Measuring the Cost of Beach Retreat

We estimate the cost over the next 50 years of allowing Delaware’s ocean beaches to retreat inland. Since most of the costs are expected to be land and capital loss, especially in housing, we focus our attention on measuring that value. We use a hedonic price regression to estimate the value of land and structures in the region using a data set on recent housing sales. Then, using historical rates of erosion along the coast and an inventory of all housing and commercial structures in the threatened coastal area, we predict the value of the land and capital loss assuming that beaches migrate inland at these historic rates. We purge the losses of any amenity values due to proximity to the coast, because these are merely transferred to properties further inland. If erosion rates remain at historic levels, our estimate of the cost of retreat over the next 50 years in present value terms is about $291 million (2000$). The number rises if we assume higher rates of erosion. We compare these estimates to the current costs of nourishing beaches and conclude that nourishment make economic sense, at least over this time period.