(Bloomberg Opinion) -- In New Jersey’s beach towns, there are two sets of data that always seem to be rising: property values and sea levels. Neither phenomenon is particularly subtle, and eventually their trajectories will collide. But no one buying property seems to think it will happen today — or maybe ever.
“The two things that I’m amazed by are the prices that people are paying and the age of the people who are paying the prices,” says Allan Dechert, who has been a real estate agent for decades on the seven-mile-long barrier island that hosts, for now, the towns of Avalon and Stone Harbor. Many of the people buying vacation homes, he says, are young and don’t need a mortgage.
Prices in Avalon, 15 miles up the coast from Cape May, are up about 19% over the past year, according to Zillow, with an average home value of $1.9 million. With about 5,500 residential properties, 3,500 of them single-family, Avalon has a tax base of $9 billion.
On a recent Monday in May, the town was buzzing with carpenters, electricians, plumbers, landscapers. “We’re seeing tons of building,” Dechert says. “We’re seeing 20-year-old houses torn down.” Though the town is just a slip of land between ocean and bay, with water literally everywhere, many new homes, Dechert said, are being built with a pool — something unheard of a couple decades ago.
Avalon is a window on the narrow upper tranche of the U.S. economy, where wealth has both soared and concentrated in recent decades. In the 1970s, the town was a summer retreat for affluent suburbanites, mostly from the Philadelphia area. They replaced modest bungalows with the town’s trademark “upside-down” houses — simple rectangles with bedrooms on the first floor and the kitchen, dining and living spaces upstairs, the better to take advantage of the views and sea breeze. Now those are being replaced by larger, often more ostentatious creations squeezed into the same narrow lots like adults wedged into children’s bathing suits.
While plenty of people are desperate for a beach vacation as they emerge from the pandemic, fewer of Avalon’s homes are available for rent, says Dechert. Some homes sit vacant much of the summer. “The bigger the house is, the less it gets used,” Dechert says.
When Avalon’s homes were more modest, the town was also more diverse — by class if not race. (It’s always been overwhelmingly White.) The year-round population in the 1970s included civil servants, bartenders, local tradesmen and the sort of people who were happy just to get by, one way or another, so long as they could stick close to the beach.
The 21st century real-estate market is less ecumenical. The typical tensions of a beach town — between locals who make their livings off the summer trade and the summer people who provide the cash — have faded. The reason is simple: Hardly anyone who works in Avalon can afford to live there. Scott Wahl, the town administrator, commutes over a bridge to work. With the year-round population dwindling, the elementary school district merged with Stone Harbor’s a decade ago.
In effect, the island has become a gated community — or, more aptly, a moated one. And that moat has an expansive agenda all its own, with remarkably little respect for property, no matter how pricey. In the nearby town of North Wildwood, local officials passed a “no wake” ordinance in 2018. That’s not unusual in shore towns, where speeding boaters cause disruption.
But this ordinance is enforced on city streets, where flooding has become chronic. If there are 6 inches or more of water on the road, motorists have to slow down to keep the water from overflowing the curb. Everywhere at the shore, surf is up.
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It has been less than a decade since Hurricane Sandy visited devastation on the Jersey Shore, devouring the sand painstakingly deposited by the Army Corps of Engineers and spitting it out anywhere it pleased. The storm was a Seussian vision of chaos: It propelled fish into buildings, automobiles into water, boats onto streets. It unmoored houses and sent them careening into the neighbors.
Yet the impact of all this destruction on investor psychology, waterfront development and real estate markets is exceedingly hard to discern. “Across the United States, coastal communities have recently built tens of thousands of houses in areas at risk of future flooding driven by sea level rise from climate change,” notes a 2019 research report by Climate Central. “That has put homeowners, renters, and investors in danger of steep personal and financial losses in the years ahead.”
A New Jersey government report on the state’s recent coastal development conveys a similar sense of wonder. “Between 2010 and 2017,” it states, “over 4,500 new homes, valued at approximately $4.61 billion, were built in coastal areas at risk for flooding. This development largely occurred after Hurricane Sandy and at a rate three times higher than that which occurred in safer areas.”
Many environmentalists were hoping that Sandy would at last induce a retreat from the coast. The opposite occurred: Housing in the storm-battered flood plains was not only replaced, but bigger and more expensive housing was added. A government program to buy out the owners of vulnerable properties has had little effect. Meanwhile, efforts to reduce carbon in the atmosphere continue to flounder.
A 2019 report on New Jersey’s coastal risk estimates “that the expected average annual loss to New Jersey from hurricane-related wind and flood damage today is likely $670 million to $1.3 billion higher than it would have been if sea levels and hurricane activity in the 1980s remained constant.”
Practically every old-timer along the shore has experienced the increase in flooding, and seen the signs that more water is on the way. Kenneth Able became director of the Rutgers University marine field station in Little Egg Harbor Township, near Atlantic City, in 1987. A visit to his office, after crossing a handful of narrow bridges along a marsh peninsula, explains why he still shows up for work two years after retirement. The building, a former Coast Guard station, sits in perfect isolation, surrounded by nothing but ocean, bay and marsh, with views that end at the horizon. This spot is home to what Able calls “probably the cleanest estuary in the Boston-to-DC megalopolis,” enabling researchers to use it as a baseline of marine health.
As we talk on a deck outside Able’s office, gulls and swallows squawk and peal. An osprey flies low over the water, clutching nesting material. At other times, seals or sharks visit the field station’s boat basin, where a small colony of oysters is attempting a regional comeback. At high tide, fish swim beneath Able’s office.
Pointing toward a sandy spit on the ocean side, perhaps 20 yards away, Able says: “That sand was marsh when I came here. The edge of that marsh there was about 40 feet further out when I came here. That’s a lot of change.”
There’s a reason for such a brazen theft. The sea is rising everywhere. But not all coasts are attacked with equal fervor. “From central New Jersey on south, it's different,” he says. “The rate of sea level rise here is about three times the global average.”
The Jersey Shore real estate market seems impervious to this fact. Farther offshore are barrier islands, no doubt idyllic in their day, that long ago sank beneath the waves. The seas were rising long before the first factory began spewing carbon into the atmosphere. CO2 simply quickens the pace.
Stewart Farrell, director of the Coastal Research Center at Stockton University in New Jersey, likens coastal real estate to a game of musical chairs in which properties trade hands at ever escalating prices until the water rise becomes untenable. At that point the music stops. “Somewhere down the road,” Farrell says, “if the high tide is in the backyard every day, twice a day, the home loses value. You can’t get $4 million for it.”
Farrell’s logic sounds indisputable. The market disputes it nonetheless. Denial about climate change may be one reason for that. But the federal government, and the power that extremely affluent people exercise in the political arena, may be a more compelling explanation.
“It isn’t an exaggeration to say that without the federal government, the coast as we know it simply wouldn’t exist,” writes Gilbert M. Gaul in “The Geography of Risk,” published in 2019. “In the 1950s, the federal government covered just 5 percent of the cost of rebuilding after hurricanes. Today, it pays for 70 percent. And in some cases, it pays for 100 percent. It is no accident that the federalization of disasters coincided with the explosive development at the coasts.”
According to Gaul, federal taxpayers have spent more than $350 billion responding to hurricanes and coastal storms in the past decade. Yet even in the absence of famous storms, tax money flows year after year to replenish exclusive beaches.
More than $900 million in federal, state and local money has been spent in New Jersey alone since Sandy, according to the Army Corps of Engineers, most of it to maintain beaches. It’s a Sisyphean task, taking sand from inlets or offshore locations and pumping it onto land to replace what the sea has eroded. The sea then erodes the new deposits and the process repeats.
Environmentalists generally hate this cycle, on a micro level because it can disrupt delicate breeding grounds and on a macro level because it represents a perpetual war on nature, which would otherwise have its way with the sand. When the barrier islands of New Jersey were divided into legal properties with fixed rights to fixed pieces of land, the developers did not account for the fact that the islands themselves are not fixed; the land is constantly in motion.
Still, as an improvisation, summer by summer, beach replenishment basically works. It has been going on at the Jersey Shore since 1910, when the Army Corps first did a project in Cape May.
Public subsidy of exclusive (and racially homogeneous) beach towns is an old story. A man named Ned Coll waged a decades-long battle, beginning in the 1960s, against wealthy Connecticut towns that restricted public access to the beach while scooping up tax dollars for shoreline projects. Avalon and adjacent towns charge fees to anyone who wishes to use the beach. So a visitor who has subsidized the multi-million-dollar beachfront through years of federal- and state-financed beach replenishment, pays once again to sit on federally-engineered sand.
Perhaps that arrangement will go on indefinitely. But it’s a function of politics and power, not nature. It’s subject to revision.
After the great nor’easter of March 1962, which wiped out beach towns up and down the coast, federal money flowed and rebuilding began immediately. The U.S. was headed to the moon; it wasn’t about to be bullied by a little wind and water. Later, when public policy began to take account of environmental concerns, New Jersey leaders contemplated curtailing the relentless development of fragile places at the shore. But homeowners were protective of property values, and beach towns were determined to secure their populations and tax bases. They shouted down the experts and bureaucrats. Development continued apace. Property values rose. The sea did, too. And here we are.
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Scott Wahl works in the increasingly narrow space between rising seas and soaring property values. As Avalon’s town administrator, he seeks to keep property owners content while fortifying the town against inundation. It’s a difficult job. “If we try to keep everyone happy,” he tells me in his office, “that’ll never work.”
Unlike the fictional mayor of Amity, the beach town in the film “Jaws,” Wahl is selling preparation and “resilience” to his town, not denial of the threat. “Flood risk and storm resiliency is not a once-in-a-while item we think about, it literally comes into daily conversations,” Wahl says in an email. “Whether we are talking about capital projects, resiliency, storm readiness, you name it, it is top of mind all the time.” Wahl isn’t bluffing. His emails are barrages of facts and lists of mitigation steps.
Wahl has met with a Dutch delegation about flood control and cultivated a team of scientists and engineers to advise the town on defensive measures and mitigation. His civic nips and tucks have lowered flood insurance rates for local homeowners and his constituent service includes an easy-to-read flood map that won’t stop the water but at least tells you where to park to keep your car dry. For those hunting for property, it’s an especially useful tool. But there’s little evidence it influences decisions about where to buy.
Avalon began planting dune grass decades ago, and considers its dune “system” the first line of defense against the ocean in a violent storm. But it’s the slow creep of rising tides entering from the bay that poses the greatest threat.
Sea rise is a matter of projection. A Climate Central report states that Avalon has already experienced a rise of 9 inches in the past half century. Another 2-foot rise this century seems highly likely — and that’s far from a worst-case scenario. The state of New Jersey is planning for a rise of slightly more than 5 feet by 2100. That would put half of Avalon underwater.
Federal flood insurance through the Federal Emergency Management Agency is beginning to reflect the rising peril. “When Sandy hit, we were expecting a lot more wind-related claims,” says Sam Wierman, Jr., vice president of Ide Insurance Agency in Stone Harbor. “But a majority of all our claims were flood-related.” For the past six years or so, Wierman says, rates for older homes in low-lying areas have been rising about 25% annually. Homes that are built to new codes, or elevated to meet them, haven’t risen so much. But for the most flood-prone structures, a premium of $1,500 a decade ago may now be closer to $10,000, and he’s seen one as high as $14,000.
A 2017 study published in Nature concludes that the presence of wetlands mitigated flooding during Hurricane Sandy, reducing flood damage by $625 million. But Jersey wetlands are in steady retreat even in areas protected from development.
Lenore Tedesco, a former Purdue University marine scientist, has been director of the Wetlands Institute in Stone Harbor for a decade. As we look west out a wall of windows facing acres of marshland punctuated by osprey nests, she explains how a storm surge responds to different environments.
Think of the incoming waves as a jar of marbles, she says. Spill them across a smooth surface, and they’ll roll forever. Spill them onto a shag carpet, and they’ll soon stop. A marsh, she says, is the equivalent of a shag carpet. “The marsh absorbs that energy just by being there,” she says. If the marsh sinks, the waves flow unimpeded.
Up and down the Jersey Shore, marshes have been disappearing. Tedesco points toward the window bank. “That’s our boathouse out there,” she says. “The first time the boat house had any water in it was 1986. I’ve got these records — there was no water. Now, it floods two feet a couple times a month.”
The influx is causing distress for birds that nest in the marsh, whose homes and eggs are flushed away with increasing frequency. And it poses a threat to the bayfront homes of Stone Harbor, which are visible through the institute’s south-facing bank of windows.
Tedesco advises both Stone Harbor and Avalon on mitigation efforts. Most, in one way or another, involve increasing elevation. “You build sea walls, you raise buildings, you raise roadways, you increase bulkhead ordinances. You rewrite your ordinance so that it says, if you’re going to build a house, it’s going to be at this elevation and you’re going to slope it away. And you’re going to build a retaining wall and put your plants up on that.”
The cost of all this, of course, is enormous. “The towns that are smart are organizing themselves to be ready for the next time money falls out of the sky after some kind of disaster,” she says.
One certainty, beyond rising water, is that another disaster will arrive, and the island will be scrambled anew. Another certainty is that calls for federal aid, and a demand to rebuild, will commence immediately. With so much money already planted on the island, it’s unclear how, or if, the cycle will ever end.
In Avalon, Scott Wahl is trying to make residents more mindful that the next calamity awaits. He wants to place markers in prominent places about town, showing the peak water levels during Hurricane Sandy. He already has models. It’s a testament to the human spirit, the capacity for denial, and perhaps to the insulating powers of wealth that such reminders are necessary. But they’re especially poignant in the little Borough of Avalon, where the street grid begins on 7th Street, adjacent to a wall of boulders holding back the sea. To the north, 6th Street was wiped off the map in 1962. The sea has been rising ever since.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Francis Wilkinson writes about U.S. politics and domestic policy for Bloomberg Opinion. He was previously executive editor of the Week, a writer for Rolling Stone, a communications consultant and a political media strategist.
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