Will mortgages and markets stay afloat in Florida?
The firm McKinsey & Company has undertaken a case study focusing on residential property in Florida exposed to flooding from storm surges and to tidal flooding and assess the likely impact both in terms of direct and knock-on effects, for example through housing price adjustments
In a recent report, "Climate risk and response: Physical hazards and socioeconomic impact." McKinsey and Co. measured the impact of climate change by the extent to which it could affect human beings, human-made physical assets, and the natural world. We explored risks today and over the next three decades and examined specific cases to understand the mechanisms through which climate change leads to increased socioeconomic risk.
Climate change is projected to exacerbate flooding due to storm surges, precipitation intensity, and rising sea levels that increase tidal (also referred to as nuisance) flooding. For example, the frequency of tidal flooding from rising sea levels is expected to grow from a few days a year to 30 to 60 times per year in 2030 and more than 200 times per year in 2050 for stations near Florida’s coast, according to First Street Foundation.
We consider two impacts from rising sea levels: increased flooding from storm surge and tidal flooding. Based on analysis conducted by KatRisk for this case study, average annual damages from storm surges in Florida’s residential real estate market total $2 billion today, a figure that could increase to $3 billion to $4.5 billion, by midcentury depending on whether the exposure is expected as constant or as seeing some buildup. However, individual counties can see more extreme increases. Examples are Volusia, St. Johns, and Broward counties, which could see their average annual losses grow by approximately 80 percent by 2050