Homeownership has long been one of the most reliable pathways to financial security and wealth building in the US, but rising insurance costs threaten this opportunity. As insurance premiums rise in many places, they increase monthly housing costs and threaten the most vulnerable homeowners’ stability. And families who are underinsured or lack insurance face risks to their largest financial asset.
Because most homeowners have a mortgage and most mortgaged homeowners have homeowner’s insurance, these rising costs affect most American homeowners. A new Urban Institute report combines monthly loan-level mortgage data and insurance data to measure this cost burden. It found variation by market and no single cause for rising insurance burden, suggesting one-size-fits-all solutions won’t work. These new data chart a path for what will work.
Nationally, insurance cost burdens fall hardest on low-income, financially constrained households and communities exposed to hazards
The report tracked insurance premiums as a share of household income at origination, a measure that captures the real weight of insurance cost for families the moment they take on a mortgage. It found that insurance cost burden is not simply related to risk—such as the property conditions that can amplify the chance of loss (like an inadequate roof or faulty wiring) or climate events that can cause damage (like hurricanes or wildfires). It reflects a complex interaction of borrower financial characteristics, property and neighborhood attributes, and geographic market conditions. Specifically, it found:
- The average annual premium at origination rose from $1,270 to $1,856 between 2018 and 2024—a 46 percent increase, well above the 25 percent inflation rate for that period.
Measured as a share of income at origination, insurance premiums rose from 1.87 percent on loans made in 2018 to 2.27 percent on those originated in 2024. The share of new mortgages where insurance premiums exceeded 3 percent of household income increased from 10.5 percent in 2018 to 16.2 percent in 2024. That means roughly one in six new homebuyers is now spending more than 3 percent of their income on insurance alone. That is before accounting for mortgage payments, property taxes, or other housing costs. - Geography increasingly shapes who bears this burden. Borrowers in high-hazard-risk areas face burdens nearly a full percentage point higher than borrowers in low-risk areas—a gap that widened between 2018 and 2024.
- Low-income borrowers face a double burden: They pay higher insurance rates per dollar of home value. Borrowers earning above 120 percent of the area median income (AMI) pay approximately $2.10 less per $1,000 of home value than borrowers earning below 50 percent AMI. In other words, those who can least afford rising costs are paying the highest rates relative to what they own, a pattern that could deepen homeownership inequities.
- There is a correlation between insurance burden and credit score. Borrowers with stronger credit scores saw significantly lower insurance burdens compared with those with worse credit scores—a result likely stemming from insurance providers using credit scores in underwriting and pricing. Borrowers with low credit scores are also more likely to have low incomes and thus more likely to own properties that are physically inadequate in a way that can affect insurance pricing.
How homeowner’s insurance burden varies by market
The analysis highlights how the eroding affordability of homeowner’s insurance does not have a single explanation, which means it will not have a single solution. Different metropolitan statistical areas (MSAs) are experiencing cost pressures through very different pathways, shaped by climate risk, insurance market conditions, home values, and local policy.
Houston is regarded as one of the more affordable large housing markets in the country. Yet, the data show the Houston MSA has the second-highest share of insurance-burdened households among major MSAs in 2024. This is because of high absolute premium costs, driven by the area’s significant flood and wind exposure, and a housing stock whose relatively modest values correspond with lower incomes to absorb high premiums.
In the Los Angeles MSA, higher median incomes keep the share of homeowners who are insurance burdened (when insurance premiums exceeded 3 percent of household income) relatively low, despite the metro area scoring high on the Federal Emergency Management Agency’s National Risk Index for Natural Hazards (NRI), reflecting significant wildfire, earthquake, and other peril exposure. However, the Los Angeles MSA is where premiums have grown the most between 2018 and 2024 (59 percent), despite long-standing state regulatory policies trying to constrain rate increases. If this trend continues and incomes don’t rise at the same pace, the insurance burden will increase.
MSAs in Florida, such as Tampa Bay, illustrate a more straightforward alignment of peril risk and premiums. A high NRI is correlated with the second-highest premiums as a share of income, and the second-highest share of homeowners who are severely insurance cost burdened (when insurance premiums exceeded 5 percent of household income).
And then there are markets where high insurance costs exist despite only moderate or low peril risk. Minneapolis is such a case, pointing to other potential cost drivers, such as building codes, claims history, or insurer market dynamics. Denver presents a similar puzzle, with some of the highest premiums and effective insurance costs (premiums relative to property values) despite only a moderate NRI. This MSA has also seen some of the fastest increases in premiums between 2018 and 2024 (39 percent). However, it has also seen rapid growth in incomes, which means the insurance burden has remained virtually unchanged.
What are the next steps to address rising insurance costs?
At the national level, insurance is becoming a heavier burden for American mortgaged homeowners, and the weight is not distributed equally. It falls hardest on lower-income households, on communities in hazard-prone areas, and increasingly on markets where the relationship between peril risk and cost is anything but straightforward.
But eroding insurance affordability is deeply local in character. A strategy that addresses California’s regulatory constraints will look very different from one designed to help Houston’s lower-income households or to understand why Denver’s premiums are outpacing the market.
Policymakers, lenders, and community organizations need market-level data to design effective responses, and those data have been largely unavailable until now.
In the months ahead, the Urban Institute will be drilling deeper into the local dynamics behind these national trends. We’ll be examining specific MSA markets, including those mentioned here, to understand what is driving insurance costs, who is most affected, and what policies and regulations could chart a more equitable path forward. As the true cost of homeownership continues to rise, this work matters more than ever.
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