The housing world doesn’t need another problem, but it has one: insurance. The insurance landscape is changing, and property insurance companies are either capping the number of policies they write, are more stringent in underwriting, refuse to write new policies altogether, are fleeing altogether, or are raising interest rates. California and Florida (and sometimes Texas) appear to be the hardest hit, and home insurance markets could feel dysfunctional, but as extreme weather events escalate in severity, they will amplify across the country. Smallholders are worried.
Ground floor of ResiClub Housing Investors Survey It found that 80% of respondents, all of whom were landlords, were concerned about insurance issues, specifically “higher home insurance premiums in the future.” A total of 224 investors who own short- or long-term single-family rental properties, condos or townhomes completed the survey. reconnaissanceAccording to ResiClub co-founder and editor-in-chief, Lance Lambert, Luck Former real estate editor.
George Haralambopoulos rents his three-bedroom, two-and-a-half-bath home in Fort Lauderdale, Florida. Haralambopoulos, who is in his mid-30s, bought the property in the midst of a pandemic-fueled housing boom and began renting it out not long after. When his property insurance company reassessed his home this year, its cost skyrocketed: Haralambopoulos said his monthly payments for insurance and property taxes rose by about $600 to $700. “It’s something that definitely gave me some shock,” he said.
Essentially, he saw his monthly housing costs jump, and he had to absorb the cost because he didn’t want to increase his tenant’s rent. Haralampopulo believes that if the rent was higher, it would be difficult to sell – so his rental income now doesn’t cover as much of the mortgage as it once did. It leaves less money for any remodeling or improvements, too, Haralambopoulos said. He’s already wondering what this year’s hurricane season will look like, and whether it will lead to higher insurance costs. “All it takes is one bad one, and then what does that scenario look like?”
Aside from the states that find themselves in the midst of this lockdown shock, there are places like Ohio as well, where the twin brother duo, who own several rental properties, have to mitigate the changes. Joshua and William Lemon, brothers in their mid-30s, bought a portfolio from another investor with properties spread across Ohio — and William happened to be an insurance broker. They said insurance companies are becoming more selective about what they will insure and strict about what they want.
They’ve had to take on more risk as well, whether that’s a higher deductible, or limiting some coverage. The two said there was one case where they had to replace electrical mechanics at one property to remain insured. They said they also replaced roofs and plumbing to combat the high rates. Another time, the insurance company almost dropped her after seeing a shed in disrepair on one of her properties, so she replaced it to prevent that from happening. The Lemon brothers worry things could get worse, especially when they hear about what’s happening in coastal states. However, it has not reached the point where they are discouraged as investors.
Last summer, Jason Dame, an assistant professor of professional practice of finance at the University of Miami who rents property in Miami, said that after renewing his insurance earlier that year, his premiums went up — and that was before his private insurance company sent him with it. Notice that he was withdrawing from the state and his policy was cancelled. He didn’t have insurance at the time, and wasn’t sure what to do given how expensive and difficult it was to find coverage.
Homeowners insurance rates have jumped, increasing by double digits in the past year. according to Standard & Poor’s 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, as the country appears to be about to experience a “very active” hurricane season.
