Climate change has been causing rising sea levels and extreme weather events, and these factors are now driving up insurance rates, thereby threatening the affordability of housing. This is particularly the case in coastal regions, where the risks are amplified.
Affordable housing developers in North Carolina are feeling the heat. Significant hikes in insurance premiums have forced many to abandon their coastal projects. One developer reported a staggering 70% annual increase in premiums over the last three years. Such a drastic rise in costs makes it nearly impossible to continue developing affordable housing in these high-risk areas.
Adding to these concerns are federal restrictions on rent increases. With escalating insurance costs, developers worry about the sustainability of the affordable housing sector. They are caught in a bind, where they cannot pass on the increased costs to tenants due to federal rent controls.
The insurance market disruption caused by climate change isn’t isolated to hurricane-prone areas. Wildfires and winter storms are causing issues nationwide. As climate change exacerbates these extreme weather events, insurance costs for housing, particularly affordable housing, are expected to continue to rise.
Various advocacy groups have proposed solutions to this mounting problem. One suggestion is to harmonize insurance requirements across the federal agencies involved with affordable housing. Another proposed solution is to implement certificate programs that assure insurers of a building’s resilience to climate change. This certificate would demonstrate that the property has been designed and built with climate resilience in mind, thereby potentially lowering insurance premiums.
The rise in insurance premiums due to climate change is also threatening the profitability of affordable housing developers. Many of these developers rely on federal programs like the Low Income Housing Tax Credit (LIHTC). However, with the premiums on the rise, these credits may not be enough to sustain profitable operations.
The situation in Coastal North Carolina exemplifies this issue. This region is a popular retirement destination, and insurance premiums for affordable housing developers have seen an increase of up to 70%. This impacts tax credit developers more than for-profit ones, as the latter often have more financial cushion to absorb such increases.
The federal government could provide much-needed assistance to affordable housing developers by standardizing requirements for low-income housing programs and incentivizing the construction of climate-resilient properties. By taking these steps, the government can help ensure the continued availability of affordable housing, even in the face of climate change and rising insurance costs.
Science4Data is committed to cut through greenwashing and measure real impact. Join the journey to a sustainable future. Your actions matter.
