Soaring Insurance Costs Could ‘End’ Affordable Housing, Developers Warn

For the poorest Americans, finding an apartment to rent or a home to buy often means tapping into a vast network of nonprofit groups that use public and charitable funds to rehab or build affordable housing. Over the past year, the skyrocketing cost of property insurance has put that network on shaky ground.

In Houston, hundreds of apartments once protected from rising rents are being sold off to landlords who can charge the full market rate. In Selma, Ala., insurance premiums are keeping even heavily subsidized homes out of buyers’ reach. In Kingsville, Texas, a planned affordable housing development was scrapped entirely.

Costs are rising for homeowners of all types, and in states like Florida, Texas and California, it has become harder to get insurance at all. The industry says bigger, more frequent storms, along with increased home prices and material and labor costs, are forcing them to raise premiums or stop writing policies.

Wealthier homeowners can go without insurance, if they can buy a home without a mortgage. Landlords of market-rate apartments can raise the rent to adjust to the higher costs. But for the 4,000 or so nonprofits and developers that aren’t allowed to raise rents, or are selling homes only to buyers with the most constrained budgets, the soaring cost of insurance is an existential threat.

The problem is most serious in coastal states, hit hard by severe weather. But Frank Woodruff, the executive director of the Community Opportunity Alliance, a trade group representing nonprofit housing developers, warned of a wider crisis.

“If it spreads further, it could threaten to end affordable housing development as we know it,” he said.