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Why Are Developers Still Pouring Billions into Waterlogged Miami?
- sbierwagen 10y agoSee also: "Goodbye Miami" from 2013 http://www.rollingstone.com/politics/news/why-the-city-of-miami-is-doomed-to-drown-20130620 http://www.rollingstone.com/politics/news/why-the-city-of-mi... and "The Siege Of Miami", 2015 http://www.newyorker.com/magazine/2015/12/21/the-siege-of-miami http://www.newyorker.com/magazine/2015/12/21/the-siege-of-mi...
- notadoc 10y agoBecause science is part of the big science conspiracy?
- cjlars 10y agoIf you look at various financial crises throughout history, you'll see that even amid increasingly clear evidence of problems, the status quo is surprisingly sticky. Things move along as normal, and everything seems fine until suddenly... they don't. In hindsight things seem obvious, but at the time it's difficult to know if you are merely flirting with the edge, or you've actually gone over it. Miami real estate (and other low lying shorefront) isn't quite at that 'oh crap' moment yet. While the evidence for CO2 driven rising sea levels is clear to me, there are plenty of financiers from the previous generation for whom it isn't. And even if they're wrong on global warming, they might be right on sea-walls, pumps and other mitigation methods. The Raising of Chicago lifted the entire city up 3-6 feet with merely 1850s technology, so it's not as if we can't solve Miami's sea level issue with sufficient investment. The issue is who foots the bill, how large it is, and what neighborhoods are left to the sea.
- finnh 10y agoI think it's time to do some research and figure out the appropriate short.
- simonebrunozzi 10y agoI was thinking about it. How would you short something like this?
- sbierwagen 10y agoThe general problem with attempting to profit from global warming is that you end up having to short the entire financial system, and it's tough to make money from the idea of "everything stops working".
- finnh 10y agoI dunno - waterproof bulldozer manufacturers should do pretty well.
- scarmig 10y agoRealistically, both Canada and Russia are countries likely to be net beneficiaries of global warming. Taxes won't have to be increased as much to deal with the effects; more taxes will be generated from increased agricultural productivity; and heating costs will decrease. Must be some way to hedge your personal losses from global warming with investments there.
- zzzzzzzza 10y agohttps://www.theguardian.com/cities/2016/oct/14/thawing-permafrost-destroying-arctic-cities-norilsk-russia https://www.theguardian.com/cities/2016/oct/14/thawing-perma... maybe not so much in the short-medium term.
- sulam 10y agoBefore you short, read the Big Short and imagine yourself as Michael Burry. Very often you can be short, right, and lose your pants because markets are slow to recognize things that they are paid to ignore.
- finnh 10y ago
- Declanomous 10y agoI live in a 130 year old house in Chicago. If you go in the basement, you can see the new foundation built on top of the old one when the house was raised, and how they added indoor plumbing at the same time. That being said, even though Chicago had high-rises at the time, buildings were all pretty much held in place by gravity at the time. Raising them was just a matter of having enough jackscrews to support the building and making sure the building was raised evenly so that it didn't crack. I suspect that the higher level of integration between modern buildings and their foundations probably means that it's going to be cheaper to just tear down the buildings and rebuild them. My best friend is a structural engineer, so it would be interesting to see what he has to say on the topic. If Miami is anything like Chicago, all the buildings are probably built on piles already, and burying them is one of the most time consuming and expensive parts of the construction process. If you could re-use the piles for a new building you might be able to get away with rebuilding buildings on the cheap. I suspect raising the vast majority of buildings would still be eminently possible though. You see this all of the time in flood-prone areas already. The only difference is that you'd be adding fill up to your new front door.
- Spellman 10y agoLive in Sacramento region where we also raised the buildings to reduce flooding issues. Not quite as impressive as the Chicago effort, but proves that it could be done.
- gniv 10y agoOr maybe Miami will turn into a Venice-like romantic canal city, where travel will be done by jetski, tourism will flourish, and real estate prices will keep going up.
- humbleMouse 10y agoI like this hypothesis.
- tqkxzugoaupvwqr 10y agoIsn’t Florida plagued by alligators? A Venice-like canal city and alligators make for an interesting mix.
- bpicolo 10y agoAlligators are mostly just fresh water. They can sort of survive brackish / a bit of salt but they're not as versatile as crocs.
- Avshalom 10y agoUnfortunately that opens the door for invasive saltwater crocodiles. While alligators are mostly super chill crocs are total dick bags.
- bpicolo 10y agoYeah. If I remember right there were a couple reports of crocs in South Florida over the years, though certainly no major issue
- flukus 10y agoBut then sea level rise will fix the issue. If cities are sticking out like islands then it doesn't leave much habitat for crocs.
- Camillo 10y ago
- will_brown 10y agoIt is a long title as is, but should read Miami Beach. Rising sea levels are an interesting question for barrier islands like Miami Beach and Florida as a whole. Though its important to also understand some of these articles unfairly paint sea level rise and climate change as responsible for a new phenomenon, the truth is Miami Beach has always flooded (during full moons water can rise right up through the ground). Not to mention Hurricanes, but truthfully Miami Beach has been sparred for the most part considering all the potential direct hits over the years and the fact that Andrew was a relatively dry hurricane. Al things considered, the engineering has always been impressive and continues to improve, just look at pre/post Hurricane Andrew codes. Does the Miami Beach flood, sure, but no more than say Charleston, South Carolina. Or have you ever drove on a road that wasn't cracked in NOLA because the salt, (its actually below sea level), Miami Beach doesn't have that issue. I will say this about the article, it doesn't even bother pretending or discussing how Miami Beach/Miami/Florida might position itself to take a leadership position issues of climate change and sea level rise. Moreover, there is almost an acknowledgement and reading between the lines of the money going into development as a scam on foreign investors...personally, I think that is pretty far off, but I can't help but admit such a fraud would be so Miami that it would be poetic.
- bubbleRefuge 10y agoYou are so right. We've allways had water come in on high tides. The risk is hurricanes and storm surge, that is why flood insurance is so high on miami beach. (BTW its feels like hurricane frequency is in a downtrend) I just purchased a place on the intercoastal waterway in miami beach after selling my palce in west broward burbs. Flood insurance is around $2500 per year. Windstorm/Homeowners is $4500. Burbs was like 350 per year for flood.
- toomuchtodo 10y ago> The risk is hurricanes and storm surge, that is why flood insurance is so high on miami beach. This nails it. Miami Beach real estate values will decline as soon as insurance companies throw up their hands and refuse to insure the losses. Can't insure, can't finance a property.
- KingMob 10y ago> they might be right on sea-walls, pumps and other mitigation methods Unfortunately, Florida will have an even harder time than most in mitigating rising sea levels, because the ground is heavily porous limestone. The sea can literally bubble up from below through the ground, and nothing short of dropping a state's worth of granite will help once the sea level rises high enough. Miami should prepare to become America's Venice in 100 years.
- mmaunder 10y agoSame in Seattle in the late 1800's. > While a destructive fire was not unusual for the time, instead of rebuilding the city as it was before, the response of the city leaders was to make two strategic decisions: first, that all new buildings must be of stone or brick, as insurance against a similar disaster in the future; and second to regrade the streets one to two stories higher than the original street grade. Pioneer Square had originally been built mostly on filled-in tidelands and, as a consequence, it often flooded. The new street level also assisted in ensuring that gravity-assisted flush toilets that funneled into Elliott Bay did not back up at high tide. https://en.wikipedia.org/wiki/Seattle_Underground https://en.wikipedia.org/wiki/Seattle_Underground
- adevine 10y agoThe answer to this question is quite simple, and the two choice sentences from the article: "And their time frame is what, five years? How do you reconcile those two things: It’s a 100-year problem and a five-year investment cycle." The answer is simply that the private equity firm does not account for the long term, but that the city of Miami Beach will have to—soon. And that is fundamentally what makes climate change so difficult to deal with. The economic incentives, which only really look 5-10-15 years out, can't respond to consequences that are 50-100 years out, and by then it's really too late.
- graaben 10y agoExactly. It reminds me of the "I'll be gone, you'll be gone" mentality of Wall Street in the mid-2000s. As long as these new developments are sold to buyers/investors now, the risk is transferred away from the developers and their incentive to build remains. And the demand isn't going to dry up any time soon with tons of cash from South America coming into Miami every day. There will be a day of reckoning soon when the next major hurricane hits and all of these new developments are damaged beyond repair. Miami got very lucky with Matthew a few months ago, but the next one is really going to hurt today's buyers.
- cr0sh 10y ago> And that is fundamentally what makes climate change so difficult to deal with. The economic incentives, which only really look 5-10-15 years out, can't respond to consequences that are 50-100 years out, and by then it's really too late. On the global level (let's say 50-100 years out), do you think we as a species are headed toward an "Easter Island" effect, where we "whistle past the graveyard" and assume everything is "fine" - until it isn't - and at that point we can't do anything and have to deal with the potentially existential consequences?
- eli_gottlieb 10y agoAt the moment, yes we are.
- anexprogrammer 10y ago
- wehadfun 10y agoBecause they like Miami and want to build something there. They could put an Armani Hotel in Nashville or Indianapolis but those cities are not cool.
- VLM 10y agoA closer analogy would be New Orleans, which is already below sea level.
- cityandtech 10y agoIt will probably take a single expensive disaster to change behaviours.
- johan_larson 10y agoThat's my bet. Some time in the coming fifty years we will lose the first city to rising water. There will be attempts at mitigation, but they will fail either for lack of money or know-how. And after that we will think differently about this problem. It could be Miami. It's certainly low-lying enough, and big enough to count. But it's also in the United States, which has a lot of money to throw at problems. Some city in a poorer country would be a better bet.
- pixl97 10y ago> Some time in the coming fifty years we will lose the first city to rising water. We've lost cities in the past due to hurricanes (which I count as a type of rising water). http://www.uh.edu/engines/epi865.htm http://www.uh.edu/engines/epi865.htm Galveston would have disappeared decades ago, until they lifted it and built a seawall. We throw a lot of money at the problem of the ocean. The issue is, sea level rise or not, the ocean will always win unless a constant stream of money is continually pumped into defense. TL;DR don't live near the ocean.
- maxxxxx 10y agoUnless they can push the cost onto taxpayers. People with oceanfront property usually are pretty well off/have influence.
- siculars 10y agoKatrina wasn't it?
- rospaya 10y agoThey're counting on the city, state and national government to bail them out at some point. Not a literal money bailout, but a "save the citizens" campaign to build massive dykes, move buildings or invest in pumps.
- xkcd-sucks 10y agoA literal bailout in its original sense of removing out water
- drcode 10y agoRelevant xkcd: https://xkcd.com/558/ https://xkcd.com/558/
- rm_-rf_slash 10y agoMiami speaks money; the other languages are secondary. The wealthy very much like Miami and even if rising tides make Miami Beach uninhabitable then at worst it's a hit to their portfolios, not a collapse of their assets. The party keeps going until it stops.
- xapata 10y agoInvestors assume that Miami is too big to fail. The government bailed out (most of) the financial firms in 2008. Bailing out (figuratively and literally) flooding cities will be a popular plan when the time comes. Just as with the housing collapse, the question will be whether the government bailout will successfully resolve the crisis.
- __derek__ 10y agoExactly. The answer is moral hazard. As long as it's possible to keep Miami dry, post-Katrina New Orleans basically guarantees that Miami and similar will see a massive influx of money to rebuild. Once these properties are physically/financially underwater, the corporate bailouts effectively guarantee that they'll be made whole-enough. Meanwhile, they get to make money off of the buildings.
- cylinder 10y agoWhy would developers care? They build, and they sell the units and move on. They are not long-term holders, and they are not even using their own money. You could tell them Miami will be nuked ten years from now and they will still develop new properties.
- pklausler 10y agoWhat's the best way to short this impending collapse in valuations?
- ChuckMcM 10y agoI wonder if this could be considered an opportunity. Let's say for the sake of argument that Miami Beach will be gone 20 - 50 years, subsumed by rising sea levels. Can you build a structure now, while it is above sea level, that in a post sea level rise will be really nice? First suspend the building on pylons that are sunk all the way down to bedrock, second design it so that as an "island" it has great access, an easy Marina attachment, a helipad on top (for example). And then make it reasonably self contained (internal shops for transacting supplies, and entertainment). And finally give it oil platform like stamina against hurricanes and storms. Sort of planning for a post apocalyptic refuge today.
- yourapostasy 10y agoIf you use pozzolan concrete reinforced with basalt, then the reinforced concrete part will last. There is a lot of research on building a "cloak of invisibility" against ocean waves. Earliest I saw about this was back in the 1990's or early 2000's I think, with some Japanese researchers who were the first I recall proposing what is now commonly cited as a discovery in 2008 by UK and French researchers [1]. It would be interesting if the building design can take the large wind loads and use the energy to create and store hydrogen, perhaps re-direct the wind to anchor the building even more if that is a structurally sound approach. https://www.newscientist.com/article/dn14829-invisibility-cloaks-could-take-sting-out-of-tsunamis/ https://www.newscientist.com/article/dn14829-invisibility-cl...
- harryh 10y agoA simpler way might be to purchase land that is currently not beach front, but might become beachfront in the future and, hence, rise in price. I suppose that might be tricky to predict though.
- roel_v 10y agoHow could such a thing be financed? If your value proposition is 'I have this apartment for sale/rent that's twice as expensive as the others, but in 20 years time you'll have dry feet' - I'm not sure who would buy such a thing. Preppers would move to the boondocks in Montana anyway.
- SmokyBourbon 10y agoThe doomsday predictions have been entirely wrong for the last half century. Why start believing them now?
- at-fates-hands 10y agoLots of talk about rising sea levels, but did anybody stop to consider it could just be sinking?
- throwaway98237 10y agoWhy is humanity still pumping unsustainable levels of greenhouse gases into the atmosphere when all the science points to that being a road that leads to catastrophic consequences which we can't predict?
- stoic 10y agoInertia
- jcranmer 10y agoWhat would you, personally, give up to make that happen?
- Johnny555 10y agoFor what it's worth, I've given up my car (I live within easy biking distance of work), live in a small townhouse (heating costs $20/month in the winter thanks to good insulation and neighbors eliminating heat loss to the sides). I purchase few goods, and try to keep most things as long as possible. Most of my entertainment/shopping is within walking/biking distance. I try to limit waste and compost/recycle everything I can. My electrical usage is so low that I don't think installing solar would be a net win in carbon emissions. Based on various calculators, my carbon footprint is about half that of a typical American. Now can I ask for a 28% decrease in carbon emissions?
- loader 10y agoI gave up meat (except fish) 13 years ago. Not because of climate change but I keep it going in part because of it now. Look into how much water and food you need to grow cows.
- throwaway98237 10y agoI'm vegan. I ride public transit when possible, and moved next door to my job so I don't need to commute on a daily basis, I buy used whenever possible, and try not to buy stuff I don't need. I take carbon into consideration when making holiday plans (a few plane rides can double a persons carbon footprint). I compost. Future changes I'm trying to make include going to local farmers market and growing more of my own food, switching to solar power. But, realistically, I'm only one person. If everyone went vegan today, gave up cars (for bikes) and planes (for electric trains), and we started growing 51% of our food locally we'd be well on our way to meeting carbon emission reduction goals. The technology has been around for awhile. The will to make the choices has not. Which is why, I'm a pessimist on these issues.
- anigbrowl 10y agoThere's a sucker born every minute. I could sell any property in Miami with ad copy like 'One investment designed to make a liberal's head explode.' FEC records for this election are going to be a goldmine for fraudsters.
- Spooky23 10y agoA: Because lots of available capital drives dumb real estate decisions. Always. Real estate is unique because it's value is realized over long periods of time and it's easy to get mortgages. In my area, they're building massive gluts of apartments and condos. The dumb money -- mostly smaller regional banks trying to break into commercial lending are leading the deals, and the bigger or more sophisticated banks stay away. That's a big reason why you have extreme boom/bust cycles, special tax rules, etc.
- ocschwar 10y agoFor the same reason why investors participate in bubbles they know are bubbles: because they think they can get out in time. If you can sell the last apartment in a condo tower, who cares that a day later the rising tides rust out the elevator components?
- frakr 10y agoIt would be interesting to know if this type of behavior would continue if the federal government stopped subsidizing flood insurance in these areas: http://www.pbs.org/wgbh/frontline/article/can-femas-flood-insurance-program-afford-another-disaster/ http://www.pbs.org/wgbh/frontline/article/can-femas-flood-in... I don't really understand why tax dollars are being spent on this type of thing.
- jondiggsit 10y agoBecause Miami is awesome?