Storm surge from Hurricane Ian floods an area of Fort Meyers, Fla. Thomas Simonetti/For The Washington Post

The nation’s real estate market has yet to fully account for the increasing threats to millions of homes from rising seas, stronger storms and torrential downpours, according to new research published Thursday.

“Climate change is happening, and there’s a tremendous amount of unknown risk around the country,” said Jeremy Porter, a co-author of the study in Nature Climate Change and a professor of quantitative methods at the City University of New York. “These things are going to come to a head.”

The combination of federal flood maps that don’t reflect the true scope of risk in a warming world, government insurance policies that subsidize development in flood-prone areas and buyers who haven’t accepted the dangers posed by climate change all contribute to the prospect of a future real estate bubble, researchers found.

They estimate that across the United States, properties in vulnerable areas are overvalued by $121 billion to $237 billion, and that if those unacknowledged risks are realized, low-income homeowners in particular stand to lose significant amounts of equity.

“As we’ve seen in California the last few weeks, these aren’t hypotheticals, and the risk is more extensive than expected – and that risks carries an enormous cost,” said Jesse Gourevitch, a lead author of the study.

But individual homeowners won’t be the only ones facing the financial fallout.

Thursday’s study, which includes researchers from the nonprofit First Street Foundation, the Environmental Defense Fund and the Federal Reserve, also details how municipal governments that rely heavily on property taxes could face huge budget shortfalls as flood-prone homes lose value or become uninhabitable.

“It could mean less revenue for infrastructure, for schools, for social services,” Porter said. “It actually impacts the entire community.”

According to the study, a significant portion of overvalued properties are concentrated in communities along the Atlantic and Gulf coasts that have heightened exposure to hurricanes and rising seas, lax flood-disclosure laws and a high proportion of residents who do not view climate change as an imminent threat. Properties in Florida are overvalued by $50 billion based on their actual flood exposure, according to the researchers’ calculations.

Ryan Orosco, of Brentwood, carries his wife Amanda Orosco, from their flooded home on Bixler Road on Monday in Brentwood, Calif. Jose Carlos Fajardo/Bay Area News Group via AP

But elsewhere in the country, the true risks also don’t match the current reality.

For instance, areas of New England and Appalachia – both places that face more and more flooding driven by extreme precipitation – also stand to lose significant value in the coming decades, the study found.

“It definitely corroborates a lot of what we already see happening, and a lot of other research that’s been done in this arena,” said Rob Moore, a senior policy analyst for the Natural Resources Defense Council, who was not involved in Thursday’s study. “We have to start being honest with people about the risks they face.”

Moore said a majority of states have “inadequate or no requirement” to disclose flood risks to buyers or renters. In addition, federal flood maps are often out of date, and even where they are current, they don’t account for future sea level rise or flooding that results from extreme rainfall events or many inland waterways.

To generate their assessment, researchers behind Thursday’s study compared the extent to which properties already account for the costs of flooding to detailed models that estimate the damage that climate-fueled disasters are likely to inflict over the next 30 years.

Benjamin Keys, a professor of real estate and finance at the University of Pennsylvania’s Wharton School who has studied the effects of sea level rise on housing markets, said the results are compelling – and if anything, probably conservative.

“For a very long time, the costs of living on the coast have not reflected the true risks,” Keys said, but “the riskiness of coastal flooding is accelerating.”

Thursday’s findings are in line with a growing body of evidence that suggests the danger posed by climate change in coming years has not yet fully been reflected in the U.S. housing market.

A 2020 analysis by the First Street Foundation, which provides flood-risk information on individual homes around the country, found that millions of homeowners will probably be stuck with properties that are literally and financially underwater, and that insurers and lenders could eventually face a financial reckoning of their own.

The firm says that 14.6 million properties currently face a substantial level of flood risk – at least a 1% annual probability of flooding. But that number will swell to more than 16 million by 2050, data shows, and the increasing frequency and severity of flooding will also cause average annual losses to climb.

Meanwhile, a Washington Post analysis of extreme flooding events around the country between June and September last year underscored how homeowners, prospective buyers, renters and even local officials are often in the dark about the potential dangers they face, which insurance they should buy and what kinds of development should be restricted.

The examination documented impacts in communities throughout the country where FEMA’s maps do not adequately warn Americans about flood risk, and how as climate change accelerates, it fuels types of flooding that such maps aren’t designed to capture.

People watch the high volume of storm rain water flowing downstream at the Los Angeles River in Los Angeles on Jan. 14. Damian Dovarganes/Asociated Press

A 2022 analysis by the research nonprofit Climate Central separately detailed how hundreds of thousands of homes, offices and other privately owned properties are likely to slip below swelling tide lines over the next few decades.

The groups found that nearly 650,000 individual, privately owned parcels, across as many as 4.4 million acres of land, are projected to fall below changing tidal boundaries by 2050. Much of that is in coastal states such as Louisiana, Florida and North Carolina. But at the same time, states such as New Jersey, New York and Maryland also stand to see thousands of properties fall below tidelines in coming decades.

That analysis also highlighted how the projected inundation of so many homes, while tragic for individual owners, promises to erode the revenue that many local governments need to operate. Likewise, Thursday’s study found that while a large number of such municipalities are concentrated in coastal counties, there are others in inland areas of eastern Tennessee, Central Texas, Wisconsin, Idaho and Montana that also are highly vulnerable as flooding increases.

“This is a problem for cities and towns who could struggle financially if property values – and therefore property taxes – take a dive,” Penny Liao, a fellow at Resources for the Future and co-author of the Nature study, said in a statement. “We need to think about flood risk not as a homeowner’s problem, but as a problem for our entire community, city and housing market.”

The authors behind Thursday’s study make clear that the timing and extent to which properties lose value will depend on the decisions that policymakers, regulators, mortgage lenders, insurers and individual homeowners make in the years ahead.

Already, the federal government has taken steps to more accurately price flood insurance policies based on actual risk. Even as people continue to flock to coastal communities, in certain flood-prone areas, property values have begun to rise more slowly. And this week, the North Carolina Real Estate Commission agreed to craft rules that would require home sellers to provide more historical flood information to potential buyers.

“There is a clear need for improving flood risk communication via updated flood maps, broadening flood risk disclosure laws at the state and federal level and increasing investment in flood risk reduction,” Gourevitch said.

“And as we decide how to adapt to these risks, decision-makers will have to grapple with the moral question about who bears the cost.”