The Rising Cost of Insuring Homes Against Climate Disasters

The increasing cost of home insurance in America, driven by climate-related risks, is significantly impacting the affordability of homeownership. This issue was a central topic at a recent affordable housing symposium in Washington, D.C., organized by the National Housing Conference.

Michael Butchko from Neighborworks America highlighted alarming data from Policygenius showing a nationwide average increase of 21% in home insurance premiums. This sharp rise is outpacing property value growth, with some areas experiencing up to 50% hikes. These soaring costs are not only pushing potential buyers out of the market but also forcing current homeowners to sell. The trend is exacerbated by major insurance providers withdrawing from disaster-prone regions, leaving homeowners with limited options.

Thom Amdur of Lincoln Avenue Communities emphasized that rising insurance costs, influenced by frequent climate events, inflation, and reduced competition in the insurance sector, pose a significant challenge not only to homeowners but also to developers. This could lead to a decline in affordable housing projects.

Experts like Peter Carroll of CoreLogic underscored the role of technology in identifying properties at high risk of natural disasters and stressed the need for future-focused risk assessments. To combat these challenges, Lincoln Avenue Communities plans to implement a scorecard system for its projects, considering climate and other risks, and aim to proactively mitigate these risks.

Nicole Bachaud from Zillow pointed out the public's growing concern about climate impacts on housing. However, affordability issues continue to drive buyers to high-risk areas. A major hurdle is that financial constraints often prevent buyers from making necessary climate risk mitigations to their properties.

Solutions discussed at the symposium included mandatory flood insurance, government backstops to bolster insurance supply, and incentives for climate resilience. Strengthening building codes and promoting resilient construction were suggested as ways to reduce insurance costs and mortgage delinquencies post-disaster.

Overall, the symposium highlighted the need for a more strategic approach to future housing developments, considering climate risks more heavily and focusing on creating climate havens. This strategic planning is essential to address the dual challenges of housing affordability and climate change resilience.