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With seas rising and storms surging, who will pay for New Zealand’s most vulnerable coastal properties?

Public Policy / opinion
With seas rising and storms surging, who will pay for New Zealand’s most vulnerable coastal properties?
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IMAGE: GettyImages.

By Tom Logan*

The release of the NZ SeaRise project’s sobering data about projected sea level rise around New Zealand is yet another reminder that the water is now lapping close to a lot of New Zealand’s front doors. The ominous question is: who will pay when it crosses the threshold?

But that’s not a question worrying insurance companies. They’ve made their position clear — they won’t be paying for it.

Insurance is based on uncertainty and is reevaluated annually. When the chance of damage rises beyond what an insurance company is prepared to bear, it withdraws.

This leaves at-risk homeowners with no insurance, either private or through the state’s Earthquake Commission. In the meantime, homeowners will likely continue to pay rising premiums, possibly unaware of the tenuous nature of their coverage.

The latest research tells us coastal properties will start to lose insurance cover within the next 10 years, if not sooner. Technically, if your property has a 1% chance of coastal damage with today’s sea level, you’ll likely lose all private insurance once the chance rises to 5% — anticipated to be less than 25 years away.

That means potentially more than 30,000 residential properties – currently valued at more than $17 billion – are expected to be uninsurable within the next few decades.

Furthermore, these timelines don’t account for the latest predictions of polar ice sheet tipping points: major sea-level rise is on its way.

Who will pay?

Domestic and international precedent suggests the central government might compensate some property owners. But there’s a significant caveat: the New Zealand government has so far followed a UK model for coastal property compensation. Called “Flood Re”, this only covers UK homes built before 2009.

Minister for Climate Change James Shaw has said the challenge for New Zealand lies in defining where the line falls. He also said developers of coastal properties today are doing so “with their eyes open”.

This is significant and suggests the government might be positioning itself to abandon more recent coastal developments.

It’s hard to argue with such a policy. Can we expect taxpayers and the government to pay such a massive bill? More pointedly, should the government be compensating for decisions made now when local councils should at least be aware of the risks?

We’re still building by the coast

While the total rateable value of exposed residential property is approximately $17 billion, $2.6 billion of that was built after 2009, according to our analysis.

Even today, local councils are continuing to grant consent for development in these immediately exposed places. The Christchurch City Council – already with one of the highest exposures to coastal hazards – has just announced a 65-home development in New Brighton, an area current modelling suggests is prone to coastal flooding.

At the same time, advice from the Ministry for the Environment suggests councils should be taking a risk-informed approach to land-use planning, and asks whether councils or investors can afford to write off these investments in future.

This guidance is not mandatory, however, and many councils do not have the resources or expertise to take a risk-based approach. Aside from the financial threat, there are the associated physical upheavals and mental health issues facing residents.

The new Strategic Planning Act (one of the three pieces of legislation replacing the old Resource Management Act) should put an end to further development in at-risk places. But this still leaves the complex financial and ethical question of what happens to existing property owners.

Simply to say these residents knew the risks when they developed and should therefore be left on their own is not an acceptable long-term, compassionate strategy. Other solutions will be needed.

Government guidance is vital

We need to be wary, however, of local communities demanding sea walls or other protections to allow them to remain. Recent research indicates such structural defences can inadvertently raise long-term risk and exposure.

A more sustainable approach proposed in Hawke's Bay involves charging ratepayers $30 a year for a coastal defence or managed retreat fund. Initially lauded as the country’s most sophisticated engagement process and strategy, it has since stalled due to councils being unable to agree which rates bill it should be on.

Another solution might be the creation of a government-managed coastal bond or insurance scheme. This would ensure the premiums paid by coastal residents stayed in the local economy to support them. Naturally, such a scheme should include conditions that limit or prevent development in risk zones.

Alternatively, New Zealand could adopt a framework for converting exposed property from freehold to leasehold, which would put time limits on occupying vulnerable properties.

The related idea of a “revolving loan program” is being discussed in California. Essentially a creative buyout scheme, this would involve councils or communities buying vulnerable properties and renting them out to pay off the loan until the property is no longer safe.

Regardless, storms like those witnessed in Wellington should remind us of the need for clear guidance and support at government level. The proposed Climate Change Adaptation (or Managed Retreat) Act will hopefully provide this guidance, but this is possibly three years away at best. With coastal development still happening, it’s clear we need it sooner.

In the meantime, those who are aware of the risks will be tempted to sell their vulnerable property to those who aren’t. That is no solution. New Zealand will still have vulnerable citizens in vulnerable places — regardless of whether or not they bought with their eyes open.The Conversation


*Tom Logan is a Lecturer of Civil Systems Engineering at the University of Canterbury. This article is republished from The Conversation under a Creative Commons license. Read the original article.

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56 Comments

If NZ values it's coastline and the infrastructure supporting access to it (as well as the environmental impact that the loss of such infrastructure will undoubtedly have), then the tax and / or rate payers will have no choice but to foot the bill, or see large chunks of sea-side Aotearoa become at-risk of serious instability, within a very short period of time. Perhaps funding of fore-shore protection isn't actually that cost-prohibitive, especially once a few standard designs are established. What is highly problematic right now, is the authorities' and publics' reactions to carrying such out protection works - so much so, that unless one does it illegally, then one just wouldn't bother.

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Foreshore protection is an illusion and brings with it other complications.  It's too late for that. The properties are as good as gone.  It has been obvious since the early 2000's.  Time to accept it and move on. Buyer beware, do your due diligence. 

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You can bet they'll want a bailout from taxpayers, though, despite information having been available for many years now to anyone with eyes and a brain.

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Even before that. I refused to buy on the waterfront back in the 90's due to the threat of rising sea levels,as I could see this was going to happen and insurance would be a problem. I just hope EQC doesn't become some new fund to pay for it.

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When homes are prone to coastal inundation, and no longer insurable, homeowners will have to bear with it.

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Government support shouldn't be linked to the time the building was built bit rather the time the building was purchased.  Anyone who bought a costal property since the early 2000's has had ample opportunity to understand the risk of sea level rise as part of their due diligence.  Sea front properties typically attract a premium which means they have likely been bought by the wealthiest and most able to afford to pay for their bad decisions. Taxpayers should not foot the bill for those who chose to ignore the evidence and warnings. 

If there is to be any sort of government support it should be for properties purchased before the early 2000's and any compensation should be based on the condition of the property at that time, improvements should be excluded. 

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Spot on.

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... it's no different to the numpties who buy a house near a well known race track , and then bitch about the noise ... or Helen Clark whining about the late night lights from Eden Park : do your own due diligence ... stop whizzing  after the event , if the lights are on , or if the seawater buggers up the shagpile carpet in the lounge ...

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Surely there are many science deniers willing to take on the risk of flooding that's never going to happen? Coastal property is about to become really cheap. Generally such individuals are theoretically against socialising costs, so it's the perfect solution. They can bucket the water out of their lounge without taxpayer support.

 

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... or ... going out on a limb here , construct coastal properties to withstand potential sea level rise  ... build high & dry atop piles ... big fecking piles , like rammed telephone poles ... Sorted ,!

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Floating homes are surfacing all over Europe. In a step up from liveaboard vessels and traditional houseboats, they offer the space and comfort of terrestrial abodes

https://projects.archiexpo.com/project-235078.html

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There was a guy near the Waikato river , that built a floating full size house. Heck of a battle with the council , but finally got it consented , i believe. 

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Forgetting all of the recent scare tactics about man made climate change, buying a house on a low lying beach front, or crumbling cliff without a council road in between you and the sea has always been a huge gamble. Always has, always will be.

Now they are trying to tell us that NZ is sinking! Tell that to those in Kaikoura, Wellington, Napier etc.

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Unbeliever.

Didn't you see the map. The eastern coast is sinking faster than any where else. It's science.

Sarc.

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Earthquakes. It's science.

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Uninterested,

1988 Internal Shell Report "The Greenhouse Effect"

As you are clearly a climate change denier, you won't like this, but just try reading it.. Now that I know your beliefs, I will do you the favour of sending you links to science based articles on the subject. Warning, I have lots of them.

By the way, nobody said NZ is sinking, only that arts of it are. It may surprise you to know, but this happens elsewhere. Eg. the Bangladesh delta and the UK. While the far North is still rising now that a kilometre or more of ice is no longer pressing down on it and like a see-saw, Southern Britain is sinking. 

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Threats.

To a man made climate change denier.

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If there's one thing these folk who rant about socialism and communism always seem to like, it's lining up with their hands out when it's their turn for taxpayer handouts. It'll be no different this time - "own two feet" won't get a look in. 

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If there's one thing that Covid made clear, this was it.

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I don't think putting their money where their mouth is, is one of their strongpoints.  

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Posts above generally missing the point. This isn't about a few rich peoples private property perched on low-lying beach frontage - this affects huge swathes of coastal NZ, including prized Public taonga - beaches, parks, roads, important infrastructure, marinas, airports, etc. For example - check out the lines drawn in this report https://www.aucklandcouncil.govt.nz/environment/what-we-do-to-help-envi… - this says that roads even 200m inland from substantial cliffs that have been standing there for as long as we can remember, will likely soon be crumbling into the sea and the resulting instability will affect thousands of inland properties. Unless action is taken at societal level and we take foreshore protection seriously, then a few rich people installing the odd palisade wall here and there ain't going to make diddly squat of a dent in the problem.

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One problem is the resource management act.

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No, I fully get the point.  I was talking about taxpayer bailing out private property owners with compensation for their property loss.  

I'm fully aware that this this "affects huge swathes of coastal NZ, including prized Public taonga - beaches, parks, roads, important infrastructure, marinas, airports, etc."

But that is the price we have to pay for inaction on climate change, no point throwing money at it now. It's gone. Move on, learn and don't make the same mistake again. 

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Also, beaches will still be there. They'll just be a little moved from their present location.

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Yeah, an early policy about it is best, then tweak it along the way.  The bad effects are still quite a while away, some councils are forward thinking it a little. For instance Wellington's new Ngauranga to Petone "cycleway" where they are reclaiming about 10m of land along that coast line is going to built with sea level rise in mind (parts of it have a higher wall where it's already bad in a southerly storm). It's a multi benefit project, cycleway, pedestrian/recreation access, civil infrastructure protection (water/sewage/power/comms), transport infrastructure protection plus as an emergency vehicle lane in case of serious accidents along the motorway.  Just having it there means that in the future, it can be easily built up higher without disturbing any other infrastructure in the future when SLR starts to overcome it.  They will need to start doing the same to the Eastbourne road however (they have talked about similar for that stretch of road) and for the Southern bays.

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We were on holiday in Queensland some months after the devastating floods of the Lockyer Valley. On TV we saw Premier Bligh and the mayor cutting the ribbon for the site of the relocation of the affected town of Grantham. They were inviting residents to swap their land in the old flood prone town for land in the new elevated town. 

https://www.brisbanetimes.com.au/national/queensland/grantham-reborn-meet-the-little-queensland-town-that-moved-20200227-p5450g.html 

The link describes how very effective and inexpensive this was. I would suggest that this is something that we could do here for climate change affected communities. The key messages are

1 They just got on with it without getting bogged down In  endless investigations, reports and bureaucracy.  (Just getting on with it will teach us orders of magnitude more than we will learn from behind computers in Wellington.  Trial it somewhere.  Refine it and try again.  Repeat, Perfect it.) 

2 House building or relocation was left to the individuals and their insurance companies 

3 It was a simple and outstanding success 

This morning I was listening to a politician from Hawkes Bay describing the bureaucratic nightmare that they face trying to dealing with this issue.  It is such a contrast to how straight forward the Australians could act when they needed to.  The RMA really has stuffed up things badly.  Pity, the intentions and original act seemed so promising.  Unfortunately it just become a vehicle for a lot of very inefficient and unreasonable behavior.  It has also become a meal ticket that is being shamelessly exploited by a whole raft of "experts" advocates and bureaucrats who have high jacked the whole system. 

 

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100%. Until there's a common will to solving the problem, nothing will get done. Unfortunately, it's not until it's become a real problem affecting a very large number of people, will something get done. It'll still fall back on the tax payer, as it's not something one can simply walk away from - there will be significant and unavoidable costs. The challenge should be, how can this be made into an opportunity?

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Chris-M, I know the Lockyer reasonably well having lived there for close on 20 years  - just a few km from Grantham.

The Government purchased the land which actually came very cheap. But the Government did not pay people for their flooded houses, and the new houses were paid for from the insurances that people already had. The Government did not provide a pay-out to rebuild for those who were not insured.

The Grantham flooding was something that had not been predicted, unlike coastal flooding in NZ. Of course hindsight is wonderful.  But in the years I lived in the Lockyer(high and dry on a hill) I never gave consideration to Grantham flooding.  In contrast, it is puzzling as to why society should have to step in if people cannot get private insurance in situations where there is foresight as to the long-term risk. If individuals take a different perspective as to the risk - and it could be that they are correct in that assessment - then that is their choice.

KeithW

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Interesting.  Agree.

The level of help in this situation was very well directed and gave just enough of a boost to make it possible for people to shift.  Even the cost of land was/is a minor concern because for every acre that they gave away they got one back from the old town. (flood prone yes, but was it also more fertile?)  Their net funding was really only the cost of the infrastructure required.  If one was smart you could develop more sites than immediately required and offset the costs with the profit from the sale of these.

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I thought the challenge with insurance is that the insurance company only assesses the risk over the 12-months they agree to cover? So if your house was 100% likely to drop off a cliff in 5 years time, but around 1% likely to do so next year, the insurance company will happily give you 12-months insurance at a premium based on the 1% risk.

My personal view is that home insurance (buildings) in NZ should be included within the local govt rates - and priced according to medium-term risk. We have earthquakes, volcanoes, extreme weather, and rising sea levels - the idea that a barely functioning insurance market can provide good value for money on buildings insurance given this context is just dumb. 

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I agree with a lot of what you say but this would be a terrible idea.  Local government is the last place responsibility for something like this should sit. LG's are right now approving development in flood plains and inundation areas. The anti-regulation brigade, short election cycles and hyper local interests prevent any local elected members taking a long-term view of big issues like this. This is one instance where the market will sort itself out as long as government doesn't try to "help" those that made/make poor decisions

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Rebuilding flooded houses in Westport was crazy . Not like land price or population pressure would stop them moving them to higher ground.

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Indeed, the Chinese also have a model for this.  When they want to take your land for something, they give you a cash payout as well as ownership of a new build of an equivalent sqm allotment in the newly built area.  Most people there often love it (though they will complain bitterly to try and get a sweet deal), apartments are in flasher new areas and the payout gives them enough to do the interior of their apartment to a high standard.  I have seen people going from 50yo shit boxes with barely any running water, dodgy elecricity/comms, that smells of sewage because of leaks to flash new places that would be the envy of any middle class citizen around the world.  And often because the old places are significantly bigger, they end up with multiple new apartments they can then rent/sell as well.

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Very sensible and avoids a whole heap of unnecessary waste of time and resources.

Again I am reminded of another holiday in Queensland.  

The news item covered land taken for water storage for Brisbane.  The land was taken.  Absolutely no argument.  They were very generously rewarded and could remain living there rent free until it was required.  I did not notice much complaint, but admittedly we were not there for more than 2-3 weeks.  May be Keith W has a better perspective?

The point seems to me that in NZ we waste huge sums of money arguing and lining the pockets of lawyers, consultants and government officials and sell short the victims of it all.  It seems far better and cheaper to me to be very generous to the affected people and brook no argument.  That way the money is ending up in the right pockets.

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Not a bad idea. They could do it now and give owners a time period to move.  But getting such land is the problem, due to so much land banking, and then councils will need new infrastructure. Then who pays for the new buildings. I guess we have done something similar in the past with the hydro dams.

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The problem shouldn't be the private land and dwellings, they're on their own no matter when they bought, despite the massive bailout that was the christchurch earthquakes this is not why we pay tax. I specifically object to subsiding someone's beach front lifestyle.

The real problem is the LG infrastructure and it's maintenance. At what point does/can the council stop maintaining leaving home owners stranded. The value of this infrastructure is many billions so the policy needs urgent sorting.

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Yes by bailing out the uninsured in Chch, the govt made a huge mistake.

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Government needs to make it plain to the banks and insurers that they are on their own in providing finance or policies to at risk properties. If the banks stopped providing mortgages to these properties it would soon sort itself out. Infrastructure is another problem that needs collective decision making. 

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Not to mention South Canterbury Finance...must've been an awful lot of connected or influential people in that group of investors.

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Yes, there were many fortunes made, and I still hear people referring to 'Mr Hubbard' as they call him with a great deal of reverential respect. Of course the rest of us were the ones who paid for it through the bail out.  Some of the stories have been told but others will never see the light of day.
KeithW

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The Christchurch earthquake is in no way comparable to sea level rise. Until it actually happened there was not much warning that it was going to happen.  Sea level rise is slow and inexorable and has been known for many years.  

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A couple of issues here:

Moral hazard Buyers should not be compensated for their own poor choices. Beachfront/clifftop property should gradually lose its value unless there is market interference. Councils (along with LINZ) should put the risk of sea level rise/flooding/inundation on LIMs so it is clear to banks, purchasers and insurers where the risk lies. The maps have been done - they just need to be easy to find.

Defences Building seawalls just shifts the problem. If a wall is built to prevent erosion, the erosion shifts to where there is no wall (simplified explanation). That is, rich people put up a wall, the poor people down the coast who can't afford one may get hammered instead.

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The same person that has enjoyed the benefits of waterfront living should pay. Asking the council and rate payers to hold back the tide is a joke. Would add it still amazes me that people are rushing to pay millions for houses where the front lawn is now a cliff, and being steadily eroded. One born every day.

RE agents who live locally and know what used to be there, laugh behind buyers backs and at the m$ owners want. 

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I see different areas of flooding each needing its own solution. The sea level rise and land subsidence is one issue with I believe land subsidence being the much larger factor. Sea level rise (land subsidence + sea level rise)  is not anywhere near as big an issue, 2mm/year max so by 2100 say 160mm. This will still affect some areas. I'm uncertain as to how easy it is to quantify land subsidence but let's take it that is far easier than sea level rise.

In general a buyer should be warned either via a LIM or notarised in the title as to the varying sea levels that may affect the property. It may need to go as far as saying no council services at such and such a sea level.

No need for timing as this is not easily quantifiable.

The other area is river plain flooding which needs a different assessment as to its solution.

What the legal aspect is for a council having granted development in a known river plain flood area (the Chch  mentioned above?) must open up the council to legal action if its something that will happen within a 10-25years time.

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Pretty simple people will need to start moving to higher ground. People expecting the taxpayer to build horrifically priced seawalls are out of luck. Anyone at 3 to 4 meters or below should have thought of the risks, I certainly did when buying  a house.

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Indeed, the risks have been known for decades. Personal responsibility exists.

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The countries responsible for global warming should pay for the land and houses lost because of man-made climate warming.  Today that would be mainly Britain burning coal 200 years ago. But from this point on it will be the developing world increasing emissions by simply trying to catch up. New concrete buildings with steel frames containing air conditioners.  Or does the developed world ask poor nations not to build hospitals?

 

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Careful, if you want to attribute responsibility to the worse polluters then New Zealanders would have to cough up big time. We have some of the worse emissions per capita. 

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If Europe & the USA reach zero-emissions (via fuel efficiency and carbon offset forests) it will still be less than the increasing emissions from the 3rd world via phones, fridges, washing machines, transport, medical and education infrastructure.

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Basically we are on a road to nowhere. Did you know that in the recent heatwave in India the government took over passenger trains because they couldn't get enough coal to the power stations to keep up with the demand from air conditioners ? Basically whatever way you look at it the planet is screwed. Any savings by developed countries will simply be taken up by the worlds increasing population. The Amazon rainforest is approaching tipping point, if it all dies and turns into a savannah grassland we are screwed.

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More clickbait BS from the MSM and activists not back up by the published record.

"...in just 18 years parts of the capital will see 30cm of sea level rise, causing once-in-a-century flood damage every year.". Yet the past three papers published on this show 1-2mm/year seal level rise in the main centres - aka boring inter-glacial warming.

Sea Level Rise in New Zealand: The Effect of Vertical Land Motion on Century-Long Tide Gauge Records in a Tectonically Active Region

"Applying VLM estimates for tectonic, local, GIA, and SED gives a mean ASL of +1.45 ± 0.36 mm/year, which is consistent with global estimates."

https://agupubs.onlinelibrary.wiley.com/cms/asset/5e0d012e-8e49-42fb-b9…

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This link similar similar to the other four papers - where are these people getting their 30 cm in 18 years thus 16.66 m/year from? RCP8.5? Surely tsunami/earthquakes are the bigger risk to NZ coasts than monotonic SLR since the Little Ice Age.

"Since the late 1880s, sea level has been steadily rising around New Zealand at an average of nearly 1.8 mm per year (18 cm per century)."

https://niwa.co.nz/climate/information-and-resources/coastal-climate-ch…

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"Some areas are sinking 3mm or 4mm a year - about the annual rate at which the sea is rising. [This] doubles the amount of sea level rise and it halves the time ..." Naish described a case study of the road connecting Petone and Eastbourne in Lower Hutt, which would see 30cm of sea level rise by 2040." As the text suggests the 30cm SLR is case specific! Obviously you have trouble understanding the concept of "mean".

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Fear porn by another govt sponsored lecturer doing his bit in the incentive driven media to promote the control driven "climate" farce that only exists in the future, but has no visible relationship to the present or past (but has sucessfully managed to hook people for the last 40 years - while nothing changed).

The Maldives are still there!! And the Chinese have completed a massive new runway and airport extention.

Follow the money! 

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I guess this is something almost every country is experiencing. Global warming effect indeed is being felt slowly.

www.scaffoldingaucklandhire.co.nz

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