route if the public is looking to minimize total economic losses due to climate risk. The problem with this strategy is that low income areas are left less protected. Trading off affordable housing against excessive vulnerability to flood risk is a position that no one should be in. How can local municipalities increase resilience investments in underserved neighborhoods? 

One approach is to hope for aid from the federal government. Unfortunately, federal planners usually fail to see the urgency of local issues and tend to rely on massive infrastructure solutions from the Army Corps of Engineers. Such solutions often do not adequately protect the environment and fail to account for the effect of projects on individual neighborhoods. In our view, a better idea is to use funding mechanisms, such as green and blue bonds, which offer lower interest rates for resilience investments if the infrastructure also promotes a healthy environment. This sort of approach is a fertile ground for partnerships with businesses seeking to implement sustainability initiatives that focus on resilience, and with nonprofit organizations. One example is the Arsht-Rockefeller Resilience Center, an organization actively promoting local resilience to climate change. This bottom-up approach allows municipalities to leverage additional resources and share best practices.   

Local communities must also address a second problem caused by sea level rise: changes in affordable housing. Research shows that sea level rise induces a process whereby low-lying properties lose value relative to properties at higher elevations. This effect is problematic. Property values rise as relatively wealthy buyers chase a small number of less vulnerable properties, and property values fall in high risk areas due to higher insurance costs and the threat of disruptions due to flooding and storm surge. Low income residents are then displaced and concentrated in vulnerable neighborhoods, resulting in climate gentrification. 

Resilience infrastructure investments protect coastal residents, but they can also exacerbate climate gentrification. As wealthier residents leave low-lying areas, the tax base shrinks, making resilience investments less affordable. This can create a feedback loop where resilience investments cause even more wealthy residents to leave for newly protected areas, leaving under-funded and vulnerable communities with an even lower tax base. There is also another consequence; our own research suggests that a resilience investment in a low-income community can make the area more desirable, raising rents to the point where low income households are priced out. This contributes to the gentrification problem when it changes the historical character and makeup of a neighborhood.

The solution is to combine resilience investments with policies that promote affordable housing. But not all policies are effective at solving this problem! For example, urban areas with affordable housing issues often enact rent control policies. However, studies show that rent control reduces the supply of rental housing, which actually ends up driving up long-run rental costs. Landlords also cut back on maintenance in response to rent control, a problem that is likely severe when properties are subject to frequent flooding. Removing zoning restrictions limiting housing density is the best solution. Removal of zoning restrictions increases the supply of high elevation housing, which limits price increases, dislocation of low-income residents and gentrification. New buildings are also subject to updated building codes, which include more protections against environmental hazards. Municipalities can also promote increasing the supply of affordable housing in other ways, such as streamlining permitting processes, which reduces the cost of new housing and ultimately rental costs.     

Coastal communities are facing an unprecedented challenge. Sea level rise and climate change are resulting in flooding, hurricanes, saltwater intrusion, spread of tropical diseases, reef damage and a host of other problems. If decision makers are to take this problem seriously, they need to acknowledge both the different sources of climate risk, as well as the incentives that different policies create in a market setting. The bottom line is that a more sustainable path of coastal urban development tackles the key sources behind vulnerability and access to affordable housing. 

Given sea level rise projections over the next decades, little room for error exists. However, we are positive that by constructing coastal resilience infrastructure in vulnerable areas, while simultaneously reducing zoning restrictions, coastal cities can achieve their goal of not only adapting, but thriving, in response to these pressing environmental challenges.  

David L. Kelly is a professor of economics and academic director of the MS in Sustainable Business, Miami Herbert Business School at University of Miami.

Renato Molina is an assistant professor of economics at the Rosenstiel School of Marine and Atmospheric Science and Miami Herbert Business School at University of Miami.