‘Climate gentrification’ is changing Miami real estate values

A modern glass house sits on the water’s edge in Miami Beach. The main ground floor apartment has a soaking tub overlooking the ocean, and the bedroom’s glass doors allow owners to roll out of the bed sheets and onto the yacht. It is for sale for $25 million.

Another house in Miami is on a dotted street in Little Haiti, about 5 kilometers inland. Its owner may walk out the front door and see a dead chicken on the street. It’s for sale for $559,000, but some experts claim it’s a better investment than a $25 million mansion.

The villa, while highly desirable and lavishly decorated, is paradise to some extent, as rising tides and increasingly severe storms may have devalued it. . On the other hand, the house in Little Haiti, located on high ground and with little risk of flooding, is being appreciated in a quick clip. It has nearly doubled in value in the past two years alone, according to Zillow.

“What we see here is the theory that in Miami, higher elevation land is worth more,” said Jesse Keenan of Harvard University, co-author of the first peer-reviewed study. . signal changes in the real estate market.

The study tracked the value of more than 100,000 single-family homes across Miami over the course of 45 years.

“What we’ve found is that properties at higher elevations are more valuable now and will be worth more and more in the future,” says Keenan. “Population, including speculative real estate investment, will be dense in these high-altitude areas.”

Keenan claims the Miami beachfront home would be worth 10 percent less than it would today if climate change hadn’t existed.

Universities, climate research groups and the National Oceanic and Atmospheric Administration have made dire predictions of sea level rise in Miami — oceans that surpass vast swaths of real estate in coming decades. So-called “disturbing” flooding, when high tides come in on sunny days, are common in some neighborhoods.

That’s why wealthier investors are now moving low-income residents to high-altitude neighborhoods like Little Haiti, Keenan argues.

Fabiola Fleuranvil is a real estate investor and community activist in the area. She is trying to educate local residents about the added value of their properties.

“All the community sees is just new people, new people joining the community, buying properties, property appreciation and property taxes, valuing them,” Fleuranvil said while walking down the street. with a listing of $599,000. “You’re in a pocket where there can be real estate between $80,000 and $100,000, and this is a property here, with exception, it’s about half a million dollars.”

The house, which was foreclosed on by an outside investor, has been completely remodeled and is likely to be sold to another investor.

“If you have a smart investor and developer and he sees what’s happening with a smart property and he buys the rest of the property next to it, within A quick year or two, you’ll see this community change, and it’s Fleuranvil, says Fleuranvil.

It was evident on the busy retail street next to the house. Entire businesses formerly owned by Haiti are empty and gutted. On one side of the street, a sleek and trendy high-end coffee company has moved in, in stark contrast to the ethnic shops.

“You have long-term commercial tenants who have been here 10, 15, 20 years and new investors and developers no longer want to check rents,” says Fleuranvil.

However, part of Little Haiti’s evolution is just a growing trend towards urbanization. It has nothing to do with water. Millennials in cities across the country are migrating to urban centers, choosing less expensive and more ethnic neighborhoods to live in. However, investors, while following demand, are increasingly paying attention to the threat of water and are developing projects in higher-altitude neighborhoods at a faster pace.

David Martin’s Terra Group, a Miami-based residential and commercial developer, has just completed a luxury waterfront apartment tower in Coconut Grove, with sweeping water views, and is building more on the side. edge. He is also building a $162 million residential and commercial development on 5 acres adjacent to a metro station further inland.

“I would say water is becoming the decision maker as it relates to investment strategies,” says Martin.

Martin said he “accepts the analysis” of Keenan’s research but believes many factors influence the financial decisions of buying and selling real estate beyond water and altitude risk. He added that the study doesn’t yield enough flood mitigation effectiveness, specifically how the waterfront towers will actually help protect Miami from future flood disasters.

“We looked at areas on the beach and along the coast, and we said, well, how can we strengthen these buildings? tax dollars on infrastructure to make Are those neighborhoods more sustainable?” Martin said.

The City of Miami has invested nearly $200 million in resilience, installing pumping stations, and upgrading infrastructure. Miami Beach is on track to spend twice that amount, raising sidewalks and breakwaters. The money comes from the new bonds – voters raise their own property taxes to protect their assets.

“You can argue about climate dilation and whether that’s a good theory,” Keenan argues, “but you can’t argue with the science and economics behind that proposition that this is is a signal.

Martin wouldn’t say that the project he is developing on higher ground is specifically climate-isolating, but he said: “This would be an example of a solution to adaptation and flood mitigation. We need to shift density to areas that are less vulnerable.”

When asked if he is hedging his bets by building on water as well as inland, he replied: “I think there are opportunities in both areas.”

Because while property values ​​are increasing on higher ground, demand remains high. Real estate agent Danny Hertzberg, a $25 million real estate listing agent, said he’s not buying the climate thesis outright, though he admits his clients are more wary of rising water.

“The main change that I see is that people are much more focused on building new, modern homes, because the newer homes, with our new code, they’re at a higher elevation. So, it’s a change,” Hertzberg said. “I don’t think people are going to give up on the beauty of life on the water, having their boat in front of them. I mean, people come here from all over the world to live on the water.”

Another recent study from the University of Colorado and the University of Pennsylvania found that homes affected by sea level rise nationwide sell for about 7% less than unexposed homes of the same price range. distance from the beach.

The price drop, it claims, has increased over time, fueled by discerning buyers and investors worried about global warming.

– Erica Posse and Lisa Rizzolo of CNBC contributed to this report

Correction: This story has been edited to remove two incorrect references to the name of the posh neighborhood. It’s Little Haiti.