— Written by Lyle Jarvis

Rates Are Going Through the Roof 💰

Home insurance rates in the U.S. are rising even faster than inflation. And for years, we've seen the link between rising costs and climate change become more and more clear. The root of the matter remains; according to the IPCC, the U.S. is becoming a more volatile place to live.

At your kitchen table, that starts with higher bills from your insurance provider, but more broadly it's turning a basic homeowner expense into a major crisis. In fact, some estimates suggest they’ve shot up by as much as 70% since 2021. Between higher premiums, more volatile markets, and increased climate damages, one of the biggest assets Americans can own is starting to erode. 

A new report covered by the The New York Times estimates just how badly these premiums are cascading into the broader real estate market. The study, which analyzed tens of millions of housing payments through 2024 to understand where insurance costs have risen most. In the top 10 percent of U.S. ZIP codes most vulnerable to hurricanes and wildfires, home values have dropped by an average of $44,000.

The Insurance Business has a Climate Problem 🌎

For years now, the insurance market has been trying to distance itself from California, leaving policyholders struggling to keep up with rising costs. In 2023, State Farm announced it would stop writing new homeowners insurance policies in California. Last year, it wouldn’t renew 72,000 policies. Other major providers are following closely behind. 

In the wake of the wildfires, State Farm made its case for emergency rate hikes on homeowners, which was granted. And starting in June, they were able to raise rates an average 17% for homeowners, 15% for renters/condos and 38% for rental dwellings. When asked about the 38-page decision, an administrative judge called it a "rescue mission to stabilize State Farm’s financial condition while safeguarding policyholders."

Last month, NYTimes published another piece detailing how California's 2023 plan to stabilize the fire insurance market hasn't gone as planned. Instead, through a series of negotiated loopholes, it's actually incentivized major insurance companies to drop policyholders in high-risk areas before securing rate hikes. Check out the article below.

Further reading: California Promised Insurance Relief, but Delivered Loopholes (NYTimes)

California isn't alone. Florida, Texas and Louisiana are following close behind, largely driven by extreme flooding. In fact, in Florida, the average cost of homeowners insurance this year was more than $5,700. In Midwestern states that are prone to hail, insurance eats up more than a fifth of an average homeowner's total housing payments.

Hiding from the Numbers 🫣 

Since data about climate risks might deter buyers from a particular home, it’d be easier for real estate companies to just squash that data altogether. To do it, they've been pressuring Zillow and other sites to do away with the risk data buyers have come to rely on. Just over a year after adding climate risk scores, Zillow has removed them from more than 1 million listings after real estate agents were complaining about sales. 

Luckily, Zillow scores aren't the only option for buyers to get an idea of a home's climate risks. If you type an address into the search bar on first street.org, it will run the flood, fire, wind, and air quality risk factors. Check it out!

Further reading: Erasing a Home’s Risks on Zillow Doesn’t Make Them Go Away (Bloomberg)

Getting Serious About Solutions 📈

Ultimately, any long-term, sustainable solution to the insurance crisis will depend on reducing the risk. This means we need to seriously boost our climate mitigation efforts, which is well within our reach technologically and economically. Here are a few ways we can do it:

Actions for Leaders

Making Resilient Building Mainstream: Millions of U.S. homes are at a higher risk of disaster because of outdated building codes. States can update building codes to weave climate resilience into infrastructure. We need to make the push for things like stronger structural resistance to extreme weather, mandating energy efficiency through better insulation, heat pump compatibility, and including features for things like flood control.

Public Insurance Options Last-resort programs, like the Fair Access Plan often provide expensive, limited coverage for folks who have been dropped by private insurers. States can help by pushing for lower-cost alternatives for a wider section of the population.

Buyouts: A last resort? For neighborhoods that have become unsafe, states are working to blueprint successful programs around home buyouts as a mitigation strategy. New Jersey boasts the Blue Acres program, a voluntary state-funded buyout program that acquires flood-prone residential properties, then converts the land to act as a natural buffer against floodwaters.

Making polluters pay: There has been a push for big insurers to bring subrogation claims against major polluters to recoup losses from storms strengthened by climate change.

Further reading: State Policy Considerations for Disaster Risk and Resilience (National Conference of State Legislators)

For Homeowners:

Home resilience & fortification: This is about making your home as resistant as possible to climate threats in your area. Homes that meet FEMA's hazard-resistant standards could see declines in average annual damages by up to 48%.

Upgrade Your Roof: Replace an older roof with a new, more durable one using modern, wind and fire-resistant materials. Fortifying your roof to a FORTIFIED standard (like in Louisiana) can reduce claims and may qualify you for significant discounts on your premium.

Create defensible space against wildfire and storms: If you are in a fire-prone region, remove vegetation, combustible ground cover materials, and tree branches within various distances of your structure. If possible, add storm shutters, impact-resistant roofing, or pressure-rated windows and doors to guard against severe weather. Further reading: Fire-resistant plants for home landscaping

Ask for Resilience Discounts: Inquire about specific discounts for home hardening and safety upgrades, as many insurers don't offer these upfront. Many states, including Florida and California, offer incentives or require insurers to provide discounts for specific mitigation measures.

Advocate for Change: Support Stronger Building Codes. Push your state to offer more tax credits, rebates, or grants for undertaking home mitigation measures, particularly for low-income communities.

Just like climate change, the longer political leaders wait to respond to this crisis, the more it will cost us. Even worse, the people who can least afford it will be the most vulnerable. The good news is, it creates an opportunity for states to respond with climate-smart solutions, and serve as powerful examples for the entire country.

👀 Some Stories You Might Have Missed This Week 🗞️📺:

1. Ding Dong, Coal is Dead: At least in California (Climate Colored Goggles)

2. New England kicks off $450M plan to supercharge heat pump adoption (Canary Media)

3. US drillers cut oil rigs to lowest in four years (Reuters)

4. These microbes could help reduce methane emissions (Washington Post)