Breaking Legal News in Hawaii: Home Sellers Must Now Disclose Sea Level Risks

Partial underwater image of a beach in Hawaii with lots of palm trees in the background.

It’s a sign of the coming times. Hawaii’s Senate Bill 474 has amended the state’s flood hazard disclosure rules for residential real estate. Disclosures now must include sea level rise exposure, in alignment with hydraulic and hydrological data from the Hawaii Climate Change Mitigation and Adaptation Commission.

Gov. David Ige signed the bill on July 2, 2021. One of the other bills signed on the same day was House Bill 243, which directs state agencies to take sea level rise into account in infrastructure plans.

These bills are among the latest steps Hawaii has taken to meet the goals of its 2050 Sustainability Plan and the capacity of future generations to thrive.

A Material Fact Impacting Property Values

Real estate purchases are considered, by most buyers, as channels for income or rising equity. That assumption can be eroded by climate change. Certainly, it is being eroded in Hawaii, where the sea is expected to rise more than three feet from its 2019 level by 2050. People who take out a 30-year mortgage today will face that date within the life of their loan. And that rise will take place inch by inch, every year.

The state’s Climate Change Mitigation and Adaptation Commission has been working since 2017 to label the areas most vulnerable to change, and connect the data with the county tax parcel databases. According to the Commission, property values in these vulnerable areas will experience gradually worsening impacts. The Hawaii Association of Realtors agrees that this is a material fact for property sellers to disclose.

What about other states? Even as rising seas erode the coasts, they push floodwaters inland. This is the case not just in Hawaii, but across the continental United States.

For property disclosures related to flood hazards in general, the National Association of REALTORS® keeps a running survey covering the entire country. So far, most U.S. residents are unable to request a flood history for their properties, or for homes they might want to buy. Many people aren’t even aware of the issue. But that will change. Rising inland waterways indicate that millions of households will soon be dealing with serial flood events. Is Hawaii charting a path for others to follow?

The Need for Greater Transparency

As climate disruptions continue, the Natural Resources Defense Council (NRDC) points out, “the need for greater transparency of flood risks will become only more imperative.” Temperatures of the world’s lakes are rising .61°F per decade. It seems the Great Lakes are rising with them. Owners of lakeshore properties are concerned about the strengthening storms. Weather events are known to become harsher and more frequent year after year on account of human-driven climate disruptions.

The southern U.S. housing market is demonstrably affected by climate-related flooding, writes the NRDC. Research by Prof. Jesse M. Keenan of the Tulane University School of Architecture shows that banks are insisting on down payments as high as 40% to offset the risk of underwriting coastal homes. Then the banks sell the loans to Fannie Mae and Freddie Mac. Sellers are lowering their prices to persuade buyers to put the high payments down.

What can halt or slow the devaluation spiral? ReBuild NC is one answer. Created by the North Carolina Office of Recovery and Resiliency, the initiative has identified “Buyout Zones” where it’s offering homeowners fair-market value and $5,000 – $10,000 in moving costs. Participants can give up their homes and simply leave at-risk areas. Then, the state will turn their land into green spaces, fortifying coastal resilience.

The Role of Insurers

Floods are not covered by standard homeowners’ insurance. There are a few private flood insurance companies. The Florida Peninsula Insurance Co. is an example of an insurance firm offering full policies that cover flood damage, as well as flood endorsements for policies. And Florida’s TypTap offers private flood coverage for residents of several states, including Florida, South Carolina, Maryland, New Jersey and Pennsylvania.

The Federal Emergency Management Agency (FEMA), part of the U.S. Department of Homeland Security, is the nation’s default flood insurer. It runs the National Flood Insurance Program (NFIP). The National Flood Insurance Program has a few issues:

  • The Program owes the U.S. Treasury $20.5 billion.
  • Updated research shows many more U.S. homes and businesses at serious risk of flooding than FEMA’s maps would indicate. Thus, many at-risk properties don’t qualify for FEMA insurance.

Insurance industry groups are attempting to fill in safety gaps. Fortified, for example, is an initiative of Insurance Institute for Business & Home Safety (IBHS). Collaborating with state underwriting associations, this initiative offers financial assistance to help eligible households replace older roofs with wind-resistant options.

Inspired by international traditions, architects in North America are designing floating and “amphibious” houses as one answer to rising sea levels along the coasts. Here’s how to buy floating real estate.

Meanwhile, in California…

San Diego’s waters are rising at a rate 32% higher than the global average (which is 70% of an inch per decade). What sections of the coastline are most vulnerable to risings seas? The city’s coastal erosion vulnerability assessment shows the clear direction of the changes and risks. Yet in California, as in most places in the United States, sellers are not legally bound to disclose coastal flooding or sea level risks to potential buyers.

Policy has to keep up with the science. Rather than leaving people uninformed, states will need to update disclosure rules to account not just for present flood risks, but also for climate-related exposures to rising waters over time. Such steps raise everyone’s awareness, and help home buyers make more educated decisions about the risks of the real estate we buy.

Supporting References

Hawaii Senate Bill 474: Residential Real Property Transactions; Mandatory Seller Disclosures; Sea Level Rise Exposure Area (31st Legislature, 2021).

Office of the Governor News Release (Hawaii): Governor Ige Signs Suite of Bills to Help Reach Goals of Updated Hawaii 2050 Sustainability Plan (Jul. 2, 2021).  

Janis L. Magin for Ige Signs Hawaii Sea Level Rise Bills Into Law (Jul. 2, 2021). 

Janis L. Magin for Bill Would Require Hawaii Home Sales to Disclose Sea Level Rise (May 4, 2021).

Hawaii Climate Change Mitigation and Adaptation Commission: State of Hawaii Sea Level Rise Viewer, (Version 1.04, 2021). Prepared by the Pacific Islands Ocean Observing System (PacIOOS) for the University of Hawaii Sea Grant College Program and the State of Hawaii Dept. of Land and Natural Resources, Office of Conservation and Coastal Lands, with funding from National Oceanic and Atmospheric Administration Office for Coastal Management. 

Noe Tanigawa for Hawaii Public Radio: Planet808: Oahu Expert Says There’s No Way Around Sea Level Rise (Nov. 8, 2019).

Andrew Hurst for Flood Insurance Rate Increases: Here’s How Much You’ll Pay This Year (Mar. 8, 2021).

Jodi Helmer for the Natural Resources Defense Council Southeast Dispatch: Climate Change Floods North Carolina’s Housing Market (Oct. 6, 2020). 

MacKenzie Elmer for Voice of San Diego: Real Estate Sellers Aren’t Required to Disclose Sea Level Rise Risk (Aug. 24, 2020).

MacKenzie Elmer for Voice of San Diego: San Diego Calculated How Fast the Sea Will Rise, But Not the Cost (Mar. 30, 2020).

Photo credit: Jeremy Bishop, via Unsplash.