Safeguarding Affordable Housing With the Right Insurance

Property insurance costs for affordable housing owners and developers have surged at a rapid pace in recent years, with some owners facing premium hikes of 25 percent or more year over year. This, coupled with that the fact some coverages are difficult to obtain or are simply unavailable, threatens the foundation of affordable housing.

Securing the right insurance is not just a business decision but a safeguard for community stability for affordable housing providers. Navigating these challenges requires insurance broker expertise and a significant time investment to ensure the best results.

Factors that impact insurance costs

Affordable housing properties often face high premiums based on their classification as “high-risk,” which includes natural disaster exposure, demographic factors and crime scores. Insurers rely heavily on crime data, such as property crimes and violent incidents, to assess risk, which often leads to disproportionately high costs for affordable housing properties.

For example:

• A well-managed, recently renovated affordable housing community in a high-crime neighborhood may still face excessive premiums due to its ZIP code.
• Insurance carriers may decline coverage or impose restrictive policies, making it harder for owners to invest in safety improvements.
• Higher premiums drain financial resources that could be used for resident services, maintenance, and future housing development.

Beyond insurers, lenders and stakeholders increasingly dictate insurance requirements, adding another layer of complexity. Recently, several major lenders have announced that they will only accept policies that provide full coverage for assault & battery, firearms, animal attacks and molestation, rather than those that exclude or limit payment for these claims. Many of these coverages are already difficult to secure, creating new compliance challenges for property owners.

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Without proactive engagement, these shifting requirements can lead to risk of non-compliance and financial strain. This systemic issue perpetuates a cycle where underserved communities pay more for insurance, leaving fewer resources for security and community-building efforts. To break this cycle, affordable housing owners must work closely with their insurance broker and lenders early in the process to secure coverage requirements that are both practical and financially feasible.

Climate risks and market volatility

Climate risk is another major driver of insurance instability. Many affordable housing properties are in flood-prone, hurricane-exposed or wildfire-vulnerable areas. These risks contribute to skyrocketing premiums and reduced coverage availability.

For example, while the Los Angeles wildfires are expected to cause $30 billion in damage, the financial impact could feel more like a $60 billion windstorm due to reinsurance structures, which allow insurance companies to share risk with larger insurers and better manage major losses from disasters. Despite the severity of the wildfires, this event alone will not trigger a “hard market” or a period where insurance is more difficult and expensive to obtain due to major industry losses and stricter policies, highlighting the complexity of insurance trends.

To remain insurable, affordable housing developers must adopt smart construction and proactive risk management strategies, including:

• Strengthening building exteriors to withstand severe weather
• Upgrading structural designs beyond minimum code requirements
• Incorporating multiple backup power sources to improve resilience
• Enhancing security measures like improved lighting, gated access, and community policing programs to lower crime risk perceptions.

Insurance is a tool for stability and equity

Rather than treating insurance as a fixed expense, affordable housing developers should approach it as a strategic investment in financial stability and long-term affordability. This is where the importance of developing a trusted partnership with an insurance provider who values mission-driven housing work is so vital.

It is important for affordable housers to:

• Advocate for fair underwriting: Encourage insurers to account for on-site security investments rather than solely relying on ZIP code-based crime scores.
• Partner with experts: Work with brokers and insurance companies who understand affordable housing challenges and prioritize equitable access to coverage.

By shifting to proactive insurance planning, owners can create more stable, insurable, and affordable housing options.

Advancements in data analytics improve risk assessments

Adopting a data-driven approach to risk and affordability can help affordable housing owners further manage risk and costs. Climate modeling and predictive analytics tools like CoreLogic’s Climate Risk Analytics enable developers to:

• Assess climate risks and determine necessary infrastructure upgrades
• Identify safer, more insurable locations for future developments
• Quantify risk reduction investments to negotiate better insurance terms.

A proactive underwriting approach helps mitigate liability risks by:

• Enhancing property security and lowering insurance costs through crime prevention measures, resident engagement programs, and community partnerships
• Reducing claims and improving coverage availability with regular inspections, maintenance, and disaster preparedness

Using data-driven strategies allows owners to challenge unfair premium hikes and secure more equitable coverage.

Best practices for affordable housing providers

To navigate today’s insurance market, affordable housing organizations should take these strategic steps to secure cost-effective coverage and advocate for industry reforms.

1. Start early: Begin the insurance renewal process at least five months in advance. Compile crime reduction data, maintenance records and climate risk mitigation plans to strengthen your case with insurers.
2. Leverage alternative insurance programs: Explore state-backed insurance pools, risk-sharing models and mission-driven insurers that cater to affordable housing needs.
3. Invest in security measures: Implement security enhancements, resident engagement programs, and smart surveillance to reduce perceived crime risk and negotiate better premiums.
4. Integrate climate adaptation strategies: Use storm-resistant materials, flood mitigation systems, and energy-efficient designs to lower exposure to extreme weather risks.
5. Engage policymakers and industry leaders: Advocate for underwriting standards that recognize proactive risk management rather than solely relying on crime scores.

By implementing these best practices, affordable housing operators can reduce insurance costs, maintain financial stability and protect residents from displacement.

Tips for affordable housing insurance brokers

Insurance brokers who specialize in affordable housing play a crucial role in guiding property owners through the complexities of the market. Brokers can provide valuable expertise and advocacy by:

• Prioritizing long-term affordability and community stability over short-term profit
• Working with insurers who recognize and reward proactive risk management strategies
• Educating affordable housing providers on available risk mitigation options to improve insurability

By selecting the right insurance partners, affordable housing owners can secure more sustainable, cost-effective coverage.

A call for equitable insurance solutions

The rising cost of insurance isn’t just a financial challenge—it’s a housing stability crisis that disproportionately affects underserved communities. Crime-based underwriting, climate risk, and shifting market demands compound the difficulty of securing equitable insurance.

Safeguarding affordable housing requires more than traditional risk assessment—it calls for innovation, advocacy, and a shared commitment to equity.

By prioritizing fairness in underwriting, supporting proactive risk management, and investing in community resilience, industry leaders and policymakers can help ensure affordable housing remains accessible—and insurable—for generations to come.

Garet Marr is regional managing director of Insurance Services at Franklin Street. Carlos A. Gonzales is chief asset management officer at The NHP Foundation.