If 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.<p>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.
The answer to this question is quite simple, and the two choice sentences from the article:<p>"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.<p>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.
Investors 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.<p>Just as with the housing collapse, the question will be whether the government bailout will successfully resolve the crisis.
They'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.
Why 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?
See also: "Goodbye Miami" from 2013 <a href="http://www.rollingstone.com/politics/news/why-the-city-of-miami-is-doomed-to-drown-20130620" rel="nofollow">http://www.rollingstone.com/politics/news/why-the-city-of-mi...</a> and "The Siege Of Miami", 2015 <a href="http://www.newyorker.com/magazine/2015/12/21/the-siege-of-miami" rel="nofollow">http://www.newyorker.com/magazine/2015/12/21/the-siege-of-mi...</a>
Why 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.
I 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.<p>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.<p>Sort of planning for a post apocalyptic refuge today.
It would be interesting to know if this type of behavior would continue if the federal government stopped subsidizing flood insurance in these areas: <a href="http://www.pbs.org/wgbh/frontline/article/can-femas-flood-insurance-program-afford-another-disaster/" rel="nofollow">http://www.pbs.org/wgbh/frontline/article/can-femas-flood-in...</a>
I don't really understand why tax dollars are being spent on this type of thing.
A: Because lots of available capital drives dumb real estate decisions. Always.<p>Real estate is unique because it's value is realized over long periods of time and it's easy to get mortgages.<p>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.<p>That's a big reason why you have extreme boom/bust cycles, special tax rules, etc.
For the same reason why investors participate in bubbles they know are bubbles: because they think they can get out in time.<p>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?
Miami speaks money; the other languages are secondary.<p>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.<p>The party keeps going until it stops.
There'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.
Because they like Miami and want to build something there.<p>They could put an Armani Hotel in Nashville or Indianapolis but those cities are not cool.