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Working Paper: Adaptation, Sea Level Rise, and Property Prices in the Chesapeake Bay Watershed

Paper Number: 2015-02

Document Date: 02/2015

Author(s): Patrick J. Walsh, Charles Griffiths, Dennis Guignet, and Heather Klemick

Subject Area(s): Economic Damages/Benefits; Recreation; Valuation Methods; Risk Assessment; Renewable Resources and Conservation: General; Water Resources; International and Global Issues: General; Climate Change; Population

Keywords: sea level rise; hedonic regression; coastal resources; environmental economics; benefit-cost analysis; valuation

Abstract: While the mean global sea level has climbed by an average of 3.2 mm/year since 1993—and is projected to increase another 0.18 – 0.82 meters by 2100—coastal populations have continued to expand. Coastal communities may be compelled to adapt to these competing forces, and at an increasing frequency in the near future. This paper explores the property price impact of several adaptation structures that can help bolster the shoreline and protect homes from sea level rise (SLR) in Anne Arundel County, MD. Our study uses a novel dataset on coastal features that is very spatially explicit, and contains the location of all adaptation structures. We also use maps of SLR zones to explore how property price impacts vary depending on vulnerability to sea level rise.

Results indicate that sea level rise and adaption structures, such as bulkheads and rip-raps, can have a significant impact on waterfront home prices, with the impact varying across risks and type of adaption structure. A home located in the most threatened SLR zone that is unprotected by an adaptation structure sells for 19-23% less, on average. On the other hand, homes in threatened SLR zones with certain adaptation structures see a 21% increase in property price, approximately compensating for the threatened location. Since sea level in the Chesapeake Bay is projected to rise approximately two feet over the next century, the results here suggest that property markets are incorporating this information. Our results should be useful to policy makers, developers, insurers, and other parties involved in coastal management, who trade off the costs and benefits of development and adaptation.

This paper is part of the Environmental Economics Working Paper Series.

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