Insurance Costs Jump 26% For U.S. Multifamily Properties
The price of insuring property is sharply mounting, with builders and operators of desperately needed rental housing reporting major increases in insurance costs in the last 12 months.
The National Multifamily Housing Council released its Multifamily Risk Survey and Report this week, which showed respondents are experiencing property insurance costs that are 26% higher than they were last year.
Limitations in coverage, hikes on deductibles and a shrinking private insurance market are to blame, according to the report. Rents, which are already at crisis point across the country, are going up as result.
“These new findings and risk mitigation guidance come at a critical time for multifamily businesses and our residents,” NMHC President Sharon Wilson Géno said in a statement. “The current confluence of high interest rates, increasing costs and an expanding need for affordable and attainable housing highlight the importance of housing providers and policymakers having a clear understanding of insurance market challenges. A more stable insurance market will help keep costs manageable which, in turn, will make rent more affordable.”
Some 61% of respondents to the survey said they had to increase deductibles, while 57% said carriers have imposed new policy limitations to reduce exposure, and 34% are seeing carriers limit or reduce coverage amounts. Wilson Géno said reform and reauthorization of the National Flood Insurance program is now vital, and pushing for federal programs to lower risks is key to improving housing affordability.
Several states, including Florida, Texas and Virginia, have joined a lawsuit against the federal government in an attempt to block the ongoing reform to the NFIP.
Developers, landlords and brokers have previously told Bisnow the insurance costs are so high they are threatening to “paralyze” the industry. Costs have killed deals already across the country, and many are calling for lending reform, government support and lender flexibility to alleviate the pressure it is putting on the market.
While insurance prices have been rising for years, Hurricane Ian’s hit to Florida in September — killing 147 people and causing a state record of $112B in damage — pushed costs even higher. The issue is global; last year marked the second year in a row where insured losses around the world from natural disasters were over $100B, per Swiss Re data.