Affordable Housing Insurance Challenges: Understanding the Market

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Whether you are an owner, developer or property manager working in the affordable housing industry, you are undoubtedly facing challenges related to your insurance program that are impacting your business strategy and bottom line. Understanding the root causes of those challenges will equip you to find solutions that work for your organization.

The Hardening Property Insurance Market

Since 2017, the property insurance market has been hardening, resulting in lower available limits, higher deductibles and increased premiums.

Causes of the challenging property insurance market include:

Higher rates of inflation and construction costs which are driving significant replacement cost increases.
More expensive reinsurance driven by adverse weather events.
Uneven investment profits causing insurers to pursue underwriting profit, which translates to stricter underwriting criteria and declined submissions.

Unique Challenges for Affordable Housing

Although there are exceptions, affordable housing properties are often older than market-rate housing, have more urban/rural exposure (vs. suburban) and are more susceptible to the use of crime scores when underwriters rate their liability insurance. Additionally, insurance carriers are requiring higher deductibles, which often puts affordable housing owners at odds with their lending and syndicator partners.

These challenges are even greater for coastal properties, elderly properties and affordable housing properties with outdated features like polybutylene pipes, aluminum wiring or Federal Pacific breakers.

Looking Ahead

There is reason for optimism. Property insurance premium increases are finally starting to moderate. While this does not mean that premiums are decreasing, it does mean that the rate of increase is beginning to decelerate. This is good news for affordable housing organizations, and we are cautiously optimistic that this trend will continue.