On rising housing insurance rates in Houston and Harris County

Image credit: Gerd Altmann/Pixabay

I have lived in a multi-family community for the past 20 years. Roughly a year ago, I volunteered to serve on the board, as a call went out for residents to serve on the board because the board was short on members. I was granted an appointed position which will eventually expire in the not-too-far-distant future, after which I’ll have to stand for election if I want to continue serving on the board.

My time on the board certainly has been a combination of pain and of the feeling of some accomplishment. This wasn’t something I was actively seeking, but I did it as my association needed someone to step up and so I did.

One of the big headaches that I became aware of after several months was that my association was low on money. When I started on the board, I mostly concentrated on responding to complaints from residents and dealing with various issues as they cropped up. It wasn’t until about three months into my tenure that my fellow board members and I had an informal talk, and the discussion revolved around money and finances. That was the first time I seriously looked at the finances of my association. After some investigation, I knew that some serious action was going to need to be taken to reverse the disastrous course my association was on financially, which we did.

In my readings of my association’s finances over the past several years, it was not hard for me to notice that one of the big cost drivers that has emerged in recent years (and which is the subject of this blog post) is that of insurance. As late as the year 2020, communities like mine could get a blanket insurance policy for several million dollars for roughly $30,000 per year. In 2021, the annual bill went up to $41,600. In 2022, the bill went up to $56,000, and in 2023 the bill ended up at $69,200 for the year. At our annual meeting last November, the lady who owns and operates our HOA informed us that the bill for 2024 would be going up to $92,000. Yet just this month, I saw an updated monthly payment for a little over $8,000 indicating that the insurance bill for 2024 would reach $96,000.

So there you have it. My association will have experienced a three-fold increase in insurance costs within a span of four years. The insurance bill is now easily the largest single cost issue for my complex. At the same meeting late last year where our HOA manager told us about the insurance rate hikes, she stated that the reason why insurance rates were going up so much was because of a singular event that occurred in early 2021: Winter storm Uri.

Insurance markets after the winter storms of 2021

What our HOA manager said to us in that meeting was that after the storms and widespread power outages of February 2021, insurance companies faced a horde of claims that were made by policy holders. In the wake of this, the powers that are in the insurance business suddenly realized that in addition to having to insure policy holders against the more well known risks in southeast Texas (such as hurricanes, windstorms, and flooding), they were now facing new uncertainties during the wintertime. It is possible to imagine that this would include uncertainties introduced to the power grids in Texas due to the widespread adoption of wind and solar power. I tried during that meeting to plead our case on behalf of the community, arguing that we never flooded during any of Houston’s major storms, nor did we have any major issues due to the winter storm power outages, other than inconvenience. Yet it seems my arguments against insurance increases fell on deaf ears.

Further, our HOA manager told us that the mix of players in the insurance market had changed. The 2021 winter storms apparently caused enough losses amongst some insurers that they decided to not underwrite any more policies and instead exited the Texas insurance market. We were also told that some players tried to enter the market and win business by undercutting other insurers, but were soon swamped and decided to leave.

What prompted me to write this epistle was that one of my younger Millennial-aged friends here in town, who lives in a house with his wife and daughter, recently posted on social media about his own insurance blues. He lives in a single family house, but posted his insurance rates had auto-renewed recently, going up from $3,500 last year to $7,000 this year! He said to me that the previous year’s increase was from $2,450 in 2022 to the aforementioned $3,500 in 2023. This time he fought back by shopping around and finally managed to get a rate this year that was around $3,000 – roughly halfway between his 2022 and 2023 rates. Ergo, the housing insurance issue is not only affecting multi-family properties, but single-family homeowners.

At this point, I have no idea whether the insurance market has finally reached and settled on a new equilibrium price area, or whether insurance rates will continue to spiral up. We have been told that my association may end up having to pay as much as double the rates we are paying now, and if that were to happen, as a board member I’m not sure what I would tell residents. I’ve reached out to my private insurer, as well as someone I know in my social network who has been a longtime insurance agent to get second opinions, just to make sure we aren’t being lied to. I was told on both occasions that what our HOA manager told us was all true.

To be more broad-minded, Houston and Harris County aren’t the only places which are experiencing greatly increased insurance rates. Exploding insurance costs over the past few years have also become a hot topic issue in Florida, where rates have soared to the point that they are negatively affecting property values. Some owners may be pushed to sell because of insurance issues.

I’m not sure there is an answer to this. No doubt some of the problem has come from the inflation that flared up in recent years, and that insurance firms are having to deal with it just like everyone else has. Rising interest rates will also have effects on insurers. The standard leftwing answer to just about anything is to declare that “the market has failed!” and to use state power to legislate and regulate the daylights out of an industry. Yet something tells me that trying that may well cause more of the remaining players in the Texas insurance market to bolt for the exits, and that would pave the way for a government takeover of property insurance. All I will say to that is that federal flood insurance has turned out to be a disaster. Ergo, my main thought is to watch and wait to see if insurance rate hikes for housing have finally leveled off, which would bring about a more stable and predictable future.