US Home Insurers Are Leaving Climate Risk Areas. We Need Affordable Housing Now

Yves here. It indeed would be nice if the government would intervene to assist people who will be displaced by housing loss in areas directly hit by climate change damage or effectively forced out via increases in home insurance prices. But as they say in Maine, “You can’t get there from here.”

First is the way large swathes of the US population have been indoctrinated to oppose large-scale official action. Second is that rising levels of corruption and falling levels of operational skills means that skepticism isn’t unwarranted. Third is the way that the American public has been prejudiced against helping the poors, even the now-fallen middle class. Forth is a elephant in the room, that migrating people out of at-risk areas into safer areas and building new abodes for them, even if on “green new deal” highly energy efficient lines, still has a climate impact.

By Chrissy Stroop, a senior correspondent for Religion Dispatches, her work has also appeared in Dame Magazine, Foreign Policy, The Boston Globe, Playboy, Political Research Associates and other outlets, including peer-reviewed academic journals. Originally published at openDemocracy

Most Americans are aware that with housing costs on the rise, more and more of us are experiencing periods of homelessness. Based on the relative dearth of national coverage, I presume far fewer of us are aware that major insurance companies have begun pulling out of areas identified as being at heightened risk due to climate change, leaving homeowners in the lurch. I wrote about the impact on Florida in July, but it turns out the problem is much larger than a single state, with California also heavily affected.

Over the next few years, it seems likely these two problems – unaffordable housing and unaffordable insurance in at-risk areas – will spiral into a potentially catastrophic cycle. Not only will some Americans be forced to abandon their homes, but the housing in these areas at high risk of damage from storms or wildfires will likely stand empty (as long as homes continue to stand at all), all of which will further drive demand up in a housing market that already prices out far too many people.

Homelessness in the United States increased 6% between 2017 and 2022, according to Department of Housing and Urban Development data analysed by nonprofit the National Alliance to End Homelessness. Notably, though, homelessness rose by a modest 0.3% from 2020 to 2022, a period marked by both pandemic-related economic disruptions and robust investments of federal resources in the American population, including direct aid cheques.

In other words, government investment in people whose lives were disrupted by the pandemic slowed the increase of homelessness in the country.

That investment, along with the possibility of remote work, also helped many millennials to buy homes of their own. Pundits had previously derided their generation for ‘failing’ to do so, even though millennials faced economic hardships previous generations had not.

More recently, however, the Federal Reserve Bank has aggressively raised interest rates to counter unusually high inflation, once again making it more difficult for Americans to buy houses. Now, according to analysis by Forbes: “Housing supply remains at near historic lows – especially entry-level supply – consequently propping up demand and sustaining higher home prices.” But low supply, a problem caused in part by the “not in my backyard” folks who object to the construction of low-income housing near them, is only one factor keeping home prices at historic highs.

Another is the high mortgage interest rates that have resulted from the Federal Reserve’s recent spate of interest rate hikes, which in turn has caused homeowners with locked-in low rates to stay put rather than sell. Another rate hike is expected by the end of the year.

Things are also bad for renters. With the average rent now at 30% of the median US income, the average American renter is considered rent-burdened, according to standard metrics.

For those of us who, like me, struggle to pay high rent in a city that is relatively safe from right-wing attacks on the rights of women and trans people, and for whom homeownership in a place where we feel more or less safe remains a distant dream, it can be difficult to empathise deeply with problems homeowners face. But according to a new report by First Street Foundation, a climate-change focused nonprofit based in New York, America is headed for a climate insurance bubble that most of us seem to be ignoring.

According to the report, which focuses largely on California, since 2009, that state has seen “a 270% increase in the cost of wildfires and a 335% increase in the number of structures destroyed by wildfires.” First Street’s modelling predicts further significant increases by 2053.

Insurers are taking note, and many homeowners in high-risk areas – also including parts of the south, west, and midwest – are now finding themselves without access to affordable insurance. The report observes that between 2015 and 2021 some of the most at-risk zip codes in California have seen a near 800% increase in the number of policies insurers refused to renew.

These non-renewals often leave homeowners with no options but state programmes, which are prohibitively expensive and considered a last resort. The report also notes that flood and wind insurance policies across many parts of the US are becoming increasingly unaffordable.

While the research suggests some of the wildfire insurance problems might be mitigated by insurers offering discounts as incentives for homeowners to take protective measures – such as clearing flammable debris and using flame-retardant building materials – this hardly seems an adequate solution.

First Street also highlights the likelihood of these conditions resulting in climate-driven migration.

“In high-risk areas, decreased demand for properties might result in declining real estate values, and, conversely, urban centers experiencing an influx of residents may experience increased demand for housing, leading to rising property values,” it states.

In Oregon, where I live, locals already complain about Californians moving north to escape their state’s astronomical housing costs, thereby driving up housing costs here. When the issue of insurers refusing to cover homes in areas at heightened risk due to climate change leads to further migration to already high cost-of-living urban centres like Portland, the impact will undoubtedly be to price more residents out of housing, resulting in increased homelessness.

This is a sobering thing to think about in the wake of the devastating wildfires in Maui, as well as both the hottest July and the hottest Augustglobally on record.

But it seems to me when the climate insurance bubble bursts amid already harsh housing conditions, Americans will be facing an outright catastrophe.

The best way to mitigate the damage would be for municipal and state governments to start working with the federal government now toward sustainable, high-density development, and for the federal government to prepare to bail out not (or not just) the ‘too big to fail’ banks and insurers that will be affected by the looming crisis, but also the ordinary Americans who will be most devastatingly affected.

Direct cash payments from the federal government improved millions of Americans’ lives during the pandemic. We can only hope the political will to directly provide housing and cash will be there when the climate shit really starts to hit the fan.

Print Friendly, PDF & Email


  1. Mikerw0

    This post conflates several issues. I would like to comment of just one of them… homeowner’s insurance. The crisis, and yes it is a crisis, in this line of business is decades in the making, but is actually easy to understand.

    At its core are two pieces, the first is a combination of moral hazard in encouraging, nee subsidizing, large scale property development in the country’s most CAT exposed areas (notably southeast and the gulf coastlines). For decades we have underpriced the costs of these risks and importantly not enforced appropriate building codes even after hurricane Andrew. So from an insurance company’s perspective the potential claims far exceed what they can price for.

    The second main component is that insurers have to file rates for homeowner insurance. This opens rates to the political process as regulators do not like the pressure of rising rates. Required rate increases are exasperated by the increased exposure, which instead of providing risk diversification produce risk concentration.

    The last few major storms have born this out as the actual losses have materially exceeded the modeled (expected) loss. This the works its way into the reinsurance industry that is designed to absorb the tail risk from CATs, is producing sustained underwriting losses and capital depletion. This both curtails capacity and raises the price of reinsurance — a lot. But it is not only a severity issue, it is also a frequency issue. Firms like Swiss Re and Munich Re have be screaming into the wind about this for over 20-years. Why, because they are looking at the data.

    The poster child, and canary in the coal mine, is Florida. Gross exposures are way up and insurers are fleeing the state. They can’t price adequately for the risk. The state fund, insurer of last resort, is effectively insolvent and the politicians have no solution (other that praying that a major event doesn’t happen). Yet, when there is an event they all rush to say we we rebuild.

    If you want a market solution, rates have to rise and substantially, and this includes flood insurance which should be mandated (which comes from the Federal government). Yes, this will drive the coast of living in certain locations through the roof. Otherwise regulate the issue away which will never happen.

    1. Anthony K Wikrent

      If you have any links regarding reinsurance industry response to climate risk, and especially recent ” losses have materially exceeded the modeled (expected) loss,” they would be most welcome. Thanks.

      1. schmoe

        If by modeled losses, you mean initial loss estimates v actual developed losses, I have no links but know that Katrina’s modeling of initial losses was not even in the ballpark of actual insured losses.
        If you are asking if insurers are surprised by how severe hurricanes are, yes,as is evidenced by the lack of reinsurance support for Florida homeowners insurance despite the insurance industry currently being well-capitalized and arguably having excess capital. Reinsurers have been flushing money down the toilet on catastrophe-exposed direct property and reinsurance for years now. 6 of the 7 highest insured loss hurricanes have occurred since 2017. Search for “Costliest US Tropical cyclones).
        I am not sure if the article mentioned it but CA has struggled with inflation in labor costs to rebuild houses after fires.

    2. Felix_47

      These are good points. I might add that litigation costs have increased tremendously. Having recently had to deal with the aftermath of the Florida hurricane I note that I was flooded with attorneys calling and pushing that I get independent estimates from their estimators and they were promising huge returns. I think a lot of Floridians got on the bandwagon as they saw the hurricane as a way to make money from the insurance company. I once asked a DA why the government so rarely goes after obvious insurance fraud and his answer was, “Because the average jury does not see insurance fraud as a crime.” So it seems part of any solution would be some sort of legal reform in Florida that would impact the lawyer’s bread and butter. Does anyone think that any restriction of US lawyers is going to happen? The author suggests “The best way to mitigate the damage would be for municipal and state governments to start working with the federal government now toward sustainable, high-density development.” I happen to think that is a good idea ecologically and it would make public transportation worthwhile. Russia has this sort of model as well. I guess what she means is high rise public housing. Ideally we could push down most of suburbia and we could live in dense high rises and housing could even be a right paid for by the government along the Singapore or Russian model or Austrian model. I would like that but are Americans willing to adhere to the strict requirements of massive plattenbau government housing? When that has been tried the results have been disastrous in the US. Americans are not willing to be regimented or to follow rules. We know that even when housing is free it is hard to get homeless to leave the freedom of the street. I run a group housing facility where housing is free and of necessity it has to be drug free with a curfew and many clients just cannot accept such limitations and prefer to live on the street and survive on their SSI allotment and what they can earn and scrounge. Full time security is needed to keep the drug dealers and bad actors out. But the reality is that these people are more often than not friends and intimates of the clients and their customers.

  2. david

    “if you want a ‘market solution’, rates have to rise and substantially, and this includes flood insurance which should be ‘mandated’ (which comes from the Federal government) ”

    A “market solution” in Florida is not a “mandate” – that is an oxymorn by definition – a free market will default to building standards that are able to withstand the rigors of Category #5 or not …exist – within at least 20 miles of the shoreline. If the lenders want to be in this FL market and require insurance that is their business model which has nothing to do with those who do not leverage and are willing to take the risks because they are prepared.

  3. Socal Rhino

    I think I saw local TV report that CA has decided to let P&C insurers raise rates rather than see more of them pull out of state.

  4. Gregorio

    A used RV has become America’s new starter home. In many west coast cities, there are even aspiring slum lords who buy them up, park them on the street, and rent them out.

  5. Mikel

    “…California’s housing crisis has been a key factor in a mass departure of people from the state. Some 500,000 more Californians left in a recent two-year period than arrived. And about 40% of the state’s residents are considering leaving, according to a recent poll, with housing cited as a main concern…”

    “…In a post on X, the social media site formerly known as Twitter, Christian Lewis, the founder of an artificial intelligence startup, said he is living in the San Francisco pod community for a month.

    “Several AI founders and indie hackers here,” he wrote, and “the downstairs lounges are actually nice.” He said the building was occupied by about 20 people and featured five bathrooms and two showers…”

    Somebody do something quick. But don’t leave it up to the “pod people.” I guess the relation to Invasion of the Body Snatchers is lost on them.

    1. JBird4049

      I noticed the creation of really small studio apartments during the boom over twenty years ago in San Francisco. What’s old is new again.

  6. JonnyJames

    The major insurance cos won’t write homeowners policy for anywhere in California. Our insurance co dropped us, and now we have to pay triple the premium for less coverage. (the so-called California Fair Plan)

    Decades of PG&E and state gov corruption has resulted in antiquated infrastructure causing fires that resulted in thousands of homes burning down and people being killed. Instead of charges of criminal negligence, PG&E got away with murder with no consequences.

    Now ratepayers, taxpayers and insurance payers must pay unprecedented amounts of extortion to Pacific Graft and Extoriton Co. as well as the Insurance Mafia.

    We are lucky that we can afford to pay the extortion. Many cannot.

    As Yves mentions, many have been indoctrinated: they don’t want public resources to help the public or the poor, they want to help the oligarchy instead. It’s like Collective Stockholm Syndrome.

    Gov. Gaviner Slickmo is silent about this, and since political bribery is legal, the state leg. won’t do anything to jeopardize their bribestream.

    The crisis will just get worse until larger numbers of people can’t pay.

  7. Janeway

    For those of us who, like me, struggle to pay high rent in a city that is relatively safe from right-wing attacks on the rights of women and trans people, and for whom homeownership in a place where we feel more or less safe remains a distant dream, it can be difficult to empathise deeply with problems homeowners face.

    Lost me right there. This article should appear on the editorial page wherever it came from.

    1. JBird4049

      I have read stuff on and by nineteenth century Europeans, and their writings about “Darkest Africa” was very often both patronizing and racist. Even among what we would still call good people today, it oozed out like water from a very full sponge.

      I am not surprised seeing this for like those Europeans, the othering of Americans is often an unconscious affect. Make no mistake, I see this on both sides, often unconsciously done like breathing, but I think that the latest “liberal” or “leftist” othering is more pernicious. They tell themselves that they are good people, cloaked in righteous virtue while othering or dehumanizing people often worse off than themselves.

      I find the more honest, open hatred from some people of the right refreshing, if that makes sense.

  8. Rip Van Winkle

    It’s called “underwriting”, going back to Lloyds Coffeehouse around 350 years ago. Loss ratios, combined ratios, reinsurance treaties, retrocessional insurance, actuarials – boring! boring!

    None of this coastal crybaby stuff goes over very well in Eau Claire WI, Peoria IL, Keokuk IA, Muncie IN or Hicksville OH, where -10 to -20 degrees F comes every January. Plenty of affordable housing.

    If states want to have their own insurance pools they are free to do so. Hmm, why are “state programmes (+30 IQ points for anything sounding British in insurance) prohibitively expensive”? Not enough bag holders? Oh – that’s the part at the end where the federal government appears.

    TBTF high-roller casino bank and insurer bailouts? – thank W and O.

    1. chris


      Banks need to do better underwriting for mortgages. Insurers need to do better underwriting for policies. The Federal Government needs to do better regulating of standards for rent. For example, when I was a landlord because I couldn’t sell a house we had to move out of quickly, I had to answer on my taxes if the rent I was charging was over the federally assessed market rate. I also had a property management company that would tell me what the going rate was for similar properties. So why don’t we enforce that? This is a situation where we have the rules and means to make the market work it out. Will that hurt some people? Yes. But these aren’t the people who need to be protected.

      As for the comments in the article about being in a safe community…she references Oregon and Portland? I guess that’s some definition of safe. Perhaps she should try living in the Midwest? The people there aren’t lepers. It’s tiring to listen to west coast people constantly complaining about parts of the country they’ve largely never been to based on stereotypes from a media that is completely biased. If you don’t have a family, don’t have local connections, don’t have a house to sell, and your job allows you to work anywhere, why do you insist on living in a place with a high cost of living? And if you choose not to move, then you need to accept that you’re spending a lot of money you’re saying you don’t have for the privilege of living in said location.

      The whole article reads like someone begging the federal government to keep subsidizing insane policies.

  9. LAS

    Government intervention? … Intervention and disruption of governance? … Government intervention? … Intervention and disruption of governance? … I almost forget, what the people really want.

  10. Piotr Berman

    Genuinely free market moves toward equilibrium, so it solves some problems like inadequate supply of rental dwellings. In particular, if reasonable modest dwelling are unaffordable, one solution is to offer something below that standard. Tories of England are fans of this approach. Today I tried to find citations for a joke and I stumbled upon this gem (Wikipedia on James Spencer Cleverly, an MP and Secretary of State for Foreign Affairs):

    In January 2016, the Labour Party proposed an amendment to the Housing and Planning Bill 2016[25] that would have required private landlords to make homes which they put up for rent “fit for human habitation”. [One of the excesses of Corbynism] According to Parliament’s register of interests, Cleverly was one of 72 Conservative MPs who voted against the amendment and who personally derived an income from renting out property. The Conservative Government had responded to the amendment by saying that they believed homes should be fit for human habitation but did not want to pass the new law that would explicitly require it.[26]

    1. skippy

      What is this thing/animal you call equilibrium – ????? – and why would anyone think markets move towards it like it has any agency.

      Firstly since things are global now there is no classical sense of a closed market e.g. you have regional markets that over lap and historical markets being challenged by recent new comers and on top of all that mad geopolitical shifts. In England’s case it an over baked mature economy that switched to the FIRE sector economy and as we speak the wheels are falling off that post Brexit.

      All I can see is the housing problem, not to be confused with supply IMO, is when everyone starts leaving or going home as opportunity diminishes. Per se lots of OZ kids are leaving and many are not interested in doing the old spend some time in the U.K. and E.U. My 26&24 year old daughter living in QE-1 are coming back home early next year due to opportunity loss.

    2. chris

      Not sure if you’ve been following other NC posts on this topic, but with respect to rentals, a big problem in the US are institutions coming into various markets, buying properties at scale, and colluding with each other via algorithms to set prices and fees high. Things may still reach an equilibrium but they do that according to the inputs from the property owners, not the renters.

Comments are closed.