The surge in home insurance premiums is emerging as a significant hurdle for achieving homeownership in the United States, according to experts at an affordable housing symposium in Washington, D.C., hosted by the National Housing Conference.

Michael Butchko, Vice President of Business Intelligence at NeighborWorks America, highlighted that home insurance premiums are rising at a faster rate than property values. Research from Policygenius, an online insurance marketplace, revealed a nationwide average increase of 21% in home insurance premiums year over year in May, equivalent to a $244 annual hike. In certain regions, premiums experienced a spike of up to 50%, according to Policygenius.

These soaring insurance costs are impacting potential home buyers, causing some to withdraw from the market and prompting homeowners to sell. Major insurance providers are canceling policies and withdrawing from disaster-prone areas, exacerbating the challenges faced by homeowners. Some property owners are opting to pay off their mortgages early to avoid the homeowner’s insurance requirement imposed by lenders.

Thom Amdur, Senior Vice President of Policy and Impact at investment firm Lincoln Avenue Communities, emphasized that the rising cost of insurance constitutes an affordable housing issue. Factors such as frequent climate events, escalating construction costs, inflation, and reduced competition in the insurance marketplace are contributing to the upward pressure on premiums. Amdur pointed out that these hikes are not only affecting homeowners but also developers, potentially leading to a reduction in affordable housing projects.

Measuring Future Property Risk

Peter Carroll, Head of Public Policy at CoreLogic, highlighted the role of technology and data in identifying areas at the greatest risk of various climate-related events. He emphasized the ability of data models to project risks 15 to 30 years into the future, considering different climate change scenarios. Carroll stressed the importance of not just assessing current risks but also anticipating future shifts in risk profiles.

Lincoln Avenue Communities plans to use data to create a scorecard for each project, incorporating climate and other risks. Amdur emphasized the need to “de-risk” real estate portfolios and showcase mitigation efforts to insurers, potentially leading to lower insurance premiums.

Consumers are increasingly seeking data to understand climate risks, and data transparency can play a crucial role in informing the public about potential risks. However, challenges remain in encouraging homebuyers to make more resilient choices and retrofit their properties to mitigate climate risks. Nicole Bachaud, a Senior Economist at Zillow, noted that data transparency should be coupled with guidance on actionable steps to address risks and foster a mindset shift toward more resilient housing choices.

Preparing the Housing Stock for Resilience

Panelists discussed various solutions to address the insurance challenges, including mandatory flood insurance, government backstops, increased funding, tax credits, and incentives for community resilience. Strengthening the nation’s housing stock against climate events emerged as a consensus approach to drive down insurance costs in the long term.

The importance of stronger building codes correlated with lower mortgage delinquencies following disasters, as indicated by CoreLogic data. Panelists stressed the need for incentives, adaptive building codes, and innovative financing to facilitate affordable resiliency retrofits for homes.

Despite varying ideas, panelists agreed that focusing on climate risk in future developments and using it as a lens for new communities could be strategic. Climate-resilient areas may become more popular as people are forced to relocate from damaged or unaffordable regions. A strategic approach to housing supply and mitigation of climate risks was deemed essential for addressing future challenges in the housing market.