Rising seas could leave towns abandoned

Article originally published in Mortgage Finance Gazette on 16th June 2022

Recently, Sir James Bevan gave a speech saying the growing threat of rising seas and rivers means we will not be able to defend homes with walls of concrete (Sir James wants to move away from “carbon-intensive material” like steel and concrete).  Instead we should give up and let them be swallowed by the encroaching waters.

He said some coastal communities will have to be moved away from danger caused by the ‘inevitable impacts of a rising sea level’.

“In the long term, climate change means that some of our communities… cannot stay where they are” he said.  On adapting to rising sea levels, he continued, “While we can come back safely and build back better after most river flooding, there is no coming back for land that coastal erosion has taken away.’

Fairbourne in Wales is a useful example of a community under threat from rising tides.  The local council has told the community, which has around 410 homes, that it will only keep sea defences going until 2050, and will start to ‘decommission’ the village before then, moving households out.

The abject surrender to climate change represented by planned abandonment of Fairbourne is not a one-off.  Sea levels around the UK have risen by 15.4cm since 1900, and the Met Office predicts modern levels could increase a further 1.12m by 2100.  Less sparsely populated rural communities are threatened, certainly, but also those that have an active tourist trade, like Mundesley and Happisburgh in Norfolk.  The rising seas are also accelerating cliff erosion and landslips along the south coasts of Sussex and the Isle of Wight.

Large swathes of agricultural land are already being given up through a process called “managed retreat”, rendering once productive land useless as salt water encroaches.  Coastal floodplains around much of the east and south coast of England, Severn Estuary,  west of Wales and north-west England could be hit.  Our modelling predicts that the number of properties at risk from coastal erosion will rise from 10,800 to some 97,000 by 2080 – an increase of almost 900 per cent.

The Environment Agency’s strategy to help get the nation ready for flooding and coastal change focuses on, as Sir James put it,  “long-term investment scenarios to better inform future decisions as part of a £5.2billion investment by 2027.”

It’s interesting that he’s brought up cash.  Because, fundamentally, this is about money – something of which the Environment Agency is in ongoing, desperate need.  It’s stretched just investigating the water companies polluting our rivers on a routine basis – to the extent that many feel it isn’t safe to swim in our rivers, lakes, and off many of our beaches.

The lack of funds also explains why the Reading and Caversham Flood Alleviation Scheme was cancelled last year.  Tight budgets leave the Environment Agency in a position to identify areas that they cannot afford to protect.

What does this mean for lenders?  It means loans set against properties that will be affected by climate change could become the new subprime mortgages.  The value of the security will fall.  Equity will be lost.

Lenders can help themselves by doing three things.

First, they need to mandate screening for climate change threats to every residential property transaction for five, ten, and 30 years into the future.  Extending credit on properties that will be worth so much less within 25 years could do more harm than good.

Second, lenders will need to understand the cost of mitigating the effects of climate change on residential property they have already leant against.  While back book analysis has been undertaken, lenders have only done so for compliance on overall stress test leverage – and only based on the here-and-now.  Going through back books is the only way to gain comfort on existing loans and establish which properties were underwritten in the past without insight into the risks posed by climate change in the future.

And third, lenders need to review and update the advice they provide in the Conveyancing Handbook (and in conjunction with guidance from professional societies including The Law Society, RICS and environmental and climate data providers like Groundsure already working with lenders to manage these risks).  Conveyancers can then use clear data as part of their duty of care to clients to flag potential issues and offer advice to borrowers on how to handle those issues.  This advice needs to be tailored to the physical and transitional risks lenders are being directed to consider as part of lenders’ own due diligence.

The “inconvenient truth” is that it’s down to lenders to make their own luck.  The officials in charge of Britain’s flood protection are not going to ride to your rescue.