Homeowners face managed retreat as climate risks worsen

Relocating homeowners is often the most viable solution to climate-related risk. The approach heads off future risks, but it can be a hard sell

In May 2022, footage of a North Carolina beach house toppling into the sea went viral. 

The owner had bought the property just two years before for $275,000, and its collapse was a stark illustration of how the climate crisis could impact coastlines around the world. 

The clip could be seen as an example of ‘unmanaged retreat’, a growing threat due to rising sea levels, accelerated erosion and increased storm frequency. It would clearly be better to take a pre-planned, ‘managed’ approach to relocating from such high-risk areas. But what does this mean, exactly, and what are the challenges involved? 

Managed retreat is the practice of abandoning, or completely relocating, occupied property built on areas with high climate-related risks, such as coastal or flood-prone land. A 2018 report by the UK Committee on Climate Change stated that 4% of existing homes are at 0.5% or greater risk of annual flooding by 2080. The projected economic damage from flooding and erosion means 33-41 miles of coastline won’t be worth defending this century. 

However, selling the idea of managed retreat to the people whose homes are in focus is no easy task.

“At the heart of it, there’s a decision to be made as to whether somewhere is worth protecting or no longer economically viable, and nobody wants to be told their home isn’t worth saving,” says Bob Ward, policy director at LSE’s Grantham Institute of Climate Change and the Environment.

Managed retreat and insurance

Governments around the world, including the UK, have focused on building hard defences against floods or rebuilding immediately in the wake of a disaster, Ward notes. “But should we rebuild or use it as a signal to ask people to move away?”

The biggest challenge is securing buy-in from a community, according to Gary Griggs, distinguished professor of earth sciences at the University of California, Santa Cruz. In California, the task is especially acute as coastal properties tend to be some of the most expensive in the state. 

“The idea is very foreign to wealthy homeowners, they have no interest in it at all,” says Griggs. “But we cannot hold back the ocean. So it will either be a managed retreat or an unmanaged retreat.”

Until now insurance policies in the UK have not incentivised homeowners to favour managed retreat after flooding. For example, Ward points to Flood Re home insurance, an initiative from the government and insurers to make flood cover more affordable. This has essentially been “an unspoken subsidy” for homes in high-flood-risk areas, he says. “It was effective, so there was no pricing signal to the property owner that they were in a place that was at high risk of flooding.”

It’s a similar story in the US, where Griggs cites problems with the National Flood Insurance Program (NFIP) from the Federal Emergency Management Agency. The NFIP offers subsidised home insurance rates for properties considered too risky for commercial insurers. However, these rates haven’t been updated since the 1970s, again encouraging residents to stay put and rebuild, rather than move away. “They’ve finally gotten to the point of redoing their insurance rates to reflect the real losses because the programme has gone billions of dollars in debt year after year,” he says.

When Hurricane Sandy hit New York and New Jersey in 2012, the government bought out some of the coastal homeowners whose properties had suffered flooding and paid for their relocation. The owners could then rent out the house until it was no longer usable. 

The scheme was well received, but Griggs notes that the homes were only worth $200,000-$300,000, whereas in parts of the US, such as California, houses can cost up to $40m. Neither the state nor central government has the finances or inclination to cover such properties. 

Next steps

Homeowners can redesign their properties to mitigate flood risk. For example, they could build on stilts or make the lower floors entirely waterproof with no electrical sockets, as sometimes seen in the Netherlands, according to Ward, where there isn’t a tradition of insuring flood-risk properties. However, he says no new properties should be built in areas that are high risk or will become high risk in the next 80 years.

What about existing at-risk properties that were built before the climate crisis was a factor? “You need to design a scheme which recognises and then fairly distributes the costs,” Ward says. This includes the costs of the loss of property but also the costs of relocating in the most effective way. “We need a societal response, and insurance ought to be part of that conversation.”

He insists on the need for a proper protocol, rather than waiting until disaster strikes. The latter scenario is very distressing. It involves an ad hoc process which generally involves those affected bearing the cost, followed by large compensation schemes.

“Any kind of economic analysis shows that’s the most expensive option of all.” If managed retreat is done properly, with conversations starting perhaps 20 years in advance, it offers a more economically viable and less upsetting process, he believes. 

“You need the community involved and to set a threshold they can agree on,” says Griggs. For example, when a house is flooded once a month or when the cliff comes to within two metres of a front porch. 

It’s not about suddenly stopping the investment that’s in place, says Ward.  “You have an investment profile that says we’re gradually going to reduce investment over time and we’re no longer going to be maintaining the defences after this point, the roads after this point,” he says. 

This is exactly what’s happened in the Welsh village of Fairbourne, where the local council has said it can’t afford to keep maintaining sea defences at a cost of £19,000 a year. The village will be gradually decommissioned and returned to marshland by 2054.

Government action 

It is difficult for the government, which is in the process of drafting a new National Adaptation Programme, says Ward. However, it needs to act. 

“Unless it’s under pressure to grapple with this, the government has not shown a great enthusiasm to get involved,” he says. “We don’t have a coherent strategy that emphasises good decision making and risk management. Central government doesn’t have to bear all the costs itself but it has to be the convening power to bring together all the different stakeholders.” 

And if homeowners still want to take on the risk? “Your premiums would go up, the price of your property would go down and then at some point you wouldn’t be able to get insurance,” he says. “But you can’t continue to have a system where not knowing the risk is a better situation.”