As homelessness continues to rise in the United States, the lack of affordable housing is a major concern. While discussions often focus on funding and zoning, non-profit housing providers are facing another significant hurdle: soaring insurance costs and limited coverage options.
Kristina Dorer, an assistant vice president at Woodruff Sawyer, has observed how the insurance landscape is changing. She notes that insuring low-income housing has become more difficult as insurance companies react to repeated losses and legal issues. “The insurance market for low-income housing has hardened as carriers tighten coverage due to significant losses,” Dorer explained. This shift means that many insurance providers are limiting their coverage options due to tenant issues, housing quality concerns like mold, legal challenges, and state consumer protection laws.
The impact of these changes is widespread. Even properties that have never filed a claim are facing substantial increases in their insurance premiums, with hikes of 30% to 40% being common. Dorer mentions that some deductibles for water damage have skyrocketed from $10,000 to as high as $100,000. The shrinking availability of coverage is also a pressing issue, as some insurers are completely withdrawing from the low-income housing market, leaving non-profits with fewer choices and tighter budgets.
These rising costs are forcing non-profit housing providers into tough financial decisions. Organizations often find themselves weighing the risks of filing a claim against the financial strain of paying out of pocket. Dorer pointed out that when insurance premiums increase significantly, it often leads to reduced services for those in need. “Nonprofits cannot increase their prices like for-profit businesses to cover added costs,” she said. A 50% increase in insurance premiums can mean much less funding for essential services.
Despite these challenges, Dorer suggests that non-profits can implement risk-reduction strategies to help manage their insurance costs. Simple measures, like installing fire safety equipment and humidity sensors, can prevent losses and potentially lead to better insurance outcomes. For instance, fire blankets can be a cost-effective way to handle small fires, while humidity sensors can help monitor conditions to prevent mold growth.
Dorer also emphasizes the importance of maintaining good relationships with tenants. Access to individual units for maintenance checks can prevent more significant damage, which ultimately affects insurance claims. Building trust with tenants is crucial, as it encourages them to allow management into their units when necessary.
While these proactive steps can help, Dorer believes that broader policy changes are needed to address the underlying issues facing low-income housing. Although some states have studied the insurance problems in this sector, little action has been taken to find solutions. She suggests exploring public support initiatives, such as grants to help cover insurance costs or alternative insurance programs tailored for non-profits.
Dorer also highlights the role of commercial brokers in advocating for affordable insurance solutions. As specialists in non-profit insurance, they are committed to ensuring that low-income housing remains viable despite the current challenges.
As the situation evolves, it is clear that the intersection of rising insurance costs and the need for affordable housing requires urgent attention. Non-profits are on the front lines of this struggle, and finding innovative solutions will be essential in supporting those most in need.