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The Surfside Collapse: A Human Tragedy. Game Changer for Florida Real Estate?

The elephant in the room: will the Champlain Towers collapse prove to be the catalyst in the Miami real estate market both in the short and long term?

Screen grab from Youtube.

While this is tragic on the human and individual level, there is little doubt that there are also wider implications for the Miami, and Florida in general, real estate market. The Champlain Tower collapse is a portent of a situation that will inevitably evolve in the short term and long-term prospects of the Miami real estate market. This is for a number of reasons; in the short-term it may be the fear factor, in the long-term, the consequences of the sea level rising.

Let me start by expressing my horror at the enormity of the tragedy that happened in Surfside with the collapse of the Champlain Towers condominium building. The loss of so many lives is impossible to comprehend. And while we don’t yet know the cause, or causes, of the tragedy, we already suspect that while some may have been beyond human control, at least one was due to the negligence of the Champlain management that failed to act on warnings. For years they knew that serious repairs were necessary, but they had put them off.  The agencies that have oversight of the building codes and re-certification process are also to blame for letting the warnings slide.

Those repairs had been estimated as a multimillion-dollar job; three and a half years after Frank Morabito had inspected the building and issued his report, they had not started. It is understandable that the residents balked at the $12 million dollar assessment, (as much as $200,000for each unit) but the fact is that the tower did collapse before the much-needed repairs might have prevented it. In July of 2020, Roof Surveys of Pompano Beach, Florida examined the roof of the Champlain Towers and found that, “significant subsurface water was detected within the building’s roof systems”. The most serious damage was located in Section 2 of the edifice, the same one that collapsed first.

The money issue is not negligible–it never is in real estate. That figure had escalated to more than $16 million by April 2021 and the condo association only had $707,003 cash available.

No one knows exactly why the tower collapsed, there are many theories: the rebar was cracked due to the water damage; the rebar was missing sufficient steel in places ; it was under the specified strength (5-bars instead of 6); the ground had been sinking steadily for the past 30 years; the water table has been rising in the Miami area and is leading to subsidence; lax enforcement of building codes and inspection allowed management to avoid compliance.

The Champlain Towers in the sales advertisement when it opened. Photo: Miamicondolifestyle.com

While this is tragic on the human and individual level, there is little doubt that there are also wider implications for the Miami–and Florida, in general–real estate market. The Champlain Tower collapse is a portent of a situation that will inevitably play a crucial role in the short term and long-term prospects of the Miami real estate market. This is for a number of reasons; in the short-term it may be the fear factor, in the long-term, the consequences of the sea level rising.

Condo owners are now fearfully eyeing their own buildings and units; some have already left; others are pressuring their building management to do more diligent inspections. One owner advises: “It really points out again how important it is to buy into a building that is a good building, meaning it was well planned with a good developer.” But we wonder, how can you know what is a good building and who is a good developer?  Similar buildings are now being inspected ASAP and a few have already been evacuated. This is not reassuring to those who live in the area.

Clifford Rossi, former senior risk management assessor at Fannie Mae and Freddie Mac, has stated that this disaster, “will certainly have buyers [who are] interested in buying into the condo market down there — and other Florida cities, for that matter, that are located close to the shore — to think twice about purchasing a property…People will start associating similar types of properties in similar types of areas to what happened.”

Climate change has already been playing a decisive role in the Florida real estate market. According to the E&ENews, “Homebuyers in the Miami area have shown signs of wariness in recent years about the prospect of buying climate-threatened homes.” The Florida coasts are obviously in the “front line” of the threat from climate change. This collapse, even if it turns out to be unrelated to the rise in water tables or sea levels, is bound to exacerbate that fear. Specifically, in the Miami area there is a phenomenon that has been dubbed “climate gentrification” as wealthy investors displace low-income residents in neighborhoods at higher elevations. Furthermore, there is the reality that in the wake of such disasters, homes lose value, setting off a chain reaction of flight from risk.

Add to this the increased severity and frequency of hurricanes and tropical storms and the mounting awareness of global warming and its threats to life and property, and it’s not a stretch to predict that the long-established cachet associated with “beachfront property” is now becoming a liability rather than the asset that it has been.

Miami streets flooded on a sunny day. Photo: Wikimedia Commons

Sea captain Dan Kipnis explains in the documentary, “Rising Seas in South Florida”, that having lived in Miami for 55 years all the small changes that he has witnessed over time have now accumulated to being big changes. The results are now docks that have disappeared, streets that flood to a depth of a foot or more when it hasn’t even rained, more frequent torrential rains and water that overtops seawalls.

Katy Sorenson, President and CEO of the Good Government Initiative at the University of Miami acknowledges that “no one wants to pay increased taxes or fees, but if people want to live here, we have to make the investments… to the infrastructure systems”. That means things like retrofitting storm water systems, water treatment plants, the pump systems, and yes, even preventing new developments in vulnerable coastal sites.

The Champlain Tower disaster may also lead to municipalities and building departments placing increased scrutiny on safety and inspections. This will surely mean more repairs, in order to ensure that the kind of negligence that indirectly led to the collapse will never happen again. Increased scrutiny and repairs in condos mean higher maintenance fees that will inevitably raise the price of living in such a building.

Will that make it a less desirable property? And concomitantly, will the dampening of interest in high-rise properties lead to an increased desirability for low-rise buildings and single-story homes?

These are all questions that we can’t answer at present, but they are the elephant in the room—especially for real estate agents and managers who right now refuse to even think about them. One thing that I’d be willing to bet on is this: the tragic Champlain Tower collapse will be a catalyst in the Florida real estate market.

 

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