NHPF Industry Report
Lower the Costs of Insuring Affordable Housing
“Every option [must be considered] to reduce costs, enforce anti-discrimination measures and reverse the trend of insurance companies simply walking away from affordable housing. ” —BAABA HALM, VICE PRESIDENT & NEW YORK MARKET LEADER, ENTERPRISE COMMUNITY PARTNERS Today, many insurance companies refuse to insure certain properties, making the ability to produce more affordable housing in the future even more arduous. These include project- based section 8 properties, ones in high crime areas, old properties, and those in high- probability climate-related disaster areas.
US Property Insurance Rates Have Increased for 20 Quarters Straight
24%
21% 22%
19%
18%
15%
13%
10%
9% 10%
8%
7% 7% 6%
4% 3% 3% 3% 4% 4%
–5% –4% –4% –4%
Q2 17 Q1 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22
Q4 16
Source: Marsh Specialty and Global Placement
According to a recent survey from the National Multi Housing Council, as of the first quarter of 2023, property insurance rates in the United States have increased for twenty-two consecutive quarters. Over the past three years, insurance premiums have skyrocketed, with many owners having experienced year-over-year premium increases from 30 to 100+ percent at affordable rental housing communities.
Garet Marr, Regional Managing Director, Franklin St. Insurance Services, believes insurance companies are not intentionally discriminating against affordable housing owners and tenants, but market conditions and industry inefficiency lead them to the conclusion that economically they must. He sees a future where affordable housing can have affordable insurance. It begins with a shake-up of the staid housing insurance industry. There must be new ways to look at the riskiest parts of insuring affordable housing—crime and climate-related disasters. Marr would like to see underwriting incentivized to focus on community investments and revitalization looking forward, with some real skin in the game. According to a 2017 American Sociological Review study, there is a causal relationship between local nonprofits and the decline in violent crime. The study found that “approximately every 10 additional organizations focusing on crime and community life per 100,000 residents leads to a 4% reduction in the property crime rate.” When a community takes an interest in themselves, with the right resources, crime, and unemployment rates decrease. Insurers need to be part of this equation at the outset. With regards to climate-induced crises, often the solution is to cease investment in areas prone to natural disaster, and many private companies have chosen to do that. This leaves an increasing void in affordable housing units in areas that need it most. The big idea here is to integrate climatology into future construction and development. By assessing the sustainability of developments not only under today’s climate conditions but considering those far in the future, insurance companies can insure with more confidence, while still calculating risk.
8 • THE NHP FOUNDATION 2023 SYMPOSIUM: INDUSTRY REPORT
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