(Photo by Tom Brenner / AFP) (Photo by TOM BRENNER/AFP via Getty Images)
The study, conducted by Policygenius, found that Florida experienced the largest jump with premiums increasing by 35%. The steep increases in homeowner’s insurance costs contribute to the already intractable housing affordability crisis, as homeowners must allocate more of their incomes to their monthly housing costs.
Natural Disaster Risk Drives Up Insurance Costs
When State Farm stopped offering new policies in California, they blamed wildfire risk and construction costs for their inability to operate profitably in the Golden State. Farmers Insurance, who also left California, cited hurricane risk for their decision to leave Florida. As climate change increases the severity and frequency of natural disasters, more homeowners and homebuyers will likely lose coverage or face increased insurance costs.
Homebuyers Prefer Homes With Lower Climate Risks
Homes that experience the largest jumps in insurance costs will likely experience lower home price appreciation than comparable homes with stable premiums. Homebuyers will prefer homes that have lower insurance costs and climate risks. A Redfin
Although homebuyers prefer homes not at risk of natural disasters, affordability remains the first consideration for homebuyers. Homebuyers in expensive cities like New York or Los Angeles are moving to Florida because of the relatively low cost of living and low tax rates. In the last two decades, about 60,000 people have moved to Lee County, FL. This county includes Fort Myers, Cape Coral and was devastated last September by Hurricane Ian. But now that Florida insurance premium prices have increased 35% in just one year, Florida cities like Cape Coral may become a less attractive location for homebuyers.
We already have a shortage of affordable housing in the United States, and rising home insurance costs will worsen the problem. Local and state governments should prioritize building resilient housing where disaster risks are low and insurance costs are low. Climate change will cost more if we delay action.