The housing world doesn’t need another problem, but it does have one: insurance. The insurance scene is changing, and property insurers are either limiting the number of policies they write, being stricter on their underwriting, refusing to write new policies at all, walking away entirely, or raising rates. California and Florida (and sometimes Texas) appear to be the hardest hit, and their home insurance markets may feel dysfunctional, but as the severity of extreme weather events escalates, it will only magnify across the country. And small owners are worried.
A survey of residential investors ResiClub-Groundfloor found that 80% of respondents, all landlords, were concerned about insurance issues, particularly “future home insurance premium increases”. According to ResiClub and its co-founder and editor-in-chief, Lance Lambert, a total of 224 investors who own short- or long-term single-family rental properties, condos or townhomes completed the survey. wealth’former real estate editor.
George Haralampoulos rents out his three-bedroom, two-and-a-half-bath home in Fort Lauderdale. Haralampoulos, in his mid-thirties, bought the property in the middle of the pandemic-fueled housing boom and began renting it out not long after. When a title insurer revalued his home this year, the cost increased: His monthly payment for insurance and property taxes jumped from about $600 to $700, Haralampoulos says. “It’s something that definitely shocked me with glue.”
Basically, he’s seen his monthly housing costs go up and he’s had to eat the cost because he doesn’t want to raise the tenant’s rent. Haralampoulos thinks that if the rent were higher, it would be a tough sell—so now his rental income doesn’t cover as much of the mortgage as it once did. It also leaves less money for any remodeling or improvements, Haralampoulos said. And he’s already wondering what this year’s hurricane season will look like and whether it will result in even higher insurance costs. “All it takes is one bad one, and then what does that scenario look like?”
In addition to the states that have found themselves in the middle of this insurance shakeup, there are also places like Ohio, where a duo of twin brothers who own several rental properties already have to mitigate the changes. Joshua and William Lemmon, brothers in their mid-thirties, bought a portfolio from another investor with properties spread across Ohio—and William happens to be an insurance broker. They said insurance carriers have become increasingly careful about what they will insure and stricter about what they want.
They have had to take on more risk as well, be it with a higher deductible, or by limiting certain coverages. And there was one instance where they had to replace the electrical mechanics on a property to remain insured, the two said. They’ve replaced roofs and plumbing, too, they said, to counter the higher rates. Another time, an insurer almost took them out after seeing a shed in bad shape on one of their properties, so they replaced it to prevent that from happening. And the Lemmon brothers are worried things could get worse, especially when they hear what’s happening in the coastal states. However, it has not reached the point of deterring them as investors.
Last summer, Jason Damm, an assistant professor of the professional practice of finance at the University of Miami who rents out a property in Miami, said after he renewed his insurance earlier that year, his premium went up — and that it was before his insurance company sent him. a notice that he was retiring from the state and his policy was cancelled. He was uninsured, at the time, and wasn’t sure what he would do given how expensive and difficult it was to find coverage.
Homeowners insurance rates rose, rising by double digits last year, according to S&P Global. In the ResiClub-Groundfloor survey, of the 80% who were concerned, 37% said they were “very concerned” and 43% said they were “somewhat concerned”. We’ll see if that changes over time—it looks like the country will have a “very active” hurricane season.