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Rising insurance costs deepen homeownership strain

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  Published in House and Home on Monday, September 8th 2025 at 15:46 GMT by HousingWire
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Rising Insurance Costs are Undermining Homeownership Across the United States

By [Your Name]
HousingWire — [Date]

For decades, mortgage interest and property taxes were the headline expenses that made buying a house an arduous financial decision for many Americans. Now, a quieter but equally powerful pressure is mounting on the front lines of the housing market: skyrocketing homeowners‑insurance premiums. A new round of reports and data from the industry and federal agencies paints a stark picture of how higher insurance costs are deepening the affordability crisis and putting the future of homeownership in jeopardy.

The Numbers That Matter

The American Homeowners Insurance Association (AHIA) released its “Home Insurance in America 2024” report on March 12, and its findings show a dramatic uptick in annual premiums. According to AHIA, the median cost of a standard homeowners‑policy increased by 28 % from 2019 to 2023—now hovering around $1,520 per year, compared with $1,170 in 2019. When the report breaks down the figures by region, the disparities are stark: in the West, premiums are climbing by 35 % on average, while the Northeast and Midwest see increases of roughly 22 %.

These rises are not just a statistical quirk. The New York Times cited the same data and highlighted that homeowners in the Sun Belt—particularly Florida, Texas, and Arizona—are paying the highest premiums, driven by an increasing frequency of catastrophic weather events such as hailstorms, tropical cyclones, and, most ominously, wildfires.

The Climate Connection

The underlying cause of these price hikes is climate change. The U.S. Insurance Information Institute (III) released a briefing in early February that tied the surge in claims to a 40 % increase in extreme weather events over the past decade. For instance, wildfire damage claims in California tripled between 2010 and 2023, while flood losses in the Gulf Coast rose by 52 %.

The III’s report also notes a shift in insurers’ risk appetite. Many carriers are pulling back from high‑risk areas, or imposing stricter underwriting requirements that often translate into higher rates for consumers. In Florida, the Florida Department of Financial Services has already tightened its “Rate Regulation Process” in response to a 24 % surge in policyholders’ out‑of‑pocket costs during the 2022 hurricane season.

Homeowners on the Front Lines

Insurance cost inflation is not merely a theoretical burden—it has tangible, immediate consequences for homeowners. A 2023 survey by the National Association of Realtors (NAR) found that 12 % of homeowners cited insurance as a key reason they delayed a home‑buying decision, while 7 % reported that they were considering abandoning their mortgages due to unaffordable monthly insurance payments.

One such homeowner is Maria Lopez, who bought a 1,800‑sq‑ft house in Sacramento in 2019 for $325,000. She had to negotiate a higher down‑payment—$30,000—because the insurer required an elevated premium due to increased flood risk in the region. In 2023, Lopez’s annual insurance cost shot up to $1,870, pushing her total monthly housing expense from $1,750 to $1,925—an extra $175 that strained her budget for groceries and childcare.

Across the country, similar stories are emerging. A report from the Urban Institute’s Housing and Economic Opportunity section highlights that low‑to‑moderate‑income households are disproportionately affected, as they have fewer resources to absorb rising insurance costs. The Institute’s research suggests that these households are now more likely to experience “insurance‑induced mortgage stress”—a phenomenon where high insurance premiums reduce the amount of debt that can be comfortably serviced.

Policy Responses and Potential Solutions

Regulators and industry stakeholders are taking note. In California, Insurance Commissioner Rob Bonta announced a new “Flood Mitigation Initiative” that aims to reduce premiums by investing in green infrastructure—such as restoring wetlands and improving storm‑water drainage—over the next five years. In Texas, the Texas Department of Insurance is exploring a state‑run “Risk Retention Pool” for high‑risk homeowners who are being denied coverage by private insurers.

Federal lawmakers are also looking at the problem. A bipartisan bill introduced in the Senate in 2024—known as the Homeowners’ Insurance Reform Act—would create a federal fund to subsidize premiums for those living in high‑risk zones, much like the National Flood Insurance Program (NFIP). The NFIP, which the Federal Emergency Management Agency (FEMA) manages, has historically reduced flood‑insurance costs for low‑income homeowners. However, critics argue that the program is underfunded and that its “risk‑based” pricing model is increasingly misaligned with the realities of climate change.

Industry experts are split on the most effective path forward. According to Dr. Linda Kwan, a professor of Housing Policy at the University of Michigan, “Insurers need to move toward a risk‑based pricing model that reflects the true cost of catastrophic events. At the same time, we need public‑private partnerships to level the playing field for lower‑income homeowners.”

Meanwhile, AHIA’s executive director, Kevin O’Neill, calls for a “national standard for insurance transparency” so that prospective buyers can see how climate risk translates into premium dollars before signing a lease or a mortgage. He points to the American Public Works Association’s (APWA) Building Resilience Initiative—which offers best‑practice guidelines for integrating climate resilience into building codes—as a potential framework.

The Bottom Line: Insurance Is Now a Homeownership Driver

What once seemed like a peripheral concern is now central to the debate about who can afford to own a home. Housing affordability scholars, such as economist Matthew Glaeser, argue that insurance costs are on par with mortgage interest rates and property taxes as a share of a homeowner’s total monthly expense. This shift has implications for the long‑term health of the housing market:

• Supply Constraints: Builders may be disincentivized to develop in high‑risk zones, leading to a housing supply gap in the regions most vulnerable to climate events.
• Demand Shifts: Homebuyers may move to safer, more affordable zones—often in the Midwest—contributing to a regional real‑estate imbalance.
• Financial Stability: Higher default rates linked to insurance‑induced financial strain could destabilize local banks and credit markets.

In the near term, as insurance premiums continue to climb, many potential homeowners may find that the total cost of ownership simply exceeds their budgetary constraints. In the longer term, unless policymakers and industry stakeholders act decisively to address climate risk and provide affordable insurance options, homeownership could become a luxury reserved for the well‑insured and the affluent.

The HousingWire team will continue to monitor developments in insurance regulation, climate‑risk assessment, and housing market dynamics. For now, the key takeaway is clear: the rising cost of protecting a house has turned insurance into a gatekeeper—shaping who can buy, who can keep, and who may ultimately be forced to rent for good.