Financial value of nature: coastal housing markets, mangroves and climate resilience

Centre for Endowment Asset Management (CEAM)
Centre for Endowment Asset Management (CEAM)

Overview

Nature-based climate resilience is becoming financially material and this study provides market-based evidence to demonstrate this. ‘Financial Value of Nature: Coastal Housing Markets, Mangroves and Climate Resilience’ quantifies how mangrove forests protect coastal property values during major hurricanes. Using 6.4 million housing transactions across Florida and high-resolution geospatial data on mangrove coverage, the authors show that mangroves substantially moderate home price declines, reduce price dispersion and lower the probability of catastrophic value losses. The findings demonstrate that natural ecosystems can deliver significant private financial benefits, information that is increasingly relevant for investors, insurers and policymakers.

An interview with Galina Hale.

Authors

Teng Liu

Center for Coastal Climate Resilience, UC Santa Cruz

Brook Constantz

UC Santa Cruz

Galina Hale

UC Santa Cruz

Michael W Beck

Center for Coastal Climate Resilience, UC Santa Cruz

Project aims

The project addresses a core challenge: although mangroves are known to reduce physical storm damage, their broader financial value, particularly the market premium that homeowners implicitly place on natural protection, has been poorly quantified.

To tackle this, the study focuses on 4 main objectives:

1

Market-based evidence of mangrove storm protection

Quantify how mangroves moderate hurricane-linked house price declines using realised housing transactions rather than engineering loss estimates.

2

Average and tail effects in housing markets

Capture both changes in average prices and in price dispersion, recognising that extreme losses are critical for risk management.

3

Willingness to pay for mangrove protection

Estimate homeowners’ implicit willingness to pay (WTP) for mangrove buffers by calculating reductions in probability value at risk (pVaR).

4

Replicable valuation framework for nature-based solutions

Provide a methodology that can be replicated to value nature-based solutions such as mangroves in financial terms.

Florida provides an ideal testbed: frequent hurricanes, extensive mangrove forests and rich transaction data through Zillow’s ZTRAX dataset. The authors combine these data with Global Mangrove Watch satellite maps and FEMA flood-risk classifications to isolate the protective effect of mangroves.

Key insights

1

Mangroves significantly reduce hurricane-related price declines

Across 3 major hurricane seasons, Ivan/Jeanne (2004), Sandy (2012) and Irma (2017), properties closer to mangrove forests consistently experienced smaller price drops. On average, distance from mangroves is strongly associated with increased post-hurricane price decline.

For example, in the 2 years after major hurricanes:

  • properties near mangroves show 10–17% declines
  • properties 4–8 kilometres away show 18–26% declines

This demonstrates that natural storm-buffering is capitalised directly into market prices.

2

Mangroves substantially reduce catastrophic loss risk (pVaR)

The researchers calculate the probability that a home loses 25% or more of its value following a hurricane:

  • Mangroves reduce this probability by 2–7%, depending on county and hurricane.
  • In Collier County after Hurricane Irma, risk falls from over 36% to about 29% for homes near mangroves.

This reduction equates to $20,000–$40,000 in private value per $1 million home and as much as $60,000 in some counties.

3

Mangrove width matters, wider forests offer more protection

Holding distance constant, properties protected by wider mangrove belts suffer much smaller price losses. Each additional 10 metres of mangrove width (up to approximately 30 metres) offers protection equivalent to being 2 kilometres closer to mangroves.

4

Effects occur even in counties not directly hit by hurricanes

Even ‘off-path’ counties experience moderated price declines after observing hurricane impacts in nearby regions, evidence that buyers update beliefs about nature-based protection. These effects are about half as large as those in directly impacted counties.

5

Effects strongest in medium flood-risk zones

Mangrove benefits are clearest where flood risk is material but insurance distortions are limited. High-risk zones often have federally mandated insurance, muting the price signal, while low-risk areas naturally show less hurricane sensitivity.

Why this matters for investors

Nature is a financially valuable adaptation asset

This study shows that ecosystems can materially stabilise asset values. Mangroves act as natural capital infrastructure, providing:

  • reduced downside risk
  • lower price volatility
  • enhanced resilience after climate shocks

These are properties investors typically pay a premium for.

Market pricing reflects changing climate risk perceptions

Price effects are larger after recent hurricanes, suggesting that markets increasingly recognise natural protection. Assets exposed to nature loss may face repricing as climate risks intensify.

Implications for lenders, insurers and asset managers

Mangrove protection reduces the likelihood of large price declines, information relevant to:

  • mortgage lenders assessing collateral risk
  • insurers evaluating catastrophe exposure
  • real estate investors screening for resilience
  • municipalities considering adaptation investments

Given an average $20–$40k reduction in expected loss per home, mangrove restoration can outperform engineered alternatives on a cost-benefit basis.

A pathway for nature-based financing

Because mangroves generate private financial benefits, not only public-good benefits, the authors argue that homeowners, developers, insurers and financial institutions have clear incentives to co-fund restoration. The study provides a quantitative foundation for such financial instruments.

Conclusion

This study shows that mangroves provide substantial, measurable financial protection to coastal homeowners, reducing hurricane-related price declines, catastrophic loss risk and price volatility. By linking millions of property transactions with detailed geospatial data, the research demonstrates that natural ecosystems function as valuable climate-resilience assets, with wider mangrove belts offering even stronger benefits. As markets increasingly recognise nature-based protection, investors, lenders and insurers gain a clear basis for integrating natural capital into risk models, portfolio decisions and adaptation strategies, strengthening long-term resilience.

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