Coastal multifamily developers, owners expect huge jump in insurance costs

Multifamily developers in coastal areas are expecting big increases in insurance costs this year, according to a report by Yardi Matrix.

In Texas and Florida, where Hurricane Ian caused $50 billion in damage last year, insurance costs are nearly 50% higher than in 2022. Some property owners could face far higher increases, though.

An executive with the largest affordable developer in Florida is bracing for 200% to 300% price spikes, according to a report by Multifamily Dive. Such great leaps in insurance costs threaten new development and property sales, Yardi Matrix says.

Yardi Matrix noted that increases in construction costs from inflation, labor, and supply chain issues along with the growth in property values are driving higher insurance costs.

Yardi Matrix added: Not only are costs increasing but insurers are covering less wind limit on replacement costs with large increases in deductibles, new exclusions for damages such as mold or flood endorsements, and limits on payouts. That forces property owners to layer wind on top of other policies to reach the replacement cost values required by lenders.

The Federal Emergency Management Agency recently sent a letter to officials in Lee County, Florida alleging that hundreds of homes were rebuilt in violation of the agency’s rules following Hurricane Ian. The letter provoked a sharp backlash as homeowners struggle to rebuild following the devastating 2022 storm that destroyed a large swath of the county.

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