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The Impact of Sea-Level Flooding on the Real Estate Development Community in Charleston SC: Results of a ULI Member Survey

The Impact of Sea-Level Flooding on the Real Estate Development Community in Charleston SC:... JOURNAL OF SUSTAINABLE REAL ESTATE 2022, VOL. 14, NO. 1, 4–20 ARES https://doi.org/10.1080/19498276.2022.2095699 American Real Estate Society The Impact of Sea-Level Flooding on the Real Estate Development Community in Charleston SC: Results of a ULI Member Survey Stephen T. Buckman and Saeideh Sobhaninia Clemson University, Clemson, SC, USA ABSTRACT ARTICLE HISTORY Received 19 November 2021 Climate change is becoming an increasing concern for many communities, particularly Revised 17 June 2022 coastal communities subject to tidal and sea-level flooding. As a result, shoreline municipal- Accepted 24 June 2022 ities walk a fine line between protecting their communities and allowing more develop- ment. A prime example of this dilemma is the port city of Charleston, South Carolina, USA. KEYWORDS Despite being ground zero for sea-level flooding, the city has seen rapid real estate devel- Charleston; climate change; opment growth. This paper analyzes a survey conducted with Urban Land Institute (ULI) coastal communities; members in the Charleston region to understand how the real estate community is coping flooding; real estate with and combating flooding impacts. Results show that while residential real estate devel- development; sea-level rise opers are rethinking their development patterns, commercial developers are slow to recog- nize the threat of climate change impacts. The paper concludes with suggestions for policies and practices to address these threats, strengthen Charleston’s commercial real estate, and better prepare the city for a safe, prosperous future. As has been noted by Upton Sinclair, it’s difficult to get English et al., 2021). The city’s nuisance flooding a man to understand something when his salary threshold is 7.0 feet (ft.) Mean Lower Low Water depends on his not understanding it. This applies to all (MLLW). Per the National Oceanic Atmospheric aspects of the climate change discussion. Cost Administration (NOAA), nuisance flooding results in considerations are amplified by the emotional need to minimal or no damage. Still, it can lead to public not understand the problem. threats and inconveniences, such as water intake Anonymous Survey Respondent pipe backups, street flooding, and flooding in low- lying areas (NOAA, 2022). Currently, Charleston has Introduction 180 days of nuisance flooding each year on average, with a record 89 days of flooding that breached the Charleston, SC, is rapidly becoming the “it” place in 7-foot seawall in 2019 (Mills, 2021). In the 1970s, the Southeastern US. It is consistently listed as a top this number averaged two days annually destination for tourists by magazines, such as Travel (Riley, 2015). and Leisure and Traveler. In 2015, Forbes ranked it as Charleston’s major flooding threshold is 8.0 ft. the 7th best destination for jobs. Invariably, this has MLLW means there is little room between nuisance not been lost on the real estate industry resulting in flooding turning into major flooding events. This extensive development in all four of the major type of flooding costs the city $12.4 million each asset classes. year (Cains, 2021). With the double punch of climate While development is bursting at the seams, change being sea-level rise and increased hurri- Charleston is also ground zero for climate change canes, major flooding will become more pro- and its impacts (Cains, 2021). The city is already nounced and frequent (Magill, 2014). Theoretically, prone to flooding at high tide (Runkle et al., 2018) and will, even with moderate sea-level rise, experi- coastal real estate valuation should decrease as sea ence chronic inundation by 2100 (Dahl et al., 2017; levels rise (Butsic et al., 2011). Yet, increasing CONTACT Stephen T. Buckman stbuckm@clemson.edu Clemson University, Clemson, SC, USA. 2022 The Author(s). Published with license by Taylor & Francis Group, LLC This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. JOURNAL OF SUSTAINABLE REAL ESTATE 5 housing and commercial property prices in coastal Filatova, 2020). NOAA has predicted that hurricanes cities show that this is not the case (Murfin & along the southeastern US seaboard and Gulf Coast Spiegel, 2020). This paradigm presents a dilemma will increase as the Atlantic Ocean and Gulf of for city governments and developers seeking to Mexico continue to warm (NOAA, 2018). In fact, meet housing and economic needs and implement severe storms and hurricanes have already increased more comprehensive commercial development in frequency (Sobhaninia & Buckman, 2022). In fact, resiliency measures (McKenzie, 2017). during the 2021 Atlantic hurricane season NOAA Resiliency measures can potentially impact com- (2021) recorded 14 named storms and seven hurri- mercial development costs and real estate prices canes. The agency noted that this extremely high (Filippova et al., 2020) and, ultimately, a city’s ability occurrence made 2021 the third most active season to build. Feigel (2015), in a National Institute of and marked six consecutive years of above-normal Standards and Technology (NIST) paper developed activity (NOAA, 2021). for its Economics of Community Disaster Resilience The economic impact of hurricanes is widely Workshop, suggests that resiliency planning must known with the most memorable and costly hurri- incorporate a variety of quantitative (e.g., frequency, canes including Katrina (US$182.5B/1,833 deaths), severity, exposure time frames, etc.) and qualitative Harvey (US$141.3B/89 deaths), Maria (US$101.7B/ (e.g., diverse stakeholder input) issues, and indirect 2,981 deaths), Sandy (US$80B/131 deaths), and Ida costs (e.g., peripheral damage, business interruption, (US$75B/96 deaths) all occurring within the last etc.) in cost-benefit analysis (CBA) and return on 20 years (NOAA & NCEI, 2022; Smith et al., 2022; investment estimates to understand impacts. Thus, Warren-Myers & Hurlimann, 2022). While not the the first step for commercial real estate resiliency costliest, Sandy was notable for its unique configur- planning will be for municipalities to establish a ation and far-reaching impacts which included the baseline of various stakeholders’ current efforts, atti- epicenters of the US economy along the tudes, and perspectives. Northeastern seaboard (Rafferty, 2021). Understanding the dynamic between growth and The effects of Sandy were felt in cities and towns climate change this paper shows the results of a along the Atlantic Coast, including New York City, survey of the ULI Charleston real estate develop- an area not historically prone to hurricanes (Gould ment community to garner how they view climate & Lewis, 2018; Ortega & Taspinar, 2018). For change impacts, what they are doing to address instance, it washed away roads in North Carolina’s these impacts, and what they feel the city’s future Outer Banks and produced record flooding in New holds. It first shows climate change/sea-level rise York City (New York), New Haven (Connecticut), and impacts Charleston and how these issues affect real Philadelphia (Pennsylvania) (Hoffman & Bryan, 2013). estate developers and developments in the area. Other impacts included crippling mountain snow- Secondly, it explores survey responses in-depth to storms in West Virginia, Tennessee, and western understand the real estate community’s perspectives Maryland; and power disruption in New Jersey, New on climate change/sea-level rise impacts on current York, Connecticut, and Rhode Island, and inland as and future developments in the city. Due to the far as Illinois, Michigan, and Wisconsin (Gibbens, limitation of previous research on commercial real 2019; Hoffman & Bryan, 2013; Rafferty, 2021). estate and sea-level rise in this area, results also lay Unfortunately, occurrences like Sandy are expected the groundwork for future rigorous statistical ana- to become the norm (Buchanan et al., 2017). lysis. Finally, the paper will help stakeholders and Thus, coastal communities, even in the Northeast policymakers better understand how climate change are highly vulnerable to climate change-driven cata- issues are regarded by the real estate sector and strophes (Arkema et al., 2013; Runkle et al., 2018). In provide insights into tackling these issues. turn, all coastal communities must plan for the slow burn of climate change (e.g., increased temperature Background change, sea-level rise) that slowly impacts commun- Climate change is not happening only in faraway ities and the immediate and direct shocks to the places (Amirzadeh & Barakpour, 2021; De Koning & system from intense natural occurrences, such as 6 S. T. BUCKMAN AND S. SOBHANINIA hurricanes and tidal flooding (Beigi, 2016; seriously…” (Quoted in PwC & Urban Land Tibbetts, 2002). Institute, 2021, p. 19). There are generally two approaches to the prob- If the private real estate sector will play a more lem of flooding and coastal sea-level rise: retreat or significant role, they are not exactly clear what that structural adaptation. In less dense markets, with- role will be (Agrawala et al., 2011; Coiacetto, 2016). drawal from the shore is feasible and more likely A 2019 report by ULI and Heitman entitled Climate (Gould & Lewis, 2017). Structural adaptation makes Risk and Real Estate Investment Decision-Making more sense in denser areas considering economic made this apparent. The report determined that the demands and space constraints (Rodr ıguez & real estate community needs to plan for climate Brebbia, 2015). Structural adaptation includes change but does not know what that involves or even how to begin. “It is an urgent and complex improving structures, raising buildings, and incor- challenge which must be addressed but for which porating mechanical equipment to withstand the industry does not yet have a clear strategy” flooding. It can also involve constructing barriers (ULI, 2019, p. 2). to prevent and minimize the damages from flood- The industry’s risks are primarily on two scales: water (Gould & Lewis, 2017). physical and transactional (Warren-Myers & Hurlimann, 2022). Per ULI, “physical risks are those The Impacts of Climate Change on the Real capable of directly affecting buildings; they include Estate Sector extreme weather events, gradual sea-level rise, and The real estate sector is increasingly engaged in cli- changing weather patterns. Transaction risks are mate change issues and financial impacts (Gould & those that result from a shift to a lower-carbon Lewis, 2018; Shokry et al., 2020). For instance, the economy and using new, non-fossil fuel sources of driving theme of the 2021 Urban Land Institute energy” (Urban Land Institute, 2019, p. 5). To better (ULI) annual conference in Chicago was social equity understand how these risks will impact the industry, and sustainability, both of which are major climate The ULI followed the 2019 report with the 2020 change issues. Climate change was also an import- report Climate Risk and Real Estate: Emerging ant theme in PWC and ULI’s 2022 Emerging Trends Practices for Market Analysis in 2020. The report in Real Estate survey report, a yearly survey of the showed that future investment decisions will be North American real estate community presented at based more on climate-induced market risk than the ULI annual conference. ever before (ULI, 2020). According to the report, “a growing consensus The 2020 report further suggests that cities pro- sees the property sector as bearing much of the actively investing in resiliency measures may be responsibility for climate change” (PWC & ULI, 2021, more attractive to investors as climate change risks p. 18). In addition, 80% of survey respondents con- become the norm (Beigi, 2016; ULI, 2020; Wilbanks sider environmental, social, and governance factors & Kates, 2010). Impacts from flooding, wildfires, and (ESG) when making investment decisions (PWC & droughts are causing the insurance industry signifi- ULI, 2021, p. 18; Wheeler, 2021). Despite the high cant losses (Collier et al., 2021). From 2010 to 2020, number of respondents considering these factors, extreme weather event losses were roughly US$3 there is little evidence to quantify if investors trillion and over US$1 trillion than the previous dec- incorporate climate risks into their decisions. ade (ULI, 2020). In 2019 alone, 40 global disaster- Hallegatte et al. (2013) posit that it is only a mat- related events cost upwards of US$1 billion (ULI, ter of time before more investors consider climate 2020). In 15 years, it is estimated that residential change, as a climate-related natural disaster (more and commercial real estate sectors will experience a than doubled between 1980 and 2016) and recov- combined loss of over US$63 billion globally and ery costs increase (Treuer et al., 2018). Regardless, US$1.07 trillion by 2100 due to flooding (Dahl there is still a general perception that it is not a et al., 2017). pressing concern. A PWC survey respondent These losses are impacting the insurance industry summed it up as, “I don’t see a whole lot of people and in turn influencing the real estate community, taking climate change and flood risk that resulting in insurers insuring less real estate in JOURNAL OF SUSTAINABLE REAL ESTATE 7 coastal and flood-prone areas (Collier et al., 2021). driven real estate bubble as more housing is built in When they do write policies in these areas it is at a climate-prone areas. Like the 2008 real estate bub- premium (Jin et al., 2015; Moody’s, 2018; Urbina, ble, they anticipate that people will walk away from 2016). As a result, insurance companies have the their homes. But unlike that bubble, people will not means to minimize the uncertainty associated with return (Kates et al., 2012; Nolan, 2015; Piguet, 2018). climate change (Botzen & van den Bergh, 2009). Ultimately, this trend could put the real estate Charleston and Climate Change: Impacts and industry underwater, figuratively and literally (Kahn, Coping Mechanisms 2016; Lewis, 2019). Climate change issues are the proverbial elephant In areas where insurers are willing to take risks, in the room regarding Charleston’s development. As mortgage companies are bundling and selling their mentioned, the city is in the crosshairs of climate notes to Freddie Mac and Fannie Mae. This transfer change (Runkle et al., 2018) at the same time, it is pushes the risk onto the taxpayer (Flavelle, 2019; seeing rapid growth (Dow & Watson, 2018). One Ouazad & Kahn, 2019). However, federal, state, and only has to open The Post and Courier, the local governments are beginning to actively regulate Charleston newspaper, any day of the week to see flood insurance. For instance, the state of New Jersey this dichotomy at play with one page having a story requires planners and developers looking to build in on flooding. climate-impacted areas to consider climate impacts, The importance of sea-level rise and related including flooding and sea-level rise, before granting flooding cannot be overlooked as it will significantly government approval (Tully, 2020;Urbina, 2016). St impact populations, ecosystems, infrastructures, and Petersburg, Florida, has instituted increased controls real estate in low-lying Charleston (Dahl et al., 2017, on where developers can build and in what capacity 2018). More than 800 mile-squares of the city’s (Holmes, 2019). While local governments like coastal area lie <4 ft above the high-tide line Nashville, Tennessee buy the property outright, to (Runkle et al., 2018). A conservative estimate by sci- prevent or control development (Schwartz, 2019). entists is that sea levels will rise 3–4.3 feet by 2100 Thus, it is becoming more evident that real (Tibbetts & Mooney, 2018). However, more recent estate-related climate change risks are becoming and sobering projections predict that it will be evident to the public as well (Botzen & van den closer to 6 feet in the Charleston area by 2100 Bergh, 2009; Westcott et al., 2020). Baldauf et al. (Runkle et al., 2018). Figure 1 depicts how increases (2020) assert that people’s beliefs affect housing pri- of 1, 3, and 6 feet will impact Charleston’s ces in areas prone to severe climatic events. For lower peninsula. example, sea-level rise negatively affects housing Coupled with the city’s growth, the financial prices when people believe that climate change is impact of flooding will be astronomical if the city real (Li, 2009; McAlpine & Porter, 2018). This rela- does nothing. The city is already seeing these tionship receives less attention among climate-skep- effects. The value of single-family homes in flood- tical populations (Barrage & Furst, 2019). Moreover, prone areas is decreasing (Tibbetts & Mooney, prices continue to increase in many of these areas 2018), and affordable housing is in peril (Johnson, (Gould & Lewis, 2018; Miller et al., 2019) even 2020). Although there is a lack of information though some studies demonstrated that the diffi- regarding commercial real estate, studies show that culty in obtaining insurance reduces property values flood-vulnerable residential housing is losing its in flood zone areas (De Koning et al., 2019). value due to increased flood days (Cains, 2021). While real estate values in flood zones are lower than in non-flood zones (Bin & Kruse, 2006; Urbina, Some project that there will be 180 days of major 2016), coastal real estate still commands a higher flooding annually by 2045. These flood events could price. As a result, developers are conflicted on how make almost 86% of properties inaccessible by road much building should take place, and real estate (Mills, 2021). Thus, the importance of protecting the agents wonder if they should direct clients away city from flooding has been at the forefront of the from coastal flood-impacted areas (Urbina, 2016). city government (Cains, 2021; Wilbanks & Some of the literature suggests a risk of a climate- Kates, 2010). 8 S. T. BUCKMAN AND S. SOBHANINIA Figure 1. Charleston peninsula and sea level rise. Maps: Justice Walker, 2019. In 2019, the city commissioned two reports to Market/Verdell’s Creek area. The Lockwood Corridor address flooding: Flooding and Sea Level Rise and New Market areas are located on the west and Strategy (City of Charleston, 2019) and The Dutch east sides of the Peninsula, respectively. The goal Dialogues Charleston (Waggoner & Ball, 2019a). The was to develop a comprehensive water manage- Strategy document outlined plans for five critical ment plant for these areas that are “experiencing components—infrastructure, governance, land use, the limits of ‘pump and drain’ due to recurrent, resources, and outreach. Activities include reevaluat- more severe storms with extreme precipitation, ing the science and revising the strategy annually, increased river discharge, and sea-level rise” implementing building codes and zoning ordinan- (Waggoner & Ball, 2019b). ces that support resilience, incentivizing flood miti- The report offered various ways to manage water gation, improving drainage systems, constructing and combat flooding. Mechanisms include storm- manmade and natural shoreline protections, and water storage, drainage tunnels, stormwater control, promoting community outreach and partnership citizen involvement, and groundwater management building, among others (City of Charleston, 2019), (Waggoner & Ball, 2019a). Beyond more localized green and resilient types with many initiatives are complete or underway (City of Charleston, 2022). of protection, the city is also looking to radical infra- The nearly two-year-long (2018–2019) Dutch structure measures (Allen et al., 2019). In conjunc- tion with the US Army Corps of Engineers, the city Dialogues report explored four distinct parts of the city—Johns Island, Church Creek, the Lockwood is investigating the construction of a seawall to pro- Corridor/Charleston Medical District, and the New tect the lower peninsula. The original proposal for JOURNAL OF SUSTAINABLE REAL ESTATE 9 the wall was to cost $1.7 billion. However, more The following five questions focused on climate recent projections (as of November 2021) have it at change impacts on Charleston and the real estate community, measures to combat climate change, $1.1 billion, with the Army Corps taking on $775 and where climate change had the most significant million and the city taking on the remaining $325 effects. The next three questions revolved around million of the costs (U.S. Army Corps of Engineers, whether climate change impacted their develop- 2021). Whether through hardening and infrastruc- ments and planning. The last questions centered on ture, or greener resilient measures, the city will who should spearhead climate change protection need to protect the peninsula and real and what developers could be doing to help com- estate valuation. bat the problem. Lastly, the survey asked about the cost constraints of climate change adaption. Methods Researchers surveyed ULI South Carolina regional Survey Results chapter members to understand stakeholders’ opin- Qualitative coding content analysis was used to ana- ions within Charleston’s development community. lyze the data and draw meaning, especially from Preliminary interviews were conducted with three the open-ended questions. This method helped the key stakeholders within the Charleston community. researchers compare the data and respondents’ per- These in-person interviews allowed the researchers spectives across different sectors and three catego- to determine survey questions that addressed the ries—demographics, Charleston climate change, and concerns of the community. Once the survey was companies’ roles and cost burdens. Results show written and designed, it was sent to three different multiple views on climate change’s impact on the stakeholder groups for vetting. Charleston real estate community. Climate change is The ULI community was chosen as it has been seen as a significant issue for the area from a gen- one of America’s most widely quoted sources of eral perspective. Yet, there is not as much concern real estate, development, and urban planning for within the actual day-to-day activities of the real years. Moreover, the ULI Charleston area chapter’s estate profession. Furthermore, development objective has always been to encourage the link changes that are made are primarily self-imposed as between real estate development, urban planning, municipal governments were seen as not doing and leadership, which is well-aligned with the goals enough for those concerned about making changes of this study. Finally, ULI Charleston has a particular in the real estate community. Notably, a significant interest and understanding of climate-related hindrance to making climate change-related adjust- impacts on the real estate industry. ments was cost. Respondents felt that costs should The survey was sent first via direct email, then be split between the private and public sectors. two weeks later in conjunction with ULI through their October 2021 e-newsletter, reaching 350 ULI Demographics members. Fifty-five (55) members responded, result- ing in a response rate of 16%. This represents a The first questions gathered sector, company, and higher-than-average response rate for most South respondents’ job information. It is important to note Carolina ULI chapter surveys. that questions did not ask about the respondents’ Surveys consisted of 18 substantive questions age, race, or gender. The questionnaire, as stated, and one asking if the respondent wished to be was sent out to 350 people who were part of the interviewed. Questions included seven open-ended, ULI in the Charleston area. four Likert-scale (rating from 1 to 5), four yes or no Respondents varied from real estate developers questions, and three demographic, such as “Are you (42%), architects (23.5%), city government officials in the private or public sector?” Demographic ques- (5.9%), and brokers (5.9%) (Table 1). While it was no tions defined what segment of the development surprise that there were few city government community respondents were in (e.g., real estate), respondents as ULI is a private sector organization, what sector, and their role within their company. the low number of brokers is a bit curious. 10 S. T. BUCKMAN AND S. SOBHANINIA Table 1. What is your primary business related to real estate? Table 3. Do you see climate change as a major (The table contains the percentage of the survey respondents concern for the Charleston Region? Rate 1–5, with and the overall ULI demographic in each category). 5 being a major concern and 1 not being a major concern. Respondents Overall ULI Business categories percentage members percentage 1 14.29% 2 7.14% Real estate development 41.18% 42.75% 3 7.14% Brokerage 5.88% 2.55% 4 21.43% Architecture/design/engineering 23.53% 19.2% 5 50.00% Investment 8.82% 2.9% Banking 5.88% 1.45% City government 5.88% 17.75% Permitting/consulting 8.82% 13.4% Table 4. Do you see concern for climate change in the real estate development community in Charleston? Rate 1–5 with 5 being a major con- Table 2. If you answered A, B, or C: what area of real estate cern and 1 not being a major concern. do you specialize in? (Check all that apply). 1 10.71% Residential (single family) 12.66% 2 17.86% Residential (multi-family) 20.25% 3 50.00% Hospitality 13.92% 4 10.71% Office 17.72% 5 10.71% Retail 8.86% Industrial 10.13% Mixed use 16.46% estate community itself. 50% of respondents see it The second question asked if the respondent was as a “minimal” concern. Of these, 58% were in the involved in real estate development, brokerage, real estate business. While 24% of architecture, architecture, or urban planning and design. Answers urban design, and engineering respondents were evenly split between multi-family and office declared climate change as a “major” concern to developers and the retail sector. Respondents’ roles the real estate sector, only 11% of real estate-associ- within their companies represented a wide swath. ated respondents felt that it was. Finally, 24% of The majority were owners and CEOs (57.5%), fol- real estate respondents do not think that climate lowed by architects, urban planners and designers, change is a concern to the real estate community at and business developers (32.5%). A few respondents all (Table 4). (9.5%) were construction managers, attorneys, and The answer to this final question presents an lenders (Table 2). interesting point of discussion. While half of the respondents saw climate change as a fundamental issue for the Charleston region, only 11% saw it as a Charleston Climate Change in General critical concern for the real estate community. The next set of questions dealt with climate change Moreover, most real estate sector responses fell in in Charleston, general ideas around the issue, and the mid-range of the Likert scale. These findings real estate’s role. Regarding the concern about cli- suggest that climate change is not an issue within mate change in the Charleston region, 50% of the real estate community or that many in the field respondents indicated it was a “major” concern and refuse to make it an issue. Given the survey findings 21% a “significant” concern. Of those 44% of the and anecdotal insights, it is most likely a combin- respondents were in real estate, and 56% were from ation of them. other fields. Thus, 62% of the real estate-associated respondents consider climate change concern, dem- Company and Cost Issues onstrating that it is becoming more alarming. On the other end of the spectrum, 14% said it was “not The last set of Likert-designed questions asked what a major” concern to the region. Sixty-two percent of the real estate community is or is not doing about these respondents were in real estate, indicating climate change and who should shoulder the costs. that there are still those who do not consider Eighty percent of respondents stated that company addressing the issue as an urgent concern (Table 3). climate-related changes were self-directed. Of these, The next question asked if respondents saw cli- 75% were real estate respondents. Eight percent mate change as a “major” concern for the real reported that changes were imposed by JOURNAL OF SUSTAINABLE REAL ESTATE 11 Table 5. If you or your company are making changes or plan- change adaptation costs, and 44% felt it should be ning to make any changes are they. the public sector. Specifically, 64% of real estate- Self-imposed 80.00% associated respondents thought the public sector Government imposed 12.00% Imposed by underwriters (insurance or financing) 8.00% should deal with the climate change costs, while 72% of architects and urban planners thought the private sector should be responsible. Lastly, costs Table 6. Are developers shying away from those areas subject were seen as a significant issue (70%) when institut- to flooding? ing climate change adaptation. The majority (86%) Yes 82.14% No 17.86% were architects, urban planners, and city officials. These results show that each group put the Table 7. In relation to the previous two questions, do you responsibility on the other side. For instance, most see development patterns shifting to different locations architecture, urban planning, and city groups because of climate change? believe that the private sector is more responsible Yes 37.04% No 62.95% for the costs. They are not considering climate change mitigation factors because of that cost. In contrast, the real estate sector considered the public sector responsible, and most did not identify cost as underwriters (Table 5). This was an interesting find- their reason for disregarding mitigations. ing as a hypothesis of this study is that under- writers, both insurance and funders, would be forcing developers to make changes. While these Open-Ended Questions findings might disprove the theory, it could also be Researchers also asked a set of open-ended ques- that the study was premature or that developers tions to obtain more nuanced answers. These ques- are getting ahead of underwriters’ requirements. tions sought to understand what measures their The next two questions were about the impact of firms were taking, where the most significant impact climate change on development patterns. of climate change was in real estate patterns, is the Overwhelmingly, 82% of the respondents felt that government doing enough, what the development development was not shying away from areas sub- community should be doing, is cost an issue to ject to flooding. Of these, 48% were real estate adaptation, and how developers are dealing with developers, and 52% were architects and urban the costs of adaptation and a final prompt for add- planners (Table 6). In addition, 63% saw no develop- itional comments. Answers reflected the previous ment shift to different locations due to climate questions while providing researchers with a deeper change (Table 7). Specifically, 54% in the real estate understanding of the issue. sector and 72% among architects and urban plan- The first question posed asked: What measures if ners saw no shift in development patterns. So, even any, you/your company were taking in your develop- though respondents believe that retreating from ments to deal with climate change? Flooding, heat or the flood-prone areas is necessary and should be resilience/preparedness for hurricanes, etc.? Answers required, they are not seeing nor shifting develop- showed that most respondents are taking minimal ment. This result presents an interesting paradox steps, just enough to cover what was needed with- that will be discussed more in the discussion of the out hurting the bottom line. In general, this includes open-ended questions. building on higher ground and using sustainable Questions about who should carry the cost bur- building materials, including drainage systems. A dens and who should be responsible for combatting few respondents reported that their companies climate change followed. A large majority (68%) of were doing more than the minimum. As one those surveyed thought that the municipal govern- respondent said: “We are designing more bioswales ment was not doing enough to combat climate and other stormwater management systems that change (65% of real estate sector respondents and mimic nature to help manage water on the property 72% of other groups). Fifty-six percent felt that the in addition to typical engineered solutions” (see private sector should bear most of the climate Table 8). 12 S. T. BUCKMAN AND S. SOBHANINIA Table 8. What measures, if any, are you/your company taking in your developments to deal with climate change? Flooding, heat or resilience/preparedness for hurricanes, etc.? Flood plain analysis, mitigation, analyzing data sets Firm has emergency plans due to flooding/hurricanes Drainage None as of now—flooding is addressed on a site-by-site basis but we are currently not taking any precautions related only to climate change … Buildings are designed and materials used to account for climate change Buy high ground, such as it is. Integrating heat and flooding concerns collectively and broadening that work to address an all hazards approach in any planning work Gaining expertise and knowledge to advise clients on the latest science and the best practices for resilience. Resilience building for sea level rise and tidal surge flooding. Increasing topography whenever possible. Major part of our basic design approach Green spaces, permeable surfaces, low emissivity exterior finishes, some LEED Flooding and Hurricanes None—do have hurricane plan. Sustainable building, land planning None Raising BFE requirements, working on a climate adaptation plan We specialize in nature-based solutions and water management to deal with increased flooding due to sea level rise and changes in rainfall patterns Flooding and resilience We are designing more bioswales and other stormwater management systems that mimic nature to help manage water on the property in addition to typical engineered solutions. We pay close attention to flood maps and drainage upgrades needed while evaluating new acquisitions. Typically do minor upgrades to energy infrastructure with LED lights and new HVAC systems. None—common and typical stormwater and development issues. Hurricane-rated products/materials, efficient utilities. Flood proofing, resilience/preparedness Our company does not have a direct say in climate change resilience/preparedness choices in developments, but we do help our clients navigate federal standards for rehabilitation and climate change preparation. A lot of that includes recycling/reusing materials, preparing buildings for more drastic climates, etc. Flooding and preparedness for hurricanes, but we have always done that. Unrelated to climate change. Among real estate-associated respondents, the there is limited available land for coastal develop- most repeated measure mentioned was improving ment that is more susceptible to future disasters, resilience and preparing for flooding and hurricanes. they are still many desirable sites (see Table 9). Other measures included efficient utilities and infra- As mentioned earlier, Charleston’s lower penin- structure systems, increasing topography, buying sula is in grave danger of flooding and suffering the land in non-flood areas, resilient material, drainage impacts of climate-induced sea-level rise. Yet, there was minimal discussion about moving away from upgrades, more green spaces, sustainable building, permeable surfaces, and land planning. Among the lower peninsula. One respondent who talked architecture and urban planning respondents, resili- about it did so from a valuation perspective, “Sea ence and preparing buildings for drastic climate level rise is obvious, although I imagine we will fig- change was the most repeatedly mentioned meas- ure out how to seal off the peninsula’s most valu- ure. Other strategies included stormwater manage- able land.” ment systems, climate adaptation engineering plans, There could be various reasons for the lack of drainage, and recycling materials. discussion. One reason could be that when discus- The second open-ended question asked: In regard sing low-lying areas and areas of flooding, respond- to real estate development patterns, where do you see ents assume we know that means the lower climate change having the greatest impact? Most peninsula. Alternatively, reasons could be financially respondents believe climate change effects on real driven as the lower peninsula is prime real estate, a estate development are most evident in floodplains, characteristic that often wins out over climate low-lying areas, and coastal areas. In the case of real change and safety issues. estate-associated respondents’ opinions, impacts are Next came a couple of questions regarding the felt primarily in flood-prone area values, insurance government’s role, including: What should govern- prices, and infrastructure investment. However, ment be doing, and What are the best and worst architects and urban designers are centered on site things it is doing or not doing? Answers were much selection and the location of new developments. more varied than the previous open-ended ques- Some believe that developers are retreating from tions. Responses ranged from issues of zoning, flood-prone areas. Others thought that, although “Zoning restrictions should be re-evaluated. Too JOURNAL OF SUSTAINABLE REAL ESTATE 13 Table 9. In regard to real estate development patterns where do you see climate change having the greatest impact? Coastline, wetlands but also inland tidal flooding due to stronger rain events Low-lying coastal communities Reclaimed land has been vulnerable and will be increasingly so but is often desirably located No—the SCPA has made leaps and bounds to increase the port of Charleston’s capacity. Climate is not a factor in the industrial “gold rush” Coastal areas Sea Level Rise is obvious, although I imagine we will figure out how to seal off the peninsula’s most valuable land. Obviously, raises an equity question in terms of less valuable land, which is well above my pay grade to figure out. Limiting land available for development on the coast Heat will impact all areas. Flooding will impact pluvial and fluvial as well as coastal, so mostly all of Charleston. Location of development, retreat from flood-prone, critical areas, building construction methods, electrical energy sources, renewable generation Increased investment in infrastructure and mitigation efforts. Site selection Coastal areas and low-lying areas It’s all about water. Both too much and too little. Building material manufacturing Coast Coastal Flooding Areas out of the flood plain Flooding concerns Storm water design Properties that experience repeat flood events. Viability and value of low-lying and flood-prone areas. Design and construction decisions if building in these areas. Insurance prices in high wind risk areas and stricter underwriting for the region in general. Bureaucracy—Permit—Government Flooding, drainage, and wetland impacts Increased involvement in infrastructure updates, more studies with regards to density impacts many larger scale projects being built in flood-prone the developers and investors will slowly move the areas,” to disallowing development in certain areas. city to wherever the higher ground is–further For instance, one respondent stated that they upriver.” This last quote is particularly telling. While should be “precluding development at all in certain Charleston is a great place to build, growth can areas.” Another mentioned that “They should be only continue if sustainable. Further suggestions restricting development in flood-prone areas, plac- included taming sea-level rise via technological ing restrictions on the percentage of the property mechanisms, such as pumps or a one plus billion- that can be impervious, and being stricter on what dollar sea wall (see Table 10). developers are required to do to combat come of Surveyors were asked what the government these climate change issues.” These statements should do and their responsibilities. Specifically, around zoning and restrictions highlight the notion they were asked: What role, if any, does or should that developers will not stop building in flood zones the development community have in combatting unless regulated. climate change? This question, by its nature, is Beyond zoning, some respondents focused on somewhat self-reflective and demands a degree of funding and infrastructure as maintaining the status self-critique. Overall, respondents felt that the quo. Overall, those who believe the government is community needed to literally and figuratively not doing enough revolved around two general “build to higher standards” and “should lead.” ideas. First, land planning was needed to restrict the There was also discussion around looking beyond development in flood-prone areas and incentivize profits and the need for developers to become development in other areas. Second, governments more responsible “… to investors and the future should incorporate more resiliency strategies in by making sound decisions that are not always developments and infrastructure. Real estate-associ- looking first to the bottom line.” Echoing this, ated respondents are more inclined toward the for- another respondent stated that “most develop- mer, and architects and urban planners toward ment decisions are understandably business-based the latter. and the short-term economics of resilient design, Among the respondents who believe that the unfortunately, are not the best for the bot- government is not doing enough, one respondent tom line.” mentioned the need for a “Good pump system. The These answers show that the real estate commu- city will flood–a fact of geography. If it gets worse, nity knows they must do better but feel constrained 14 S. T. BUCKMAN AND S. SOBHANINIA Table 10. If you answered NO to the previous question, what should the government be doing? If you answered yes, what are the best and worst things it is doing or not doing? Incentivizing areas that do not flood; making the permitting process easier for those areas Zoning restrictions should be re-evaluated. Too many large-scale projects being built in flood-prone areas. Long-term planning for improved infrastructure … drainage/flooding, water quality, roads, etc. Perhaps I’m splitting hairs, but climate change response must be driven by the federal government. The municipal government should implement responses to that, as well as to the results of climate change, which is an adaptation Requiring raised elevations of new construction, raising roads, paying for storm barrier construction Imposing greater restrictions, such as elevation-based zoning coupled with an all hazards requirement tied to Act 163 Planning and executing on planning More aggressive about tying development entitlements to more resilient approaches to development and to creating funding to invest in mitigation/ infrastructure measures Precluding development at all in certain areas Land planning to insure development only occurs where and how it should … It’s doing too much in ineffectual areas and not enough in actual real-world practical ways. Good pump system. City will flood—fact of geography. If it gets worse than developers and investors will slowly move the city to wherever the higher ground is—further up river. Establish strong controls on developing projects in flood-prone areas Making deliberate decisions to move the needle for development interests by implementing incentive-based regulations that actually encourage developers to incorporate more resilient strategies in their developments Municipalities are underfunded and thus have limited staff to deal with storm water-related issues. They should be restricting development in flood-prone areas, placing restrictions on the percentage of the property that can be impervious, and being stricter on what developers are required to do to combat some of these climate change issues (sea level rise, increased storms, storm surge, etc.) It’s going to take time to execute all of the infrastructure needed, but from what I can tell, the Charleston city government is taking flooding and sea level risks very seriously. Between the work being done now and proposed future work I think we are doing almost all that can be done. We are low, but there are areas that are lower that we can continue to learn from and implement best practices. Government is already doing too much, by limiting the potential developable areas round table discussion w/ experts and local consultants, to advise best practices They are not being proactive at all with regards to approving developments and the future flooding/infrastructure problems it causes. This is especially true in infill parts of downtown and in undeveloped rural areas Table 11. What role, if any, does or should the development community have in combatting climate change? Build to higher standards (literally)—start building up Development community should help city/county with restrictions, so major developments are not permitted in flood-prone areas. Limiting the development of vulnerable land Collaborate with government and other stakeholders. Share expertise. Raising elevations Integrate all hazards and consider the service life of investments in addressing those hazards It should lead Change in building management and operations practices, especially in making first-cost investments in more sustainable development and construction. Educate the market on what needs to change and why Limited impervious surfaces, helping limit stormwater surges, reducing energy consumption, taxes We should be leaders Developing more sustainable buildings, shy away from flood-prone areas Responsibility to investors and to the future by making sound decisions that are not always looking first to the bottom-line Most development decisions are understandably business-based, and the short-term economics of resilient design unfortunately are not the best for the bottom line (other than a few developers with unique interests) Development should be at a higher standard to account for the impacts of climate change. Developers can help by managing the water that falls on their property, improving the infrastructure on their property, and making sure that their development isn’t increasing flooding or other issues for properties next to it Continuing to implement efficient energy design and adequate stormwater retention into projects. You cannot combat climate change. Change will always happen. We can only mitigate the environmental circumstances. We need to be much more thoughtful of the impacts our developments have on flooding in the surrounding community. Unfortunately, most developments are just pushing flooding issues to their neighbors, rather than fully addressing the issue by costs and a project’s return on investment. elephant in the room. Questions on cost included: Moreover, results show that real estate-associated What role is cost playing in the added effort of cli- respondents are interested in sustainable develop- mate change adaptation, and How are developers ments that adopt higher standards of construction dealing with the cost of climate change adaptation, to combat climate change impacts. Respondents and how would those costs be better dealt with in from other areas of expertise emphasized that the the future? Responses to the first question revealed development community should manage the water that cost plays a significant role, as it equaled that falls on their property and their developments’ “higher construction costs, more resilient materials.” Additionally, others expressed that it was becoming effects on surrounding areas (see Table 11). Cost is a prevailing factor in all climate change too expensive to build in coastal and flood- discussions, and adaptation issues represent the prone areas. JOURNAL OF SUSTAINABLE REAL ESTATE 15 Table 12. If you answered yes to the issue of cost, what role is cost playing in the added effort of climate change adaptation? Higher construction costs, more resilient materials Increased flooding events mean there will be more frequent and greater damage to projects in our community. Lack of political and social will to abandon locations and not develop others that are profitable As has been noted by Upton Sinclair, it’s difficult to get a man to understand something when his salary depends on his not understanding it. This applies to all aspects of climate change discussion. Cost considerations are amplified by the emotional need not to understand the problem Developers have to consider walking away from opportunities to do the right thing. First-cost investments are more beneficial than resilience mitigation and other “fixes.” Incentives and tax recognition of the benefits of first-cost investments should be more responsive and easier to access. The problem is that there is a higher furnace what a much higher long-term cost this developer is not responsible for Coastal development is becoming more expensive to build, but prices are still going up. Demand is there so supply follows. Profits and taxes that are generated have to be more wisely invested. until practices that may cost more up front are placed into a longer-term equation then the needed changes will remain cost prohibitive the old way of developing is still the most economical when looking exclusively at costs to developers. When looking at long-term costs, the case is becoming stronger, but most development decisions are still based on short-term profit margins. Added costs for mitigating the effects of climate change cut into a developer’s bottom line, it’s understandable why they would not want to make these changes and spend extra money which is why it should be a requirement. Cost is an impact, but the bigger impact is a benefit. It’s easy to underwrite a capital outlay if there is an identifiable value increase to go with it. Extra taxation and fees Green infrastructure is expensive, so is remediation. developers will not spend this money unless its required The immediate climate change adaption that needs to change in the Charleston area is much of our infrastructure, but the city does not require developers to put enough money towards helping pay for these issues. Table 13. Again, if yes. Only the developers who think Charleston is still a “good deal” are here—increased costs definitely shut out the smaller developers Unsure. Unknown to me Some nominal changes, but few developments actually tackle substantive shifts toward climate change readiness. See above … public sector can incentivize and reward first-cost investments to a greater extent. Developers had to pay higher the less amount of climate change they are anticipating and how they develop their projects, perhaps those costs start even out. We shouldn’t allow development to occur where it shouldn’t … change zoning to adapt to the reality … Trying to squeeze construction costs as much as possible, efficient design, and passing it on to buyers. For the most part, I’d say the development community is outreaching. By looking for ways to incorporate broader acceptance of better development practices those costs will lower over time Good question! I wish I had an answer for you. There are probably grants that could assist in the extra cost of dealing with the impacts of climate change, perhaps if those were more easily accessible as funding sources then they could provide financial assistance A lot of the cost is passed through to the tenants in their rent. Between insurance costs or increased construction costs or location premiums for high and dry locations. Looking for cheaper land. Passing the cost to the customers. They are not dealing with it Developers need to provide more money to the city/state to address major infrastructure problems (mostly with regards to flooding/sea level rise), rather than push the issues off for others to deal with How are developers dealing with the cost of climate change adaptation, and how would those costs be better dealt with in the future? But this creates a dilemma in the minds of devel- Overall, results show that adaptation is viewed opers. As one respondent noted, “Coastal develop- as expensive. Therefore, developers are unwilling ment is becoming more expensive to build, but to adopt it unless it is required or profitable. They prices are still increasing. Demand is there, so sup- also highlight that developers are more concerned ply follows. Profits and taxes that are generated with economic constraints and short-term profits have to be more wisely invested.” This was echoed than long-term climate effects. Per one respond- by a respondent who highlighted the continued ent, “Added costs for mitigating effects of climate demand and the polarization between those who change cut into a developers’ bottom line, it’s can and cannot develop. “Only developers who understandable why they would not want to think Charleston is still a ‘good deal’ will continue make these changes and spend extra money to operate there. Increased costs definitely shut out which is why it should be a requirement” (see the smaller developers.” These insights quickly sum Table 13). up the issue of cost. It supports the mindset that The last question asked respondents to provide while it is becoming more expensive to build, both additional comments. While much of what was from a land perspective and a construction cost per- offered had already been covered, there was a pre- spective, people will pay the price to live in a desir- vailing sentiment that to combat the issue of cli- able place (Table 12). mate change and sea-level rise in Charleston, it 16 S. T. BUCKMAN AND S. SOBHANINIA Table 14. Is there anything you would like to add? Private sector should shoulder a larger burden of cost and consequences (nonsubsidized insurance, etc.) for development decisions When it comes to climate change, particularly flooding and building design, there is low-hanging fruit to address. Politics is a deterrent. The private sector can add tremendous value to the process. Answer to the last question should be “Both.” Of course, at the end of the day, the private sector eventually pays for the actions of the public sector. The answer to “who pays for it in the first place” depends on what actions we’re talking about. A sea wall is one thing. Better insulated buildings or stormwater detention systems are quite other things. No one gets to opt into climate change so those developers willing to boldly address it will ultimately have a much better position than those avoiding it for as long as possible Clearly the answer to the question, private paying additional fees when their developments have a negative on long-term resiliency I think the costs should be shared public/private in the answer above, but I wasn’t able to select both. The public sector doesn’t have the money to deal with this, by placing requirements, the private sector will innovate so that they can provide solutions and still make a return on their investment. But they won’t necessarily do that R&D if the market isn’t pushing them to do it. It will take both private and public sector action. But if climate change is truly the risk that it is made out to be, then the public sector is going to have to continue to lead the way on the issue. The key issue for property owners in the low country will be that the government is proactive in implementing infrastructure issues that will protect property values and keep assets safe from adverse weather events and flooding. Our local government has been doing a great job of this over the last few years. Climate Change is an excuse by the Government to restrict development. We do not build in Floodplains, wetlands, streams, or buffers. We are required to follow DHEC and OCRM Stormwater regulations. The development community keeps getting squeezed harder and harder for buildable land. Thus, we build further out and are surprised when sprawl occurs. Zoning and Utilities are the best way to combat climate change by allowing higher densities on good land. It shouldn’t be an either/or solution. this affects everyone, so the cost-sharing and policy should reflect that With regards to who should be dealing with the issue of costs, I think the public sector needs to lead the charge/be in control of the finances, but the private sector needs to be providing them more money. would have to be a partnership between the private Responses indicated that much of the community and public sectors. Others pointed to the govern- takes a minimalist approach to adaptation. For ment as the underlying issue. instance, answers included “Buy high ground, such as it is,”“paying close attention to flood maps and “Climate change is an excuse by the government to instituting drainage upgrades while evaluating new restrict development. We do not build in floodplains, wetlands, streams, or buffers. We are required to acquisitions,” or “… minor upgrades to energy follow DHEC and OCRM stormwater regulations. The infrastructure with LED lights and new HVAC sys- development community keeps getting squeezed hard tems.” In general, it appears that developers believe and harder for buildable land. Thus, we build further that the minimalist approach is enough to make out and are surprised when sprawl occurs. Zoning and financial partners and governmental entities happy. utilities are the best way to combat climate change by While the survey results disclose that developers allowing higher densities on good land.” should do more, respondents believe that most of While some see government as an obstruction, the burden should fall on the backs of the govern- others see it as a mechanism for changing course. ment to secure areas for development. This would In their mind, the successful developer gets in front make it profitable for developers to continue to of the issue. “No one gets to opt into climate. So build. Suggestions included government should be those developers willing to boldly address it will “More aggressive about tying development entitle- ultimately have a much better position than those ments to more resilient approaches to development avoiding for as long as possible” (see Table 14). and creating funding to invest in mitigation/infra- structure measures,” and “Making deliberate deci- Conclusion sions to move the needle for development interests implementing incentive-based regulations that actu- This research shows that a significant portion of the ally encourage developers to incorporate more survey respondents is taking a business-as-usual resilient strategies in their developments.” approach and do not fully see or acknowledge the The issue of profit remains a driving force in the long-term negative impacts of climate change. Per minds of the community. The study demonstrates one respondent, their company addresses “Flooding that developers will continue to build in areas prone and preparedness for hurricanes, but we have to climate change impacts if it is profitable. Even as always done that unrelated to climate change.” The overall sentiment was that climate change was not the cost of doing business increases, both in terms a grave concern, despite 50% of the community of adaptation strategies and effects on the develop- believing it is an issue. ment paradigm, there are those willing to pay the JOURNAL OF SUSTAINABLE REAL ESTATE 17 climate risks. OECD Environment Working Papers, No. 39. premium. This disparity forces some smaller devel- OECD Publishing. https://doi.org/10.1787/5kg221jkf1g7-en opers with less financial backing out of the game Allen, T. R., Crawford, T., Montz, B., Whitehead, J., Lovelace, and creates inequity in development. “Sea-level rise S., Hanks, A. D., … Kearney, G. D. (2019). Linking water is obvious, although I imagine we will figure out infrastructure, public health, and sea level rise: Integrated how to seal off the peninsula’s most valuable land. assessment of flood resilience in coastal cities. Public Obviously, [this] raises an equity question in terms Works Management & Policy, 24(1), 110–139. https://doi. org/10.1177/1087724X18798380 of less valuable land … .” Amirzadeh, M., & Barakpour, N. (2021). Strategies for building This research lays the groundwork for under- community resilience against slow-onset hazards. standing Charleston’s real estate and development International Journal of Disaster Risk Reduction, 66, 102599. community’s perspectives on climate change. Yet, https://doi.org/10.1016/j.ijdrr.2021.102599 questions prevail. For instance, will it just become Arkema, K. K., Guannel, G., Verutes, G., Wood, S. A., Guerry, A., Ruckelshaus, M., Lacayo, M., & Silver, J. M. (2013). too expensive to do business in an area like Coastal habitats shield people and property from sea-level Charleston as investors and insurance underwriters rise and storms. Nature Climate Change, 3(10), 913–918. begin to shy away; will climate change ever really https://doi.org/10.1038/nclimate1944 matter to developers with very short time horizons Baldauf, M., Garlappi, L., & Yannelis, C. (2020). Does climate (e.g., 2–10 years from breaking ground to selling off change affect real estate prices? Only if you believe in it. the asset); or will developers just run the course in The Review of Financial Studies, 33(3), 1256–1295. https:// doi.org/10.1093/rfs/hhz073 Charleston until the price gets too high and Barrage, L., & Furst, J. (2019). Housing investment, sea level move on? rise, and climate change beliefs. 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The Impact of Sea-Level Flooding on the Real Estate Development Community in Charleston SC: Results of a ULI Member Survey

The Impact of Sea-Level Flooding on the Real Estate Development Community in Charleston SC: Results of a ULI Member Survey

Abstract

Abstract Climate change is becoming an increasing concern for many communities, particularly coastal communities subject to tidal and sea-level flooding. As a result, shoreline municipalities walk a fine line between protecting their communities and allowing more development. A prime example of this dilemma is the port city of Charleston, South Carolina, USA. Despite being ground zero for sea-level flooding, the city has seen rapid real estate development growth. This paper analyzes a survey...
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© 2022 The Author(s). Published with license by Taylor & Francis Group, LLC
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1949-8284
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10.1080/19498276.2022.2095699
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Abstract

JOURNAL OF SUSTAINABLE REAL ESTATE 2022, VOL. 14, NO. 1, 4–20 ARES https://doi.org/10.1080/19498276.2022.2095699 American Real Estate Society The Impact of Sea-Level Flooding on the Real Estate Development Community in Charleston SC: Results of a ULI Member Survey Stephen T. Buckman and Saeideh Sobhaninia Clemson University, Clemson, SC, USA ABSTRACT ARTICLE HISTORY Received 19 November 2021 Climate change is becoming an increasing concern for many communities, particularly Revised 17 June 2022 coastal communities subject to tidal and sea-level flooding. As a result, shoreline municipal- Accepted 24 June 2022 ities walk a fine line between protecting their communities and allowing more develop- ment. A prime example of this dilemma is the port city of Charleston, South Carolina, USA. KEYWORDS Despite being ground zero for sea-level flooding, the city has seen rapid real estate devel- Charleston; climate change; opment growth. This paper analyzes a survey conducted with Urban Land Institute (ULI) coastal communities; members in the Charleston region to understand how the real estate community is coping flooding; real estate with and combating flooding impacts. Results show that while residential real estate devel- development; sea-level rise opers are rethinking their development patterns, commercial developers are slow to recog- nize the threat of climate change impacts. The paper concludes with suggestions for policies and practices to address these threats, strengthen Charleston’s commercial real estate, and better prepare the city for a safe, prosperous future. As has been noted by Upton Sinclair, it’s difficult to get English et al., 2021). The city’s nuisance flooding a man to understand something when his salary threshold is 7.0 feet (ft.) Mean Lower Low Water depends on his not understanding it. This applies to all (MLLW). Per the National Oceanic Atmospheric aspects of the climate change discussion. Cost Administration (NOAA), nuisance flooding results in considerations are amplified by the emotional need to minimal or no damage. Still, it can lead to public not understand the problem. threats and inconveniences, such as water intake Anonymous Survey Respondent pipe backups, street flooding, and flooding in low- lying areas (NOAA, 2022). Currently, Charleston has Introduction 180 days of nuisance flooding each year on average, with a record 89 days of flooding that breached the Charleston, SC, is rapidly becoming the “it” place in 7-foot seawall in 2019 (Mills, 2021). In the 1970s, the Southeastern US. It is consistently listed as a top this number averaged two days annually destination for tourists by magazines, such as Travel (Riley, 2015). and Leisure and Traveler. In 2015, Forbes ranked it as Charleston’s major flooding threshold is 8.0 ft. the 7th best destination for jobs. Invariably, this has MLLW means there is little room between nuisance not been lost on the real estate industry resulting in flooding turning into major flooding events. This extensive development in all four of the major type of flooding costs the city $12.4 million each asset classes. year (Cains, 2021). With the double punch of climate While development is bursting at the seams, change being sea-level rise and increased hurri- Charleston is also ground zero for climate change canes, major flooding will become more pro- and its impacts (Cains, 2021). The city is already nounced and frequent (Magill, 2014). Theoretically, prone to flooding at high tide (Runkle et al., 2018) and will, even with moderate sea-level rise, experi- coastal real estate valuation should decrease as sea ence chronic inundation by 2100 (Dahl et al., 2017; levels rise (Butsic et al., 2011). Yet, increasing CONTACT Stephen T. Buckman stbuckm@clemson.edu Clemson University, Clemson, SC, USA. 2022 The Author(s). Published with license by Taylor & Francis Group, LLC This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. JOURNAL OF SUSTAINABLE REAL ESTATE 5 housing and commercial property prices in coastal Filatova, 2020). NOAA has predicted that hurricanes cities show that this is not the case (Murfin & along the southeastern US seaboard and Gulf Coast Spiegel, 2020). This paradigm presents a dilemma will increase as the Atlantic Ocean and Gulf of for city governments and developers seeking to Mexico continue to warm (NOAA, 2018). In fact, meet housing and economic needs and implement severe storms and hurricanes have already increased more comprehensive commercial development in frequency (Sobhaninia & Buckman, 2022). In fact, resiliency measures (McKenzie, 2017). during the 2021 Atlantic hurricane season NOAA Resiliency measures can potentially impact com- (2021) recorded 14 named storms and seven hurri- mercial development costs and real estate prices canes. The agency noted that this extremely high (Filippova et al., 2020) and, ultimately, a city’s ability occurrence made 2021 the third most active season to build. Feigel (2015), in a National Institute of and marked six consecutive years of above-normal Standards and Technology (NIST) paper developed activity (NOAA, 2021). for its Economics of Community Disaster Resilience The economic impact of hurricanes is widely Workshop, suggests that resiliency planning must known with the most memorable and costly hurri- incorporate a variety of quantitative (e.g., frequency, canes including Katrina (US$182.5B/1,833 deaths), severity, exposure time frames, etc.) and qualitative Harvey (US$141.3B/89 deaths), Maria (US$101.7B/ (e.g., diverse stakeholder input) issues, and indirect 2,981 deaths), Sandy (US$80B/131 deaths), and Ida costs (e.g., peripheral damage, business interruption, (US$75B/96 deaths) all occurring within the last etc.) in cost-benefit analysis (CBA) and return on 20 years (NOAA & NCEI, 2022; Smith et al., 2022; investment estimates to understand impacts. Thus, Warren-Myers & Hurlimann, 2022). While not the the first step for commercial real estate resiliency costliest, Sandy was notable for its unique configur- planning will be for municipalities to establish a ation and far-reaching impacts which included the baseline of various stakeholders’ current efforts, atti- epicenters of the US economy along the tudes, and perspectives. Northeastern seaboard (Rafferty, 2021). Understanding the dynamic between growth and The effects of Sandy were felt in cities and towns climate change this paper shows the results of a along the Atlantic Coast, including New York City, survey of the ULI Charleston real estate develop- an area not historically prone to hurricanes (Gould ment community to garner how they view climate & Lewis, 2018; Ortega & Taspinar, 2018). For change impacts, what they are doing to address instance, it washed away roads in North Carolina’s these impacts, and what they feel the city’s future Outer Banks and produced record flooding in New holds. It first shows climate change/sea-level rise York City (New York), New Haven (Connecticut), and impacts Charleston and how these issues affect real Philadelphia (Pennsylvania) (Hoffman & Bryan, 2013). estate developers and developments in the area. Other impacts included crippling mountain snow- Secondly, it explores survey responses in-depth to storms in West Virginia, Tennessee, and western understand the real estate community’s perspectives Maryland; and power disruption in New Jersey, New on climate change/sea-level rise impacts on current York, Connecticut, and Rhode Island, and inland as and future developments in the city. Due to the far as Illinois, Michigan, and Wisconsin (Gibbens, limitation of previous research on commercial real 2019; Hoffman & Bryan, 2013; Rafferty, 2021). estate and sea-level rise in this area, results also lay Unfortunately, occurrences like Sandy are expected the groundwork for future rigorous statistical ana- to become the norm (Buchanan et al., 2017). lysis. Finally, the paper will help stakeholders and Thus, coastal communities, even in the Northeast policymakers better understand how climate change are highly vulnerable to climate change-driven cata- issues are regarded by the real estate sector and strophes (Arkema et al., 2013; Runkle et al., 2018). In provide insights into tackling these issues. turn, all coastal communities must plan for the slow burn of climate change (e.g., increased temperature Background change, sea-level rise) that slowly impacts commun- Climate change is not happening only in faraway ities and the immediate and direct shocks to the places (Amirzadeh & Barakpour, 2021; De Koning & system from intense natural occurrences, such as 6 S. T. BUCKMAN AND S. SOBHANINIA hurricanes and tidal flooding (Beigi, 2016; seriously…” (Quoted in PwC & Urban Land Tibbetts, 2002). Institute, 2021, p. 19). There are generally two approaches to the prob- If the private real estate sector will play a more lem of flooding and coastal sea-level rise: retreat or significant role, they are not exactly clear what that structural adaptation. In less dense markets, with- role will be (Agrawala et al., 2011; Coiacetto, 2016). drawal from the shore is feasible and more likely A 2019 report by ULI and Heitman entitled Climate (Gould & Lewis, 2017). Structural adaptation makes Risk and Real Estate Investment Decision-Making more sense in denser areas considering economic made this apparent. The report determined that the demands and space constraints (Rodr ıguez & real estate community needs to plan for climate Brebbia, 2015). Structural adaptation includes change but does not know what that involves or even how to begin. “It is an urgent and complex improving structures, raising buildings, and incor- challenge which must be addressed but for which porating mechanical equipment to withstand the industry does not yet have a clear strategy” flooding. It can also involve constructing barriers (ULI, 2019, p. 2). to prevent and minimize the damages from flood- The industry’s risks are primarily on two scales: water (Gould & Lewis, 2017). physical and transactional (Warren-Myers & Hurlimann, 2022). Per ULI, “physical risks are those The Impacts of Climate Change on the Real capable of directly affecting buildings; they include Estate Sector extreme weather events, gradual sea-level rise, and The real estate sector is increasingly engaged in cli- changing weather patterns. Transaction risks are mate change issues and financial impacts (Gould & those that result from a shift to a lower-carbon Lewis, 2018; Shokry et al., 2020). For instance, the economy and using new, non-fossil fuel sources of driving theme of the 2021 Urban Land Institute energy” (Urban Land Institute, 2019, p. 5). To better (ULI) annual conference in Chicago was social equity understand how these risks will impact the industry, and sustainability, both of which are major climate The ULI followed the 2019 report with the 2020 change issues. Climate change was also an import- report Climate Risk and Real Estate: Emerging ant theme in PWC and ULI’s 2022 Emerging Trends Practices for Market Analysis in 2020. The report in Real Estate survey report, a yearly survey of the showed that future investment decisions will be North American real estate community presented at based more on climate-induced market risk than the ULI annual conference. ever before (ULI, 2020). According to the report, “a growing consensus The 2020 report further suggests that cities pro- sees the property sector as bearing much of the actively investing in resiliency measures may be responsibility for climate change” (PWC & ULI, 2021, more attractive to investors as climate change risks p. 18). In addition, 80% of survey respondents con- become the norm (Beigi, 2016; ULI, 2020; Wilbanks sider environmental, social, and governance factors & Kates, 2010). Impacts from flooding, wildfires, and (ESG) when making investment decisions (PWC & droughts are causing the insurance industry signifi- ULI, 2021, p. 18; Wheeler, 2021). Despite the high cant losses (Collier et al., 2021). From 2010 to 2020, number of respondents considering these factors, extreme weather event losses were roughly US$3 there is little evidence to quantify if investors trillion and over US$1 trillion than the previous dec- incorporate climate risks into their decisions. ade (ULI, 2020). In 2019 alone, 40 global disaster- Hallegatte et al. (2013) posit that it is only a mat- related events cost upwards of US$1 billion (ULI, ter of time before more investors consider climate 2020). In 15 years, it is estimated that residential change, as a climate-related natural disaster (more and commercial real estate sectors will experience a than doubled between 1980 and 2016) and recov- combined loss of over US$63 billion globally and ery costs increase (Treuer et al., 2018). Regardless, US$1.07 trillion by 2100 due to flooding (Dahl there is still a general perception that it is not a et al., 2017). pressing concern. A PWC survey respondent These losses are impacting the insurance industry summed it up as, “I don’t see a whole lot of people and in turn influencing the real estate community, taking climate change and flood risk that resulting in insurers insuring less real estate in JOURNAL OF SUSTAINABLE REAL ESTATE 7 coastal and flood-prone areas (Collier et al., 2021). driven real estate bubble as more housing is built in When they do write policies in these areas it is at a climate-prone areas. Like the 2008 real estate bub- premium (Jin et al., 2015; Moody’s, 2018; Urbina, ble, they anticipate that people will walk away from 2016). As a result, insurance companies have the their homes. But unlike that bubble, people will not means to minimize the uncertainty associated with return (Kates et al., 2012; Nolan, 2015; Piguet, 2018). climate change (Botzen & van den Bergh, 2009). Ultimately, this trend could put the real estate Charleston and Climate Change: Impacts and industry underwater, figuratively and literally (Kahn, Coping Mechanisms 2016; Lewis, 2019). Climate change issues are the proverbial elephant In areas where insurers are willing to take risks, in the room regarding Charleston’s development. As mortgage companies are bundling and selling their mentioned, the city is in the crosshairs of climate notes to Freddie Mac and Fannie Mae. This transfer change (Runkle et al., 2018) at the same time, it is pushes the risk onto the taxpayer (Flavelle, 2019; seeing rapid growth (Dow & Watson, 2018). One Ouazad & Kahn, 2019). However, federal, state, and only has to open The Post and Courier, the local governments are beginning to actively regulate Charleston newspaper, any day of the week to see flood insurance. For instance, the state of New Jersey this dichotomy at play with one page having a story requires planners and developers looking to build in on flooding. climate-impacted areas to consider climate impacts, The importance of sea-level rise and related including flooding and sea-level rise, before granting flooding cannot be overlooked as it will significantly government approval (Tully, 2020;Urbina, 2016). St impact populations, ecosystems, infrastructures, and Petersburg, Florida, has instituted increased controls real estate in low-lying Charleston (Dahl et al., 2017, on where developers can build and in what capacity 2018). More than 800 mile-squares of the city’s (Holmes, 2019). While local governments like coastal area lie <4 ft above the high-tide line Nashville, Tennessee buy the property outright, to (Runkle et al., 2018). A conservative estimate by sci- prevent or control development (Schwartz, 2019). entists is that sea levels will rise 3–4.3 feet by 2100 Thus, it is becoming more evident that real (Tibbetts & Mooney, 2018). However, more recent estate-related climate change risks are becoming and sobering projections predict that it will be evident to the public as well (Botzen & van den closer to 6 feet in the Charleston area by 2100 Bergh, 2009; Westcott et al., 2020). Baldauf et al. (Runkle et al., 2018). Figure 1 depicts how increases (2020) assert that people’s beliefs affect housing pri- of 1, 3, and 6 feet will impact Charleston’s ces in areas prone to severe climatic events. For lower peninsula. example, sea-level rise negatively affects housing Coupled with the city’s growth, the financial prices when people believe that climate change is impact of flooding will be astronomical if the city real (Li, 2009; McAlpine & Porter, 2018). This rela- does nothing. The city is already seeing these tionship receives less attention among climate-skep- effects. The value of single-family homes in flood- tical populations (Barrage & Furst, 2019). Moreover, prone areas is decreasing (Tibbetts & Mooney, prices continue to increase in many of these areas 2018), and affordable housing is in peril (Johnson, (Gould & Lewis, 2018; Miller et al., 2019) even 2020). Although there is a lack of information though some studies demonstrated that the diffi- regarding commercial real estate, studies show that culty in obtaining insurance reduces property values flood-vulnerable residential housing is losing its in flood zone areas (De Koning et al., 2019). value due to increased flood days (Cains, 2021). While real estate values in flood zones are lower than in non-flood zones (Bin & Kruse, 2006; Urbina, Some project that there will be 180 days of major 2016), coastal real estate still commands a higher flooding annually by 2045. These flood events could price. As a result, developers are conflicted on how make almost 86% of properties inaccessible by road much building should take place, and real estate (Mills, 2021). Thus, the importance of protecting the agents wonder if they should direct clients away city from flooding has been at the forefront of the from coastal flood-impacted areas (Urbina, 2016). city government (Cains, 2021; Wilbanks & Some of the literature suggests a risk of a climate- Kates, 2010). 8 S. T. BUCKMAN AND S. SOBHANINIA Figure 1. Charleston peninsula and sea level rise. Maps: Justice Walker, 2019. In 2019, the city commissioned two reports to Market/Verdell’s Creek area. The Lockwood Corridor address flooding: Flooding and Sea Level Rise and New Market areas are located on the west and Strategy (City of Charleston, 2019) and The Dutch east sides of the Peninsula, respectively. The goal Dialogues Charleston (Waggoner & Ball, 2019a). The was to develop a comprehensive water manage- Strategy document outlined plans for five critical ment plant for these areas that are “experiencing components—infrastructure, governance, land use, the limits of ‘pump and drain’ due to recurrent, resources, and outreach. Activities include reevaluat- more severe storms with extreme precipitation, ing the science and revising the strategy annually, increased river discharge, and sea-level rise” implementing building codes and zoning ordinan- (Waggoner & Ball, 2019b). ces that support resilience, incentivizing flood miti- The report offered various ways to manage water gation, improving drainage systems, constructing and combat flooding. Mechanisms include storm- manmade and natural shoreline protections, and water storage, drainage tunnels, stormwater control, promoting community outreach and partnership citizen involvement, and groundwater management building, among others (City of Charleston, 2019), (Waggoner & Ball, 2019a). Beyond more localized green and resilient types with many initiatives are complete or underway (City of Charleston, 2022). of protection, the city is also looking to radical infra- The nearly two-year-long (2018–2019) Dutch structure measures (Allen et al., 2019). In conjunc- tion with the US Army Corps of Engineers, the city Dialogues report explored four distinct parts of the city—Johns Island, Church Creek, the Lockwood is investigating the construction of a seawall to pro- Corridor/Charleston Medical District, and the New tect the lower peninsula. The original proposal for JOURNAL OF SUSTAINABLE REAL ESTATE 9 the wall was to cost $1.7 billion. However, more The following five questions focused on climate recent projections (as of November 2021) have it at change impacts on Charleston and the real estate community, measures to combat climate change, $1.1 billion, with the Army Corps taking on $775 and where climate change had the most significant million and the city taking on the remaining $325 effects. The next three questions revolved around million of the costs (U.S. Army Corps of Engineers, whether climate change impacted their develop- 2021). Whether through hardening and infrastruc- ments and planning. The last questions centered on ture, or greener resilient measures, the city will who should spearhead climate change protection need to protect the peninsula and real and what developers could be doing to help com- estate valuation. bat the problem. Lastly, the survey asked about the cost constraints of climate change adaption. Methods Researchers surveyed ULI South Carolina regional Survey Results chapter members to understand stakeholders’ opin- Qualitative coding content analysis was used to ana- ions within Charleston’s development community. lyze the data and draw meaning, especially from Preliminary interviews were conducted with three the open-ended questions. This method helped the key stakeholders within the Charleston community. researchers compare the data and respondents’ per- These in-person interviews allowed the researchers spectives across different sectors and three catego- to determine survey questions that addressed the ries—demographics, Charleston climate change, and concerns of the community. Once the survey was companies’ roles and cost burdens. Results show written and designed, it was sent to three different multiple views on climate change’s impact on the stakeholder groups for vetting. Charleston real estate community. Climate change is The ULI community was chosen as it has been seen as a significant issue for the area from a gen- one of America’s most widely quoted sources of eral perspective. Yet, there is not as much concern real estate, development, and urban planning for within the actual day-to-day activities of the real years. Moreover, the ULI Charleston area chapter’s estate profession. Furthermore, development objective has always been to encourage the link changes that are made are primarily self-imposed as between real estate development, urban planning, municipal governments were seen as not doing and leadership, which is well-aligned with the goals enough for those concerned about making changes of this study. Finally, ULI Charleston has a particular in the real estate community. Notably, a significant interest and understanding of climate-related hindrance to making climate change-related adjust- impacts on the real estate industry. ments was cost. Respondents felt that costs should The survey was sent first via direct email, then be split between the private and public sectors. two weeks later in conjunction with ULI through their October 2021 e-newsletter, reaching 350 ULI Demographics members. Fifty-five (55) members responded, result- ing in a response rate of 16%. This represents a The first questions gathered sector, company, and higher-than-average response rate for most South respondents’ job information. It is important to note Carolina ULI chapter surveys. that questions did not ask about the respondents’ Surveys consisted of 18 substantive questions age, race, or gender. The questionnaire, as stated, and one asking if the respondent wished to be was sent out to 350 people who were part of the interviewed. Questions included seven open-ended, ULI in the Charleston area. four Likert-scale (rating from 1 to 5), four yes or no Respondents varied from real estate developers questions, and three demographic, such as “Are you (42%), architects (23.5%), city government officials in the private or public sector?” Demographic ques- (5.9%), and brokers (5.9%) (Table 1). While it was no tions defined what segment of the development surprise that there were few city government community respondents were in (e.g., real estate), respondents as ULI is a private sector organization, what sector, and their role within their company. the low number of brokers is a bit curious. 10 S. T. BUCKMAN AND S. SOBHANINIA Table 1. What is your primary business related to real estate? Table 3. Do you see climate change as a major (The table contains the percentage of the survey respondents concern for the Charleston Region? Rate 1–5, with and the overall ULI demographic in each category). 5 being a major concern and 1 not being a major concern. Respondents Overall ULI Business categories percentage members percentage 1 14.29% 2 7.14% Real estate development 41.18% 42.75% 3 7.14% Brokerage 5.88% 2.55% 4 21.43% Architecture/design/engineering 23.53% 19.2% 5 50.00% Investment 8.82% 2.9% Banking 5.88% 1.45% City government 5.88% 17.75% Permitting/consulting 8.82% 13.4% Table 4. Do you see concern for climate change in the real estate development community in Charleston? Rate 1–5 with 5 being a major con- Table 2. If you answered A, B, or C: what area of real estate cern and 1 not being a major concern. do you specialize in? (Check all that apply). 1 10.71% Residential (single family) 12.66% 2 17.86% Residential (multi-family) 20.25% 3 50.00% Hospitality 13.92% 4 10.71% Office 17.72% 5 10.71% Retail 8.86% Industrial 10.13% Mixed use 16.46% estate community itself. 50% of respondents see it The second question asked if the respondent was as a “minimal” concern. Of these, 58% were in the involved in real estate development, brokerage, real estate business. While 24% of architecture, architecture, or urban planning and design. Answers urban design, and engineering respondents were evenly split between multi-family and office declared climate change as a “major” concern to developers and the retail sector. Respondents’ roles the real estate sector, only 11% of real estate-associ- within their companies represented a wide swath. ated respondents felt that it was. Finally, 24% of The majority were owners and CEOs (57.5%), fol- real estate respondents do not think that climate lowed by architects, urban planners and designers, change is a concern to the real estate community at and business developers (32.5%). A few respondents all (Table 4). (9.5%) were construction managers, attorneys, and The answer to this final question presents an lenders (Table 2). interesting point of discussion. While half of the respondents saw climate change as a fundamental issue for the Charleston region, only 11% saw it as a Charleston Climate Change in General critical concern for the real estate community. The next set of questions dealt with climate change Moreover, most real estate sector responses fell in in Charleston, general ideas around the issue, and the mid-range of the Likert scale. These findings real estate’s role. Regarding the concern about cli- suggest that climate change is not an issue within mate change in the Charleston region, 50% of the real estate community or that many in the field respondents indicated it was a “major” concern and refuse to make it an issue. Given the survey findings 21% a “significant” concern. Of those 44% of the and anecdotal insights, it is most likely a combin- respondents were in real estate, and 56% were from ation of them. other fields. Thus, 62% of the real estate-associated respondents consider climate change concern, dem- Company and Cost Issues onstrating that it is becoming more alarming. On the other end of the spectrum, 14% said it was “not The last set of Likert-designed questions asked what a major” concern to the region. Sixty-two percent of the real estate community is or is not doing about these respondents were in real estate, indicating climate change and who should shoulder the costs. that there are still those who do not consider Eighty percent of respondents stated that company addressing the issue as an urgent concern (Table 3). climate-related changes were self-directed. Of these, The next question asked if respondents saw cli- 75% were real estate respondents. Eight percent mate change as a “major” concern for the real reported that changes were imposed by JOURNAL OF SUSTAINABLE REAL ESTATE 11 Table 5. If you or your company are making changes or plan- change adaptation costs, and 44% felt it should be ning to make any changes are they. the public sector. Specifically, 64% of real estate- Self-imposed 80.00% associated respondents thought the public sector Government imposed 12.00% Imposed by underwriters (insurance or financing) 8.00% should deal with the climate change costs, while 72% of architects and urban planners thought the private sector should be responsible. Lastly, costs Table 6. Are developers shying away from those areas subject were seen as a significant issue (70%) when institut- to flooding? ing climate change adaptation. The majority (86%) Yes 82.14% No 17.86% were architects, urban planners, and city officials. These results show that each group put the Table 7. In relation to the previous two questions, do you responsibility on the other side. For instance, most see development patterns shifting to different locations architecture, urban planning, and city groups because of climate change? believe that the private sector is more responsible Yes 37.04% No 62.95% for the costs. They are not considering climate change mitigation factors because of that cost. In contrast, the real estate sector considered the public sector responsible, and most did not identify cost as underwriters (Table 5). This was an interesting find- their reason for disregarding mitigations. ing as a hypothesis of this study is that under- writers, both insurance and funders, would be forcing developers to make changes. While these Open-Ended Questions findings might disprove the theory, it could also be Researchers also asked a set of open-ended ques- that the study was premature or that developers tions to obtain more nuanced answers. These ques- are getting ahead of underwriters’ requirements. tions sought to understand what measures their The next two questions were about the impact of firms were taking, where the most significant impact climate change on development patterns. of climate change was in real estate patterns, is the Overwhelmingly, 82% of the respondents felt that government doing enough, what the development development was not shying away from areas sub- community should be doing, is cost an issue to ject to flooding. Of these, 48% were real estate adaptation, and how developers are dealing with developers, and 52% were architects and urban the costs of adaptation and a final prompt for add- planners (Table 6). In addition, 63% saw no develop- itional comments. Answers reflected the previous ment shift to different locations due to climate questions while providing researchers with a deeper change (Table 7). Specifically, 54% in the real estate understanding of the issue. sector and 72% among architects and urban plan- The first question posed asked: What measures if ners saw no shift in development patterns. So, even any, you/your company were taking in your develop- though respondents believe that retreating from ments to deal with climate change? Flooding, heat or the flood-prone areas is necessary and should be resilience/preparedness for hurricanes, etc.? Answers required, they are not seeing nor shifting develop- showed that most respondents are taking minimal ment. This result presents an interesting paradox steps, just enough to cover what was needed with- that will be discussed more in the discussion of the out hurting the bottom line. In general, this includes open-ended questions. building on higher ground and using sustainable Questions about who should carry the cost bur- building materials, including drainage systems. A dens and who should be responsible for combatting few respondents reported that their companies climate change followed. A large majority (68%) of were doing more than the minimum. As one those surveyed thought that the municipal govern- respondent said: “We are designing more bioswales ment was not doing enough to combat climate and other stormwater management systems that change (65% of real estate sector respondents and mimic nature to help manage water on the property 72% of other groups). Fifty-six percent felt that the in addition to typical engineered solutions” (see private sector should bear most of the climate Table 8). 12 S. T. BUCKMAN AND S. SOBHANINIA Table 8. What measures, if any, are you/your company taking in your developments to deal with climate change? Flooding, heat or resilience/preparedness for hurricanes, etc.? Flood plain analysis, mitigation, analyzing data sets Firm has emergency plans due to flooding/hurricanes Drainage None as of now—flooding is addressed on a site-by-site basis but we are currently not taking any precautions related only to climate change … Buildings are designed and materials used to account for climate change Buy high ground, such as it is. Integrating heat and flooding concerns collectively and broadening that work to address an all hazards approach in any planning work Gaining expertise and knowledge to advise clients on the latest science and the best practices for resilience. Resilience building for sea level rise and tidal surge flooding. Increasing topography whenever possible. Major part of our basic design approach Green spaces, permeable surfaces, low emissivity exterior finishes, some LEED Flooding and Hurricanes None—do have hurricane plan. Sustainable building, land planning None Raising BFE requirements, working on a climate adaptation plan We specialize in nature-based solutions and water management to deal with increased flooding due to sea level rise and changes in rainfall patterns Flooding and resilience We are designing more bioswales and other stormwater management systems that mimic nature to help manage water on the property in addition to typical engineered solutions. We pay close attention to flood maps and drainage upgrades needed while evaluating new acquisitions. Typically do minor upgrades to energy infrastructure with LED lights and new HVAC systems. None—common and typical stormwater and development issues. Hurricane-rated products/materials, efficient utilities. Flood proofing, resilience/preparedness Our company does not have a direct say in climate change resilience/preparedness choices in developments, but we do help our clients navigate federal standards for rehabilitation and climate change preparation. A lot of that includes recycling/reusing materials, preparing buildings for more drastic climates, etc. Flooding and preparedness for hurricanes, but we have always done that. Unrelated to climate change. Among real estate-associated respondents, the there is limited available land for coastal develop- most repeated measure mentioned was improving ment that is more susceptible to future disasters, resilience and preparing for flooding and hurricanes. they are still many desirable sites (see Table 9). Other measures included efficient utilities and infra- As mentioned earlier, Charleston’s lower penin- structure systems, increasing topography, buying sula is in grave danger of flooding and suffering the land in non-flood areas, resilient material, drainage impacts of climate-induced sea-level rise. Yet, there was minimal discussion about moving away from upgrades, more green spaces, sustainable building, permeable surfaces, and land planning. Among the lower peninsula. One respondent who talked architecture and urban planning respondents, resili- about it did so from a valuation perspective, “Sea ence and preparing buildings for drastic climate level rise is obvious, although I imagine we will fig- change was the most repeatedly mentioned meas- ure out how to seal off the peninsula’s most valu- ure. Other strategies included stormwater manage- able land.” ment systems, climate adaptation engineering plans, There could be various reasons for the lack of drainage, and recycling materials. discussion. One reason could be that when discus- The second open-ended question asked: In regard sing low-lying areas and areas of flooding, respond- to real estate development patterns, where do you see ents assume we know that means the lower climate change having the greatest impact? Most peninsula. Alternatively, reasons could be financially respondents believe climate change effects on real driven as the lower peninsula is prime real estate, a estate development are most evident in floodplains, characteristic that often wins out over climate low-lying areas, and coastal areas. In the case of real change and safety issues. estate-associated respondents’ opinions, impacts are Next came a couple of questions regarding the felt primarily in flood-prone area values, insurance government’s role, including: What should govern- prices, and infrastructure investment. However, ment be doing, and What are the best and worst architects and urban designers are centered on site things it is doing or not doing? Answers were much selection and the location of new developments. more varied than the previous open-ended ques- Some believe that developers are retreating from tions. Responses ranged from issues of zoning, flood-prone areas. Others thought that, although “Zoning restrictions should be re-evaluated. Too JOURNAL OF SUSTAINABLE REAL ESTATE 13 Table 9. In regard to real estate development patterns where do you see climate change having the greatest impact? Coastline, wetlands but also inland tidal flooding due to stronger rain events Low-lying coastal communities Reclaimed land has been vulnerable and will be increasingly so but is often desirably located No—the SCPA has made leaps and bounds to increase the port of Charleston’s capacity. Climate is not a factor in the industrial “gold rush” Coastal areas Sea Level Rise is obvious, although I imagine we will figure out how to seal off the peninsula’s most valuable land. Obviously, raises an equity question in terms of less valuable land, which is well above my pay grade to figure out. Limiting land available for development on the coast Heat will impact all areas. Flooding will impact pluvial and fluvial as well as coastal, so mostly all of Charleston. Location of development, retreat from flood-prone, critical areas, building construction methods, electrical energy sources, renewable generation Increased investment in infrastructure and mitigation efforts. Site selection Coastal areas and low-lying areas It’s all about water. Both too much and too little. Building material manufacturing Coast Coastal Flooding Areas out of the flood plain Flooding concerns Storm water design Properties that experience repeat flood events. Viability and value of low-lying and flood-prone areas. Design and construction decisions if building in these areas. Insurance prices in high wind risk areas and stricter underwriting for the region in general. Bureaucracy—Permit—Government Flooding, drainage, and wetland impacts Increased involvement in infrastructure updates, more studies with regards to density impacts many larger scale projects being built in flood-prone the developers and investors will slowly move the areas,” to disallowing development in certain areas. city to wherever the higher ground is–further For instance, one respondent stated that they upriver.” This last quote is particularly telling. While should be “precluding development at all in certain Charleston is a great place to build, growth can areas.” Another mentioned that “They should be only continue if sustainable. Further suggestions restricting development in flood-prone areas, plac- included taming sea-level rise via technological ing restrictions on the percentage of the property mechanisms, such as pumps or a one plus billion- that can be impervious, and being stricter on what dollar sea wall (see Table 10). developers are required to do to combat come of Surveyors were asked what the government these climate change issues.” These statements should do and their responsibilities. Specifically, around zoning and restrictions highlight the notion they were asked: What role, if any, does or should that developers will not stop building in flood zones the development community have in combatting unless regulated. climate change? This question, by its nature, is Beyond zoning, some respondents focused on somewhat self-reflective and demands a degree of funding and infrastructure as maintaining the status self-critique. Overall, respondents felt that the quo. Overall, those who believe the government is community needed to literally and figuratively not doing enough revolved around two general “build to higher standards” and “should lead.” ideas. First, land planning was needed to restrict the There was also discussion around looking beyond development in flood-prone areas and incentivize profits and the need for developers to become development in other areas. Second, governments more responsible “… to investors and the future should incorporate more resiliency strategies in by making sound decisions that are not always developments and infrastructure. Real estate-associ- looking first to the bottom line.” Echoing this, ated respondents are more inclined toward the for- another respondent stated that “most develop- mer, and architects and urban planners toward ment decisions are understandably business-based the latter. and the short-term economics of resilient design, Among the respondents who believe that the unfortunately, are not the best for the bot- government is not doing enough, one respondent tom line.” mentioned the need for a “Good pump system. The These answers show that the real estate commu- city will flood–a fact of geography. If it gets worse, nity knows they must do better but feel constrained 14 S. T. BUCKMAN AND S. SOBHANINIA Table 10. If you answered NO to the previous question, what should the government be doing? If you answered yes, what are the best and worst things it is doing or not doing? Incentivizing areas that do not flood; making the permitting process easier for those areas Zoning restrictions should be re-evaluated. Too many large-scale projects being built in flood-prone areas. Long-term planning for improved infrastructure … drainage/flooding, water quality, roads, etc. Perhaps I’m splitting hairs, but climate change response must be driven by the federal government. The municipal government should implement responses to that, as well as to the results of climate change, which is an adaptation Requiring raised elevations of new construction, raising roads, paying for storm barrier construction Imposing greater restrictions, such as elevation-based zoning coupled with an all hazards requirement tied to Act 163 Planning and executing on planning More aggressive about tying development entitlements to more resilient approaches to development and to creating funding to invest in mitigation/ infrastructure measures Precluding development at all in certain areas Land planning to insure development only occurs where and how it should … It’s doing too much in ineffectual areas and not enough in actual real-world practical ways. Good pump system. City will flood—fact of geography. If it gets worse than developers and investors will slowly move the city to wherever the higher ground is—further up river. Establish strong controls on developing projects in flood-prone areas Making deliberate decisions to move the needle for development interests by implementing incentive-based regulations that actually encourage developers to incorporate more resilient strategies in their developments Municipalities are underfunded and thus have limited staff to deal with storm water-related issues. They should be restricting development in flood-prone areas, placing restrictions on the percentage of the property that can be impervious, and being stricter on what developers are required to do to combat some of these climate change issues (sea level rise, increased storms, storm surge, etc.) It’s going to take time to execute all of the infrastructure needed, but from what I can tell, the Charleston city government is taking flooding and sea level risks very seriously. Between the work being done now and proposed future work I think we are doing almost all that can be done. We are low, but there are areas that are lower that we can continue to learn from and implement best practices. Government is already doing too much, by limiting the potential developable areas round table discussion w/ experts and local consultants, to advise best practices They are not being proactive at all with regards to approving developments and the future flooding/infrastructure problems it causes. This is especially true in infill parts of downtown and in undeveloped rural areas Table 11. What role, if any, does or should the development community have in combatting climate change? Build to higher standards (literally)—start building up Development community should help city/county with restrictions, so major developments are not permitted in flood-prone areas. Limiting the development of vulnerable land Collaborate with government and other stakeholders. Share expertise. Raising elevations Integrate all hazards and consider the service life of investments in addressing those hazards It should lead Change in building management and operations practices, especially in making first-cost investments in more sustainable development and construction. Educate the market on what needs to change and why Limited impervious surfaces, helping limit stormwater surges, reducing energy consumption, taxes We should be leaders Developing more sustainable buildings, shy away from flood-prone areas Responsibility to investors and to the future by making sound decisions that are not always looking first to the bottom-line Most development decisions are understandably business-based, and the short-term economics of resilient design unfortunately are not the best for the bottom line (other than a few developers with unique interests) Development should be at a higher standard to account for the impacts of climate change. Developers can help by managing the water that falls on their property, improving the infrastructure on their property, and making sure that their development isn’t increasing flooding or other issues for properties next to it Continuing to implement efficient energy design and adequate stormwater retention into projects. You cannot combat climate change. Change will always happen. We can only mitigate the environmental circumstances. We need to be much more thoughtful of the impacts our developments have on flooding in the surrounding community. Unfortunately, most developments are just pushing flooding issues to their neighbors, rather than fully addressing the issue by costs and a project’s return on investment. elephant in the room. Questions on cost included: Moreover, results show that real estate-associated What role is cost playing in the added effort of cli- respondents are interested in sustainable develop- mate change adaptation, and How are developers ments that adopt higher standards of construction dealing with the cost of climate change adaptation, to combat climate change impacts. Respondents and how would those costs be better dealt with in from other areas of expertise emphasized that the the future? Responses to the first question revealed development community should manage the water that cost plays a significant role, as it equaled that falls on their property and their developments’ “higher construction costs, more resilient materials.” Additionally, others expressed that it was becoming effects on surrounding areas (see Table 11). Cost is a prevailing factor in all climate change too expensive to build in coastal and flood- discussions, and adaptation issues represent the prone areas. JOURNAL OF SUSTAINABLE REAL ESTATE 15 Table 12. If you answered yes to the issue of cost, what role is cost playing in the added effort of climate change adaptation? Higher construction costs, more resilient materials Increased flooding events mean there will be more frequent and greater damage to projects in our community. Lack of political and social will to abandon locations and not develop others that are profitable As has been noted by Upton Sinclair, it’s difficult to get a man to understand something when his salary depends on his not understanding it. This applies to all aspects of climate change discussion. Cost considerations are amplified by the emotional need not to understand the problem Developers have to consider walking away from opportunities to do the right thing. First-cost investments are more beneficial than resilience mitigation and other “fixes.” Incentives and tax recognition of the benefits of first-cost investments should be more responsive and easier to access. The problem is that there is a higher furnace what a much higher long-term cost this developer is not responsible for Coastal development is becoming more expensive to build, but prices are still going up. Demand is there so supply follows. Profits and taxes that are generated have to be more wisely invested. until practices that may cost more up front are placed into a longer-term equation then the needed changes will remain cost prohibitive the old way of developing is still the most economical when looking exclusively at costs to developers. When looking at long-term costs, the case is becoming stronger, but most development decisions are still based on short-term profit margins. Added costs for mitigating the effects of climate change cut into a developer’s bottom line, it’s understandable why they would not want to make these changes and spend extra money which is why it should be a requirement. Cost is an impact, but the bigger impact is a benefit. It’s easy to underwrite a capital outlay if there is an identifiable value increase to go with it. Extra taxation and fees Green infrastructure is expensive, so is remediation. developers will not spend this money unless its required The immediate climate change adaption that needs to change in the Charleston area is much of our infrastructure, but the city does not require developers to put enough money towards helping pay for these issues. Table 13. Again, if yes. Only the developers who think Charleston is still a “good deal” are here—increased costs definitely shut out the smaller developers Unsure. Unknown to me Some nominal changes, but few developments actually tackle substantive shifts toward climate change readiness. See above … public sector can incentivize and reward first-cost investments to a greater extent. Developers had to pay higher the less amount of climate change they are anticipating and how they develop their projects, perhaps those costs start even out. We shouldn’t allow development to occur where it shouldn’t … change zoning to adapt to the reality … Trying to squeeze construction costs as much as possible, efficient design, and passing it on to buyers. For the most part, I’d say the development community is outreaching. By looking for ways to incorporate broader acceptance of better development practices those costs will lower over time Good question! I wish I had an answer for you. There are probably grants that could assist in the extra cost of dealing with the impacts of climate change, perhaps if those were more easily accessible as funding sources then they could provide financial assistance A lot of the cost is passed through to the tenants in their rent. Between insurance costs or increased construction costs or location premiums for high and dry locations. Looking for cheaper land. Passing the cost to the customers. They are not dealing with it Developers need to provide more money to the city/state to address major infrastructure problems (mostly with regards to flooding/sea level rise), rather than push the issues off for others to deal with How are developers dealing with the cost of climate change adaptation, and how would those costs be better dealt with in the future? But this creates a dilemma in the minds of devel- Overall, results show that adaptation is viewed opers. As one respondent noted, “Coastal develop- as expensive. Therefore, developers are unwilling ment is becoming more expensive to build, but to adopt it unless it is required or profitable. They prices are still increasing. Demand is there, so sup- also highlight that developers are more concerned ply follows. Profits and taxes that are generated with economic constraints and short-term profits have to be more wisely invested.” This was echoed than long-term climate effects. Per one respond- by a respondent who highlighted the continued ent, “Added costs for mitigating effects of climate demand and the polarization between those who change cut into a developers’ bottom line, it’s can and cannot develop. “Only developers who understandable why they would not want to think Charleston is still a ‘good deal’ will continue make these changes and spend extra money to operate there. Increased costs definitely shut out which is why it should be a requirement” (see the smaller developers.” These insights quickly sum Table 13). up the issue of cost. It supports the mindset that The last question asked respondents to provide while it is becoming more expensive to build, both additional comments. While much of what was from a land perspective and a construction cost per- offered had already been covered, there was a pre- spective, people will pay the price to live in a desir- vailing sentiment that to combat the issue of cli- able place (Table 12). mate change and sea-level rise in Charleston, it 16 S. T. BUCKMAN AND S. SOBHANINIA Table 14. Is there anything you would like to add? Private sector should shoulder a larger burden of cost and consequences (nonsubsidized insurance, etc.) for development decisions When it comes to climate change, particularly flooding and building design, there is low-hanging fruit to address. Politics is a deterrent. The private sector can add tremendous value to the process. Answer to the last question should be “Both.” Of course, at the end of the day, the private sector eventually pays for the actions of the public sector. The answer to “who pays for it in the first place” depends on what actions we’re talking about. A sea wall is one thing. Better insulated buildings or stormwater detention systems are quite other things. No one gets to opt into climate change so those developers willing to boldly address it will ultimately have a much better position than those avoiding it for as long as possible Clearly the answer to the question, private paying additional fees when their developments have a negative on long-term resiliency I think the costs should be shared public/private in the answer above, but I wasn’t able to select both. The public sector doesn’t have the money to deal with this, by placing requirements, the private sector will innovate so that they can provide solutions and still make a return on their investment. But they won’t necessarily do that R&D if the market isn’t pushing them to do it. It will take both private and public sector action. But if climate change is truly the risk that it is made out to be, then the public sector is going to have to continue to lead the way on the issue. The key issue for property owners in the low country will be that the government is proactive in implementing infrastructure issues that will protect property values and keep assets safe from adverse weather events and flooding. Our local government has been doing a great job of this over the last few years. Climate Change is an excuse by the Government to restrict development. We do not build in Floodplains, wetlands, streams, or buffers. We are required to follow DHEC and OCRM Stormwater regulations. The development community keeps getting squeezed harder and harder for buildable land. Thus, we build further out and are surprised when sprawl occurs. Zoning and Utilities are the best way to combat climate change by allowing higher densities on good land. It shouldn’t be an either/or solution. this affects everyone, so the cost-sharing and policy should reflect that With regards to who should be dealing with the issue of costs, I think the public sector needs to lead the charge/be in control of the finances, but the private sector needs to be providing them more money. would have to be a partnership between the private Responses indicated that much of the community and public sectors. Others pointed to the govern- takes a minimalist approach to adaptation. For ment as the underlying issue. instance, answers included “Buy high ground, such as it is,”“paying close attention to flood maps and “Climate change is an excuse by the government to instituting drainage upgrades while evaluating new restrict development. We do not build in floodplains, wetlands, streams, or buffers. We are required to acquisitions,” or “… minor upgrades to energy follow DHEC and OCRM stormwater regulations. The infrastructure with LED lights and new HVAC sys- development community keeps getting squeezed hard tems.” In general, it appears that developers believe and harder for buildable land. Thus, we build further that the minimalist approach is enough to make out and are surprised when sprawl occurs. Zoning and financial partners and governmental entities happy. utilities are the best way to combat climate change by While the survey results disclose that developers allowing higher densities on good land.” should do more, respondents believe that most of While some see government as an obstruction, the burden should fall on the backs of the govern- others see it as a mechanism for changing course. ment to secure areas for development. This would In their mind, the successful developer gets in front make it profitable for developers to continue to of the issue. “No one gets to opt into climate. So build. Suggestions included government should be those developers willing to boldly address it will “More aggressive about tying development entitle- ultimately have a much better position than those ments to more resilient approaches to development avoiding for as long as possible” (see Table 14). and creating funding to invest in mitigation/infra- structure measures,” and “Making deliberate deci- Conclusion sions to move the needle for development interests implementing incentive-based regulations that actu- This research shows that a significant portion of the ally encourage developers to incorporate more survey respondents is taking a business-as-usual resilient strategies in their developments.” approach and do not fully see or acknowledge the The issue of profit remains a driving force in the long-term negative impacts of climate change. Per minds of the community. The study demonstrates one respondent, their company addresses “Flooding that developers will continue to build in areas prone and preparedness for hurricanes, but we have to climate change impacts if it is profitable. Even as always done that unrelated to climate change.” The overall sentiment was that climate change was not the cost of doing business increases, both in terms a grave concern, despite 50% of the community of adaptation strategies and effects on the develop- believing it is an issue. ment paradigm, there are those willing to pay the JOURNAL OF SUSTAINABLE REAL ESTATE 17 climate risks. OECD Environment Working Papers, No. 39. premium. This disparity forces some smaller devel- OECD Publishing. https://doi.org/10.1787/5kg221jkf1g7-en opers with less financial backing out of the game Allen, T. R., Crawford, T., Montz, B., Whitehead, J., Lovelace, and creates inequity in development. “Sea-level rise S., Hanks, A. D., … Kearney, G. D. (2019). Linking water is obvious, although I imagine we will figure out infrastructure, public health, and sea level rise: Integrated how to seal off the peninsula’s most valuable land. assessment of flood resilience in coastal cities. Public Obviously, [this] raises an equity question in terms Works Management & Policy, 24(1), 110–139. https://doi. org/10.1177/1087724X18798380 of less valuable land … .” Amirzadeh, M., & Barakpour, N. (2021). Strategies for building This research lays the groundwork for under- community resilience against slow-onset hazards. standing Charleston’s real estate and development International Journal of Disaster Risk Reduction, 66, 102599. community’s perspectives on climate change. Yet, https://doi.org/10.1016/j.ijdrr.2021.102599 questions prevail. For instance, will it just become Arkema, K. K., Guannel, G., Verutes, G., Wood, S. A., Guerry, A., Ruckelshaus, M., Lacayo, M., & Silver, J. M. (2013). too expensive to do business in an area like Coastal habitats shield people and property from sea-level Charleston as investors and insurance underwriters rise and storms. Nature Climate Change, 3(10), 913–918. begin to shy away; will climate change ever really https://doi.org/10.1038/nclimate1944 matter to developers with very short time horizons Baldauf, M., Garlappi, L., & Yannelis, C. (2020). Does climate (e.g., 2–10 years from breaking ground to selling off change affect real estate prices? Only if you believe in it. the asset); or will developers just run the course in The Review of Financial Studies, 33(3), 1256–1295. https:// doi.org/10.1093/rfs/hhz073 Charleston until the price gets too high and Barrage, L., & Furst, J. (2019). Housing investment, sea level move on? rise, and climate change beliefs. Economics Letters, 177, The development community and government 105–108. https://doi.org/10.1016/j.econlet.2019.01.023 will have to deal with these and similar questions Beigi, S. (2016). How can resilience influence gentrification for regarding Charleston’s fate in the face of climate creating sustainable urban systems? University of Oxford. Bin, O., & Kruse, B. (2006). Real estate market response to change. While being on the minds of the commu- coastal flood hazards. Natural Hazards Review, 7(4), 137–144. nity, climate change is not resulting in severe https://doi.org/10.1061/(ASCE)1527-6988(2006)7:4(137) changes in how development is moving forward. Botzen, W. W., & van den Bergh, J. C. (2009). Bounded ration- Round table discussions with government officials, ality, climate risks, and insurance: Is there a market for experts, stakeholders, and local consultants can be natural disasters? Land Economics, 85(2), 265–278. https:// very beneficial to change the perception of climate doi.org/10.3368/le.85.2.265 Buchanan, M. K., Oppenheimer, M., & Kopp, R. E. (2017). change for the development community. Thus, we Amplification of flood frequencies with local sea level rise suggest the continued engagement of these stake- and emerging flood regimes. Environmental Research holders to raise awareness and understanding of Letters, 12(6), 064009. https://doi.org/10.1088/1748-9326/ the urgency of addressing climate change. aa6cb3 Butsic, V., Hanak, E., & Valletta, R. G. (2011). Climate change and housing prices: Hedonic estimates for ski resorts in Acknowledgments western North America. Land Economics, 87(1), 75–91. We would also like to acknowledge the support received https://doi.org/10.3368/le.87.1.75 from graduate assistants Justice Walker and Hope Warren, Cains, M. G. (2021). 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Journal

Journal of Sustainable Real EstateTaylor & Francis

Published: Dec 31, 2022

Keywords: Charleston; climate change; coastal communities; flooding; real estate development; sea-level rise

References