NYC waterfront property: Will new development consider climate change?
If ocean levels continue to rise, as climate change modelers predict, land that is now oceanfront will soon be ocean floor.
Is this the right time to be buying up waterfront land in Brooklyn and Queens? On the one hand, in the midst of a recession --- prices for good properties could be real low. This NYC Waterfront real estate article talks about some of the investment opportunities but note that climate change is barely mentioned but once in the article! In the year 2010, a new building could live on until the 22nd century! I thought that risk is an important part of evaluating the net rate of return on real estate? In Spring 2011, I will make my debut as a Professor at the UCLA Anderson School of Management and I will be teaching Real Estate Finance. We will discuss this case study!
Are these developers talking to Heidi Cullen about future sea level rise scenarios? Will the insurance companies charge them high premiums for building on this land? What precautions will they take against the rising risk of sea level rise? Could thousands of multi millionaires be trapped in new expensive condos located on a flooded coastal zone?
Here is a quote:
"But what Jeffrey E. Levine, the developer whose company is building the Edge, sees when he looks to the north are vast swaths of undeveloped land stretching along the Brooklyn and Queens waterfront.
“It is a great opportunity to buy land and warehouse it for development,” said Mr. Levine, the president of Levine Builders, which operates Douglaston Development, builder of the Edge.
Many other major developers, real estate lawyers and city officials are thinking along similar lines. Even with new construction slowed by a troubled financing environment, the groundwork is being laid for the next great phase of waterfront development in the city.
The Bloomberg administration recently unveiled a draft of a comprehensive waterfront plan, known as Vision 2020, that includes more than 500 prospective projects costing tens of millions of dollars. These range from efforts to increase access to the water for kayakers and canoeists, to measures to protect against rising sea levels resulting from climate change.
“Vision 2020 is a blueprint for the next 10 years and beyond that will change the way New Yorkers live for generations to come,” Amanda Burden, the director of the Department of City Planning, said in October at a public hearing on the report’s recommendations. She said that the goal was for the water to become the “sixth borough.” “The water should become a part of our everyday lives,” Ms. Burden declared.
Now, I agree that the water helps make NYC a "green city" but does Ms. Burden really want more people living near the water? How confident is she that this won't be a flood zone? What precautions will her agency require to minimize exposure to flood risk? Now the irony here is that rich people will live in this particular flood zone so maybe this is a type of "progressive public policy" to more equally share risk exposure? I'm so used to people telling me that the poor will face the most risk from climate change (and this statement is often true) but does this proposed development represent a salient counter-example?
There is a certain irony here that Mayor Bloomberg is simultaneously preparing NYC for climate change and encouraging more people to live in areas presumably at risk from climate change. Ideally, some climate change experts from Columbia Univ are being brought in to conduct a parcel by parcel analysis to determine how much sea level rise would need to be to seriously flood the new developments that the real estate developers are planning. Will these developers be required to take pro-active steps to protect their future buyers? They will take these steps if they believe that future buyers will bid less for these units because of their fear of flooding. If potential buyers are informed about the risks and fear the sea level rise probabilities, then the future Don Trumps here will have strong incentives to "climate proof" their new buildings but this raises the issue of whether engineers are up to the challenge of offsetting Mother Nature's blows.
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. This post originally ran on greeneconomics.blogspot.com.