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Videographer: Marco Bello/Bloomberg
Palm Beach Billionaires’ Fix for Sinking Megamansions:
Build Bigger
Fast-rising home prices allow a ritzy island to attempt
climate adaptations few municipalities can afford.
By Prashant Gopal and Amanda L. Gordon
June 11, 2021
Thomas Peterffy became one of the world’s richest people by
mastering risk on Wall Street. Building his Mediterranean-style mansion seven
years ago on a vulnerable stretch of Florida’s Palm Beach Island was a matter
of seeing the odds clearly once again. The consequences of climate change will
play out over decades, and Peterffy is 76 years old.
“I don’t have a care about it at all,” he said over lunch at
Mar-a-Lago earlier this year, just down the street from his home. The founder
of Interactive Brokers Group has a fortune of more than $21 billion, according
to the Bloomberg Billionaires Index.
Thomas Peterffy, with Lynne Wheat, in Palm Beach in 2017.
Photographer: Nick Mele/Patrick McMullan/Getty Images
“If something needs to be done to save it,” he added, “it’s
not going to be my problem.”
The town of Palm Beach is busy adapting to the risks of a
warming planet, even if there appear to be fewer worriers among the buyers and
speculative builders on the island. Some of the lowest-lying properties in the
U.S. are seeing the highest-flying prices. The real estate website Zillow
estimates the value of Peterffy’s home at $52 million. This year a new
nine-bedroom mansion with toes-in-the-sand views sold to financier Scott
Shleifer for a record-breaking price in excess of $122 million.
Waterfront real estate prices are rising across the U.S. in
a frenzied pandemic-tinged market. During the first quarter of this year homes
at high risk of flooding sold for a record 13.6% premium over less risky homes,
according to brokerage Redfin. In Palm Beach the boom is being sustained by
participants with short horizons and the security that wealth provides.
Speculators are rushing to knock down the old and create spaces lavish enough
to justify surging prices, and buyers are lining up. It probably doesn’t hurt
that Florida law requires no disclosure by property sellers of past flood
damage.
A "For Sale" sign outside a house in Palm Beach, Florida, U.S., on Wednesday, April 7, 2021. Purchase contracts for single-family houses priced at $10 million or more surged 306% in March from a year earlier, the biggest gain since the pandemic started, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report. Photographer: Marco Bello/Bloomberg
In a frenzied pandemic-tinged housing market, "for
sale" signs abound in Palm Beach.
Photographer: Marco Bello/Bloomberg
Wrestling with the long-term consequences falls to the town
of Palm Beach, which is reliant on property-tax revenue in a state with no
income tax. Florida’s rising waterfront prices reliably fill government
coffers—for now. Violent storms and more frequent flooding threaten to
eventually wreck both home prices and municipal finances. The question is who,
in the end, will bear the cost.
For new arrivals, the calculation is simple: “Let’s build
this thing the way we want it,” said Michael John Vincent Spaziani, a property
appraiser and member of Palm Beach’s planning and zoning commission, of the
prevailing outlook. “If it gets dangerous, we’ll sell it and move somewhere
else.”
Billionaire Building Boom in Florida
Taxable value of new real estate construction on Palm Beach
Note: Data is for Town of Palm Beach and Includes new builds
and renovation, both residential and commercial.
Source: Palm Beach County
Explore dynamic updates of the Earth’s key data points
Open The Data Dash
The development of Palm Beach began with moneyed chancers.
In the late 1800s, railroad tycoon Henry Flagler began
turning the narrow barrier island’s swampy tropical landscape into an oasis for
the rich. By digging inlets, Palm Beach became separated from the mainland and
eventually connected to the Intracoastal Waterway system that stretches to
Boston. By the 1920s Palm Beach had become an established winter getaway, with
grand hotels and houses with coral limestone facades, terra cotta tiles and
tower lookouts. Locals developed pride in their historic architecture and the
natural beauty that brought the rich there in the first place.
A century later, in the middle of the Covid-19 pandemic that
nudged the restless rich out of locked-down cities, the historic pattern is
repeating itself. Wealthy newcomers are seeking homes with oversized windows
and open layouts. Some are establishing full-time residences rather than
seasonal retreats, complete with leased office spaces and kids enrolled in
local private schools.
There are modern-day differences. Nuisance flooding is
becoming common to the south in Miami and Fort Lauderdale, and some homes in
the Keys have already been made uninhabitable. While much of Palm Beach Island
is at higher elevation, the water and winds threaten to press in from all
directions.
Powerful king tides—a regular occurrence in the fall, with
water rising higher and lingering longer—are getting more severe and now seem
like a harbinger of what’s to come. Last October’s tides submerged boat docks
and brought calf-high waters to the Lake Trail, a popular path that takes
joggers past the mansions belonging to Charles Schwab and Henry Kravis. The
grounds of former President Donald Trump’s Mar-a-Lago club are vulnerable to intensified
flooding conditions.
A powerful king tide flooded the Lake Trail in October.
Photographer: Lannis Waters/Palm Beach Daily News/Imagn
Even the 75-room palace Flagler built for himself, now a
museum, puts down sandbags whenever heavy rain is in the forecast. But the town
is willing to do much more to help safeguard the next generation of homes
facing down flood risk.
To see a vivid example of this phenomenon, head to the end
of El Brillo Way, the site of an estate previously owned by the late Jeffrey
Epstein. In a white West Indies-style mansion with a pool overlooking a small
cove on the intracoastal, the disgraced financial adviser sexually assaulted
underage girls.
The building was bulldozed out of existence in April, and
even the address has now changed. That’s all thanks to real estate developer
Todd Michael Glaser.
He paid Epstein’s estate $18.5 million for the house in
March, and now he’s imagining the future. Glaser has drawn up plans for a new
house in the Art Moderne style, with curved corners, upper-story terraces with
bronze railings and enough bedrooms for up to 12 people. Inside will be
finishes of bleached driftwood and sand-blasted stone, while the outdoor spaces
will include a kitchen, hot and cold spas, and hammocks stretched between
coconut trees.
Glaser is building a new waterfront mansion designed by
architect Kobi Karp, replacing a now-demolished estate owned by Jeffrey
Epstein.
▼
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Videographer: Marco Bello/Bloomberg
Palm Beach Billionaires’ Fix for Sinking
Megamansions:
Build Bigger
Fast-rising home prices allow a ritzy
island to attempt climate adaptations few municipalities can afford.
By Prashant Gopal and Amanda L. Gordon
June 11, 2021
Thomas Peterffy became one of the world’s
richest people by mastering risk on Wall Street. Building his
Mediterranean-style mansion seven years ago on a vulnerable stretch of
Florida’s Palm Beach Island was a matter of seeing the odds clearly once again.
The consequences of climate change will play out over decades, and Peterffy is
76 years old.
“I don’t have a care about it at all,” he
said over lunch at Mar-a-Lago earlier this year, just down the street from his
home. The founder of Interactive Brokers Group has a fortune of more than $21
billion, according to the Bloomberg Billionaires Index.
Thomas Peterffy, with Lynne Wheat, in
Palm Beach in 2017.
Photographer: Nick Mele/Patrick
McMullan/Getty Images
“If something needs to be done to save
it,” he added, “it’s not going to be my problem.”
The town of Palm Beach is busy adapting
to the risks of a warming planet, even if there appear to be fewer worriers
among the buyers and speculative builders on the island. Some of the
lowest-lying properties in the U.S. are seeing the highest-flying prices. The
real estate website Zillow estimates the value of Peterffy’s home at $52
million. This year a new nine-bedroom mansion with toes-in-the-sand views sold
to financier Scott Shleifer for a record-breaking price in excess of $122
million.
Waterfront real estate prices are rising
across the U.S. in a frenzied pandemic-tinged market. During the first quarter
of this year homes at high risk of flooding sold for a record 13.6% premium
over less risky homes, according to brokerage Redfin. In Palm Beach the boom is
being sustained by participants with short horizons and the security that
wealth provides. Speculators are rushing to knock down the old and create
spaces lavish enough to justify surging prices, and buyers are lining up. It
probably doesn’t hurt that Florida law requires no disclosure by property sellers
of past flood damage.
A "For Sale" sign outside a
house in Palm Beach, Florida, U.S., on Wednesday, April 7, 2021. Purchase
contracts for single-family houses priced at $10 million or more surged 306% in
March from a year earlier, the biggest gain since the pandemic started,
appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in
a report. Photographer: Marco Bello/Bloomberg
A "For Sale" sign outside a
house in Palm Beach, Florida, U.S., on Wednesday, April 7, 2021. Purchase contracts
for single-family houses priced at $10 million or more surged 306% in March
from a year earlier, the biggest gain since the pandemic started, appraiser
Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report.
Photographer: Marco Bello/Bloomberg
A "For Sale" sign outside a
house in Palm Beach, Florida, U.S., on Wednesday, April 7, 2021. Purchase
contracts for single-family houses priced at $10 million or more surged 306% in
March from a year earlier, the biggest gain since the pandemic started,
appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in
a report. Photographer: Marco Bello/Bloomberg
In a frenzied pandemic-tinged housing
market, "for sale" signs abound in Palm Beach.
Photographer: Marco Bello/Bloomberg
Wrestling with the long-term consequences
falls to the town of Palm Beach, which is reliant on property-tax revenue in a
state with no income tax. Florida’s rising waterfront prices reliably fill
government coffers—for now. Violent storms and more frequent flooding threaten
to eventually wreck both home prices and municipal finances. The question is
who, in the end, will bear the cost.
For new arrivals, the calculation is
simple: “Let’s build this thing the way we want it,” said Michael John Vincent
Spaziani, a property appraiser and member of Palm Beach’s planning and zoning
commission, of the prevailing outlook. “If it gets dangerous, we’ll sell it and
move somewhere else.”
Billionaire Building Boom in Florida
Taxable value of new real estate
construction on Palm Beach
Note: Data is for Town of Palm Beach and
Includes new builds and renovation, both residential and commercial.
Source: Palm Beach County
Explore dynamic updates of the Earth’s
key data points
Open The Data Dash
The development of Palm Beach began with
moneyed chancers.
In the late 1800s, railroad tycoon Henry
Flagler began turning the narrow barrier island’s swampy tropical landscape
into an oasis for the rich. By digging inlets, Palm Beach became separated from
the mainland and eventually connected to the Intracoastal Waterway system that
stretches to Boston. By the 1920s Palm Beach had become an established winter
getaway, with grand hotels and houses with coral limestone facades, terra cotta
tiles and tower lookouts. Locals developed pride in their historic architecture
and the natural beauty that brought the rich there in the first place.
A century later, in the middle of the
Covid-19 pandemic that nudged the restless rich out of locked-down cities, the
historic pattern is repeating itself. Wealthy newcomers are seeking homes with
oversized windows and open layouts. Some are establishing full-time residences
rather than seasonal retreats, complete with leased office spaces and kids
enrolled in local private schools.
There are modern-day differences.
Nuisance flooding is becoming common to the south in Miami and Fort Lauderdale,
and some homes in the Keys have already been made uninhabitable. While much of
Palm Beach Island is at higher elevation, the water and winds threaten to press
in from all directions.
Powerful king tides—a regular occurrence
in the fall, with water rising higher and lingering longer—are getting more
severe and now seem like a harbinger of what’s to come. Last October’s tides
submerged boat docks and brought calf-high waters to the Lake Trail, a popular
path that takes joggers past the mansions belonging to Charles Schwab and Henry
Kravis. The grounds of former President Donald Trump’s Mar-a-Lago club are
vulnerable to intensified flooding conditions.
A powerful king tide flooded the Lake
Trail in October.
Photographer: Lannis Waters/Palm Beach
Daily News/Imagn
Even the 75-room palace Flagler built for
himself, now a museum, puts down sandbags whenever heavy rain is in the
forecast. But the town is willing to do much more to help safeguard the next
generation of homes facing down flood risk.
To see a vivid example of this
phenomenon, head to the end of El Brillo Way, the site of an estate previously
owned by the late Jeffrey Epstein. In a white West Indies-style mansion with a
pool overlooking a small cove on the intracoastal, the disgraced financial
adviser sexually assaulted underage girls.
The building was bulldozed out of
existence in April, and even the address has now changed. That’s all thanks to
real estate developer Todd Michael Glaser.
He paid Epstein’s estate $18.5 million
for the house in March, and now he’s imagining the future. Glaser has drawn up
plans for a new house in the Art Moderne style, with curved corners,
upper-story terraces with bronze railings and enough bedrooms for up to 12
people. Inside will be finishes of bleached driftwood and sand-blasted stone,
while the outdoor spaces will include a kitchen, hot and cold spas, and
hammocks stretched between coconut trees.
Glaser is building a new waterfront
mansion designed by architect Kobi Karp, replacing a now-demolished estate
owned by Jeffrey Epstein.
▼
Source: Kobi Karp Architecture and
Interior Design, Inc.
Glaser said the project could more than
triple his initial investment, easy, once construction is finished. There’s one
crucial amenity he’s already showing off.
He arrived at a municipal pumping station
next to the Epstein site in his black Mercedes-Maybach with an orange
pinstripe, the car door emblazoned with his initials. The 57-year-old Miami
native jumped onto the concrete-and-steel pump station, recently rehabbed by
the town at a cost of $700,000. The system kicks in whenever water threatens
the hedge-lined street.
A sale price of, say, $70 million would
be a boon for Palm Beach. “Because that’s $1.4 million in taxes,” Glaser said
of his project. “The city is listening to the billionaires.”
Pumps aren’t the only climate defense.
Glaser said he will build higher than the mansion that preceded it, satisfying
the requirement to exceed Federal Emergency Management Agency flood maps. Plus,
there are seawalls. On the tour of the pumps, Glaser picked up a dead fish on
the wrong side of the barrier and tossed it onto the moss-covered rocks.
Epstein lived on a low-lying stretch of
Palm Beach property with a 98% chance of flooding over the next five years,
according to First Street Foundation, a nonprofit that measures climate risk
for individual properties. “We’re spending a lot more money now to protect a
guy who’s not buying it now but who could be buying it 50 years from now,”
Glaser said.
Palm Beach, Florida
Like many coastal Florida cities and
towns, Palm Beach is planning for an inhospitable future. Local officials
commissioned the Woods Hole Group in 2017 to assess flood risks caused by
climate change. Now the Massachusetts-based consultancy is finalizing a second
report on how to protect the island, including more than 2,000 single-family
homes.
Climate change in Palm Beach is a tale of
two coasts. Homes on the ocean are best situated because they were built on a
ridge that’s about 15 feet above sea level, although that won’t stop hurricanes
or beach erosion. Properties along the yacht-lined intracoastal are the town’s
greatest vulnerability, with elevations as low as a few feet. This waterfront
is especially challenging to protect because many of the bulkheads are
privately owned and their heights vary. Future floods will send backflow from
the intracoastal towards inland homes that also face threat from swelling
groundwaters, said Keren Bolter, a South Florida climate scientist at
consultancy Arcadis.
Seawall installation at property on the
Palm Beach intracoastal.
▼
Source: Michael Stavaridis/Nievera
Williams Design, Inc.
The town is in the midst of a $128
million, 10-year project to move utilities underground as well as a
decades-long effort to replenish eroded beaches backed in part by federal
funds. There’s also spending to maintain and improve 13 stormwater pump
stations. Even the $38 million upgrade of Palm Beach’s marina includes a $3.6
million budget to add 2 feet of height to a 1,540-foot stretch of seawall owned
by the town, with the ability to raise it another 2 feet in the future.
“We are not deniers,” said Kirk Blouin,
the town manager. “It’s bright and sunny and the roads are bone dry, but we’re
preparing. We’re not daunted by this. We think this is fixable.”
Florida is investing $640 million in
climate resilience, its largest investment to date, which could bring more
funding to Palm Beach. The consultants from Woods Hole have been urging town
planners to seek an Army Corps of Engineers study for a surge barrier. Nasser
Brahim, senior climate resiliency specialist with the group, put it bluntly in
a presentation to Palm Beach officials last month: “The town, we think, has
been very very fortunate that it has not experienced a massive flood.”
Properties along the yacht-lined
intracoastal side of the island are the most vulnerable, with elevations as low
as a few feet.
Videographer: Marco Bello/Bloomberg
Steadily rising real-estate values have
helped Palm Beach do what other municipalities cannot. This is true even when
it comes to picking up trash from doorsteps four days a week. The town’s
reserve funds have grown to $129 million alongside the taxable value of real
estate, which last year jumped almost 7% from 2019.
The town is anchored to the tax base,
which must keep growing to pay for increasingly expensive climate defenses.
Spaziani, the local appraiser, said the median single-family home in Palm Beach
increased 27% from a year ago to more than $7 million. The value of new
construction last year rose 139% to $267 million, more than the previous three
years combined.
Billy Fleming, a landscape architecture
professor at the University of Pennsylvania, sees a dangerous dynamic
developing. The faster values grow, he warns, the bigger the crash will be when
homes start flooding. Of course, the rich pay significant property
taxes—Peterffy alone pays more than $600,000 a year—but those bidding up home
values now are also adding to the expense of protecting low-lying land and
might one day need rescuing when floodwaters come.
“This real estate boom is the last
hurrah,” said Fleming. “These guys are smart. They know the end is near and
they are going to squeeze every last dollar out of that place before the rest
of us are left to manage its decline.”
Town officials reject this view. Instead
they see the island’s risk steadily decreasing, one renovated house at a time.
That’s because redevelopment projects raise the elevation of the upgraded
structures. The current heights are “above what people are predicting to be a
rational sea-level rise,” said Brazil, the town official. “So I think we’re
ahead.”
Consultants from Woods Hole are advising
the town to not only protect public infrastructure but also make private
property owners lift their homes and seawalls. The town, for example, could
require homeowners to elevate if they complete a renovation project equal to
25% of the house’s value. The current trigger for these adaptive changes is
50%.
Developers sometimes raise the ground
underneath a home. But the piecemeal approach creates its own vulnerabilities.
When some homes are high and others are low, there’s rupture that opens up what
local architect Gene Pandula calls “buck-tooth blocks.” Without proper design,
efforts to adapt can spark tensions between neighbors. Water flows downward, so
an elevated house can push the problem next door.
Elevating a property in Palm Beach.
Source: Katie Carpenter/Resilient Enterprise
Solutions
A couple houses down from Petterfy is the
home of Robert Merrill, a bandleader and local radio host who plays numbers
from the Great American Songbook on Legends 100.3 FM. He decided to spend about
$200,000 to lift his 1959 home that he bought last year for $7.5 million. The
project penciled out: He’d recoup his investment within about six years thanks
to savings on insurance.
Merrill stood on his back porch and
lifted his arm up neck high. That’s where his house will be raised, about 9 feet
above sea level. He removed the furniture inside the house in anticipation of
the lift, even though it wasn’t strictly necessary. “I was told by the people
who are doing this I could have a dinner party” during the lift process, he
said.
In other coastal areas where buyers have
more moderate budgets, market constraints impose limits on construction that
carries climate risk, said Jesse Keenan, a Tulane School of Architecture
professor who studies climate change. Flood insurance is a prerequisite to getting
a mortgage. FEMA recently announced plans to boost insurance costs, beginning
later this year, to more closely align with the chances of flooding.
Homes on the ocean are better situated
because they were built on a ridge that’s about 15 feet above sea level,
although that won’t stop hurricanes or beach erosion.
Videographer: Marco Bello/Bloomberg
Palm Beach’s richest homeowners aren’t
worried about those costs. National flood insurance only covers flood damage up
to $250,000, above which homeowners would have to supplement with private
policies from firms like Lloyd’s of London or Pure Insurance. Since 1978 the
town has ranked at the top of insurance losses and loss payments in the county,
according to Woods Hole.
Already 84% of homes in the Palm Beach
zip code are at risk of flooding this year, based on projections by First
Street. By midcentury, 94% will have risk of flooding.
Terraced steps are one of the ways Palm
Beach property owners disguise elevation.
Source: Katie Carpenter/Resilient
Enterprise Solutions
While architects working here have always
designed homes with the coastal environment in mind, modern defenses against
extreme weather have become even more important. These include hold-down clips
to keep the roof from flying off, retainer walls around the perimeter, lawns
that slope upward toward the house, steps that disguise elevation, and trees
and vegetation to blunt the force of wind and water.
These protective enhancements can work.
Anne Fairfax of Fairfax & Sammons Architects has seen the rubber marks left
by a passive floodgate that prove it. She said the cost for such a gate, which
only gets lifted when water arrives, is about $20,000 to $30,000. She recently
added one to a 1920s home on Golfview Road that sold for $8.25 million.
“These are things that you don’t see.
It’s not that you’re putting up pretty wallpaper on the house,” Fairfax said.
“You’re toughening it toward climate change and potential higher risk.”’
Let’s say these improvements succeed, for
a time, in protecting coastal megamansions from the ravages of climate change.
That still raises the question of who in the decades ahead will continue to pay
ever-rising prices on Palm Beach. Two thirds of residents are over 65, a demographic
that can discount long-term risks. Transplants with school-age kids aren’t
necessarily focused on the idea of passing the homes on to future generations,
said Gavin Guinan, the chief operating officer of Woolems Luxury Builders. He’s
found some of his younger clients who’ve accumulated vast wealth on paper have
time horizons of five to 10 years.
The billionaire Peterffy has talked to
his grown children and found they have no interest in moving into his
waterfront home. As a Hungarian immigrant whose father toughened him up by
telling him to go find work if he wanted to eat, he doesn’t let it bother him.
His children “think this is a bubble and
a completely unrealistic way of living,” Peterffy said with a laugh. “But you
know I say to them, ‘Look, I was born in a basement during the bombing raid and
I starved for the first 20 years.’ So I don’t have to apologize.”
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Source: Kobi Karp Architecture and Interior Design, Inc.
Glaser said the project could more than triple his initial
investment, easy, once construction is finished. There’s one crucial amenity
he’s already showing off.
He arrived at a municipal pumping station next to the
Epstein site in his black Mercedes-Maybach with an orange pinstripe, the car
door emblazoned with his initials. The 57-year-old Miami native jumped onto the
concrete-and-steel pump station, recently rehabbed by the town at a cost of
$700,000. The system kicks in whenever water threatens the hedge-lined street.
A sale price of, say, $70 million would be a boon for Palm
Beach. “Because that’s $1.4 million in taxes,” Glaser said of his project. “The
city is listening to the billionaires.”
Pumps aren’t the only climate defense. Glaser said he will
build higher than the mansion that preceded it, satisfying the requirement to
exceed Federal Emergency Management Agency flood maps. Plus, there are
seawalls. On the tour of the pumps, Glaser picked up a dead fish on the wrong
side of the barrier and tossed it onto the moss-covered rocks.
Epstein lived on a low-lying stretch of Palm Beach property
with a 98% chance of flooding over the next five years, according to First
Street Foundation, a nonprofit that measures climate risk for individual
properties. “We’re spending a lot more money now to protect a guy who’s not
buying it now but who could be buying it 50 years from now,” Glaser said.
Palm Beach, Florida
Like many coastal Florida cities and towns, Palm Beach is
planning for an inhospitable future. Local officials commissioned the Woods
Hole Group in 2017 to assess flood risks caused by climate change. Now the
Massachusetts-based consultancy is finalizing a second report on how to protect
the island, including more than 2,000 single-family homes.
Climate change in Palm Beach is a tale of two coasts. Homes
on the ocean are best situated because they were built on a ridge that’s about
15 feet above sea level, although that won’t stop hurricanes or beach erosion.
Properties along the yacht-lined intracoastal are the town’s greatest
vulnerability, with elevations as low as a few feet. This waterfront is
especially challenging to protect because many of the bulkheads are privately
owned and their heights vary. Future floods will send backflow from the intracoastal
towards inland homes that also face threat from swelling groundwaters, said
Keren Bolter, a South Florida climate scientist at consultancy Arcadis.
Seawall installation at property on the Palm Beach
intracoastal.
▼
Source: Michael Stavaridis/Nievera Williams Design, Inc.
The town is in the midst of a $128 million, 10-year project
to move utilities underground as well as a decades-long effort to replenish
eroded beaches backed in part by federal funds. There’s also spending to
maintain and improve 13 stormwater pump stations. Even the $38 million upgrade
of Palm Beach’s marina includes a $3.6 million budget to add 2 feet of height
to a 1,540-foot stretch of seawall owned by the town, with the ability to raise
it another 2 feet in the future.
“We are not deniers,” said Kirk Blouin, the town manager.
“It’s bright and sunny and the roads are bone dry, but we’re preparing. We’re
not daunted by this. We think this is fixable.”
Florida is investing $640 million in climate resilience, its
largest investment to date, which could bring more funding to Palm Beach. The
consultants from Woods Hole have been urging town planners to seek an Army
Corps of Engineers study for a surge barrier. Nasser Brahim, senior climate
resiliency specialist with the group, put it bluntly in a presentation to Palm
Beach officials last month: “The town, we think, has been very very fortunate
that it has not experienced a massive flood.”
Properties along the yacht-lined intracoastal side of the
island are the most vulnerable, with elevations as low as a few feet.
Videographer: Marco Bello/Bloomberg
Steadily rising real-estate values have helped Palm Beach do
what other municipalities cannot. This is true even when it comes to picking up
trash from doorsteps four days a week. The town’s reserve funds have grown to
$129 million alongside the taxable value of real estate, which last year jumped
almost 7% from 2019.
The town is anchored to the tax base, which must keep
growing to pay for increasingly expensive climate defenses. Spaziani, the local
appraiser, said the median single-family home in Palm Beach increased 27% from
a year ago to more than $7 million. The value of new construction last year
rose 139% to $267 million, more than the previous three years combined.
Billy Fleming, a landscape architecture professor at the
University of Pennsylvania, sees a dangerous dynamic developing. The faster
values grow, he warns, the bigger the crash will be when homes start flooding.
Of course, the rich pay significant property taxes—Peterffy alone pays more
than $600,000 a year—but those bidding up home values now are also adding to
the expense of protecting low-lying land and might one day need rescuing when
floodwaters come.
“This real estate boom is the last hurrah,” said Fleming.
“These guys are smart. They know the end is near and they are going to squeeze
every last dollar out of that place before the rest of us are left to manage
its decline.”
Town officials reject this view. Instead they see the
island’s risk steadily decreasing, one renovated house at a time. That’s
because redevelopment projects raise the elevation of the upgraded structures.
The current heights are “above what people are predicting to be a rational
sea-level rise,” said Brazil, the town official. “So I think we’re ahead.”
Consultants from Woods Hole are advising the town to not
only protect public infrastructure but also make private property owners lift
their homes and seawalls. The town, for example, could require homeowners to
elevate if they complete a renovation project equal to 25% of the house’s
value. The current trigger for these adaptive changes is 50%.
Developers sometimes raise the ground underneath a home. But
the piecemeal approach creates its own vulnerabilities. When some homes are
high and others are low, there’s rupture that opens up what local architect
Gene Pandula calls “buck-tooth blocks.” Without proper design, efforts to adapt
can spark tensions between neighbors. Water flows downward, so an elevated
house can push the problem next door.
Elevating a property in Palm Beach.
Source: Katie Carpenter/Resilient Enterprise Solutions
A couple houses down from Petterfy is the home of Robert
Merrill, a bandleader and local radio host who plays numbers from the Great
American Songbook on Legends 100.3 FM. He decided to spend about $200,000 to
lift his 1959 home that he bought last year for $7.5 million. The project
penciled out: He’d recoup his investment within about six years thanks to
savings on insurance.
Merrill stood on his back porch and lifted his arm up neck
high. That’s where his house will be raised, about 9 feet above sea level. He
removed the furniture inside the house in anticipation of the lift, even though
it wasn’t strictly necessary. “I was told by the people who are doing this I
could have a dinner party” during the lift process, he said.
In other coastal areas where buyers have more moderate
budgets, market constraints impose limits on construction that carries climate
risk, said Jesse Keenan, a Tulane School of Architecture professor who studies
climate change. Flood insurance is a prerequisite to getting a mortgage. FEMA
recently announced plans to boost insurance costs, beginning later this year,
to more closely align with the chances of flooding.
Homes on the ocean are better situated because they were
built on a ridge that’s about 15 feet above sea level, although that won’t stop
hurricanes or beach erosion.
Videographer: Marco Bello/Bloomberg
Palm Beach’s richest homeowners aren’t worried about those
costs. National flood insurance only covers flood damage up to $250,000, above
which homeowners would have to supplement with private policies from firms like
Lloyd’s of London or Pure Insurance. Since 1978 the town has ranked at the top
of insurance losses and loss payments in the county, according to Woods Hole.
Already 84% of homes in the Palm Beach zip code are at risk
of flooding this year, based on projections by First Street. By midcentury, 94%
will have risk of flooding.
Terraced steps are one of the ways Palm Beach property
owners disguise elevation.
Source: Katie Carpenter/Resilient Enterprise Solutions
While architects working here have always designed homes
with the coastal environment in mind, modern defenses against extreme weather
have become even more important. These include hold-down clips to keep the roof
from flying off, retainer walls around the perimeter, lawns that slope upward
toward the house, steps that disguise elevation, and trees and vegetation to
blunt the force of wind and water.
These protective enhancements can work. Anne Fairfax of
Fairfax & Sammons Architects has seen the rubber marks left by a passive
floodgate that prove it. She said the cost for such a gate, which only gets
lifted when water arrives, is about $20,000 to $30,000. She recently added one
to a 1920s home on Golfview Road that sold for $8.25 million.
“These are things that you don’t see. It’s not that you’re
putting up pretty wallpaper on the house,” Fairfax said. “You’re toughening it
toward climate change and potential higher risk.”’
Let’s say these improvements succeed, for a time, in
protecting coastal megamansions from the ravages of climate change. That still
raises the question of who in the decades ahead will continue to pay
ever-rising prices on Palm Beach. Two thirds of residents are over 65, a demographic
that can discount long-term risks. Transplants with school-age kids aren’t
necessarily focused on the idea of passing the homes on to future generations,
said Gavin Guinan, the chief operating officer of Woolems Luxury Builders. He’s
found some of his younger clients who’ve accumulated vast wealth on paper have
time horizons of five to 10 years.
The billionaire Peterffy has talked to his grown children
and found they have no interest in moving into his waterfront home. As a
Hungarian immigrant whose father toughened him up by telling him to go find
work if he wanted to eat, he doesn’t let it bother him.
His children “think this is a bubble and a completely
unrealistic way of living,” Peterffy said with a laugh. “But you know I say to
them, ‘Look, I was born in a basement during the bombing raid and I starved for
the first 20 years.’ So I don’t have to apologize.”
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