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.

One of the hardest decisions multifamily developers and their design teams have to make is what mix of amenities they’re going to put into each project. A lot of squiggly factors go into that decision: the type of community, the geographic market, local recreation preferences, climate/weather conditions, physical parameters, and of course the budget. The permutations are mind-boggling.

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