The Impact of Rising Homeowners Insurance on Housing Affordability in Texas

Discussion on housing affordability often highlights factors like home prices and mortgage rates. In Texas, however, homeowners insurance is emerging as a significant, fast-growing component of housing costs. A statewide survey last fall revealed that nearly 80% of Texans have seen their property insurance costs rise in the past five years. Adjusted for inflation, homeowners insurance premiums in Texas increased by 13.4% in 2023 and an additional 12.9% in 2024.

To further analyze these trends, Texas 2036 collaborated with the Kinder Institute for Urban Research at Rice University. They examined 25 years of premium data from the Texas Department of Insurance, integrating it with Census statistics related to income, home values, and ownership rates across all Texas counties.

Findings indicate significant growth in premiums, with the average homeowners insurance cost in the median Texas county rising 74% from 2009 to 2024 when adjusted for inflation, from approximately $1,717 to $2,983. Over the same period, median household income saw a more modest increase of 11%. Notably, from 2019 to 2024, premiums surged by 30%, while income only grew by 3%.

These premium increases have significantly impacted housing affordability. In 2009, insurance premiums represented 2.9% of median household income, rising to 4.7% by 2024. For households earning 80% of the county median income, this share reached 5.8%. Utilizing a standard affordability threshold where housing costs exceed 30% of gross income, it's estimated that around 64% of Texas households couldn't afford median-valued homes in their counties in 2024. A further 4% premium hike could render homes unaffordable for an additional 20,000 families, with a 10% increase potentially affecting 50,000 more.

Interestingly, despite rising premiums, there was no consistent correlation with homeownership or insurance coverage rates across Texas counties. This lack of a clear pattern might suggest that many households maintain their homes and insurance but cut back on other expenses or delay achieving financial goals. Such trade-offs were outside the scope of this study's design.

Addressing homeowners insurance as part of housing affordability is likely to be a focus in the upcoming legislative session. Decisions and policies will require robust baseline data, such as that provided by the Kinder Institute's report. This comprehensive analysis offers a critical foundation for understanding and potentially addressing the economic challenges posed by rising insurance premiums.

The report, "The Insurance Squeeze: Rising Premiums, Affordability, and Income Inequality Across Texas Counties Since 2000," was authored by Aram Yang, Caroline S. Cheong, Michelle Smirnova, and Stephen Averill Sherman, with sponsorship from Texas 2036.