Land Use and Climate Change Bubbles: Resilience, Retreat, and Due Diligence

Abstract

This article examines events on the ground in several localities where climate change is lowering property values and analyzes how those changes in value can be reckoned with by regulators. The article merges practices and principles of real estate transactions and finance with those of land use and environmental regulation.

Climate change is a planetary phenomenon whose environmental implications are far-reaching. Reports on climate change consequences increasingly focus on what is happening locally and presently, while speculation continues about long-term global consequences. In numerous communities, property values are declining because of repeated flooding, continued threats of storm surges, sustained high temperatures, constant fear of wildfires, lack of water in residential, commercial, and agricultural areas, and real concerns with mudslides in vulnerable areas. Cumulatively, these changes are causing a reverse economic bubble associated with land use that mirrors the effect of the infamous housing bubble of 2008, but is potentially much more harmful to the nation.

Much of the article consists of local case studies demonstrating these adverse economic effects. It then points out that these effects are being accounted for in the private sector while public regulation is stunted by concerns over the per se takings doctrine established in the case of Lucas v. South Carolina Coastal Council. The article examines the lawyer’s role in assisting real estate purchasers with their due diligence duties under the historical doctrine of caveat emptor. It argues that this duty includes the consideration of present but also emerging property conditions and how those conditions are accounted for in the casualty insurance and mortgage industries and by real estate appraisers.

As the private market adapts to climate change, new building techniques and locational preferences for new construction are emerging, evidencing strategic adaptation to increasingly evident risks associated with climate change. The article concludes with a reflection on how these private market realities should influence land use and environmental regulation, particularly local land use controls.

Keywords: climate change, land use, climate bubble