Mortgage and Insurance Rates Are Through the Roof — Will Trend Continue in 2024?
Written by
Yaël Bizouati-Kennedy
Edited by
Cory Dudak
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High mortgage rates have been one of the factors crippling the housing industry. But now, high property insurance rates are also putting a damper on the sector, making it harder for consumers to find affordable housing.
As Bloomberg reported, property developers in the country have been sounding the alarm. As property insurance rates continue to rise, the “pipeline for much-needed housing construction — especially new apartments with affordable units,” will shut down.
Premiums and deductibles for policies required by mortgage lenders “have shot up two- to three-fold over the last five years, frustrated developers say,” according to Gothamist.
The reasons insurers cite to deny coverage are legion. Some of the increases have to do with natural disasters, but others “appear to have little or no connection to risks related to wildfires, floodwaters or storm winds,” according to Bloomberg.
For instance, a 2022 report by The New York State Department of Financial Services (DFS) and the New York State Homes and Community Renewal (HCR) found that between 2019 and 2021, insurance premiums increased by an average of 43% across 20,000 units of affordable and income-restricted housing.
“Mortgages have requirements that nowadays can’t be met with primary insurance providers,” Barry Kahn, president and CEO of Houston-based developer Hettig/Kahn Companies told Bloomberg. “It’s going to result in a lot of affordable housing getting lost if something isn’t done.”
In turn, Gothamist reported that property owners are forced to find coverage on a separate market, known as the “the excess and surplus market”– but it’s not subject to the same level of state oversight and, hence, has higher rates.
This translates into them passing down the costs to tenants — increasing their rents.
For instance, Brooklyn, N.Y. landlord Robert Lee, who rents to voucher recipients in his five Brooklyn buildings, told Gothamist that his insurance premium went up by 25% this year because he rents to subsidized tenants.
“Landlords go for a 3% raise and [tenants ] want to shoot us. But this is one of the reasons why,” Lee told Gothamist. “There are companies that are declining and they are raising their rates because no one is paying any attention to them.”
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