Insurance costs continue to increase, hampering rental housing providers and exacerbating the nation’s affordability crisis, according to a new report from the National Multifamily Housing Council (NMHC).
Some stabilization returned to the property insurance market in 2024, noted the “2024 State of the Multifamily Risk Report.” While levels remain elevated, last year saw the first decline in rates since 2017 after 27 consecutive quarters of growth.
However, the report finds liability insurance continues to face headwinds, due to rising litigation costs, nuclear class action verdicts, and a shrinking pool of guaranteed cost and zero-deductible programs driving premium increases.
The NMHC report combines quantitative results from a membership survey with insurance industry expertise from FHS Risk Management and builds on previous findings that indicated premium increases were a result of a plethora of factors, including increased replacement cost valuation and the reinsurance market’s limited capacity. Property types included Class A, B, and C communities as well as affordable, student, seniors, and military housing.
Multifamily owners and operators remain exposed to future volatility, with 91.8% reporting they have assets in states impacted by natural disasters, including California, Colorado, Florida, Louisiana, and Texas.
“These new findings and risk mitigation recommendations come at a critical time for rental housing providers and our residents,” said NMHC president Sharon Wilson Géno. “The current confluence of high insurance costs, interest rates, and construction and material costs make the development and operation of rental housing a financial challenge. A more stable insurance market will help keep costs in check, which, in turn, will improve housing affordability and potentially lower rental housing costs for residents.”
The NMHC urges action, saying policymakers should have a clear understanding of the insurance market challenges as well as the impact on affordability. It calls for policymakers to find ways to incentivize a more robust insurance and reinsurance market so owners and operators can access attainable and quality coverage lines. It also requests that policymakers reform and provide a long-term reauthorization of the National Flood Insurance Program so multifamily communities can mitigate the financial and property risk from flooding events.
