Gongloff: Why home insurance now costs more than property taxes

As severe weather intensifies, keeping a roof overhead is becoming a major financial strain for many Americans

A stubborn myth in climate debates is that trying to prevent the planet from becoming unlivable somehow works against the affordability of basic necessities. But a scorched, disaster-ravaged world is hardly cheap. When essentials become scarcer, they usually become more expensive.

Housing is a clear example. Home insurance is already extremely costly in many parts of the United States, and those rising premiums are pushing this essential part of the American dream further out of reach for many families. The main driver is climate change: premiums have climbed more than 46% since 2021, about three times the pace of inflation, as natural disasters grow more destructive. In housing, as in other basic needs, the environment directly shapes what people can afford.

According to new research from Bloomberg Intelligence analyst Andrew John Stevenson, home insurance premiums now exceed property taxes in two-thirds of U.S. counties. When auto insurance for extreme-weather damage is included, that share rises to 75% of counties. And unlike property taxes, homeowners cannot deduct insurance premiums from their income taxes. They simply have to pay them.

Stevenson estimated that, on a county-by-county basis, the average annual “climate” premium comes to $3,160, compared with $2,423 for property taxes. Nationally, property taxes remain higher on average at $4,594, largely because of high-tax states such as California and New York. But insurance is a much heavier burden in low-tax, high-disaster regions such as the Deep South and the Plains, where premiums can be four times higher than property taxes.

As insurance makes housing less affordable and slows home sales, it also threatens the property-tax base in these counties. That can mean fewer public services, higher property taxes, or both.

States such as Alabama, Colorado and Oklahoma are not as closely associated with disasters as wildfire-prone California or hurricane-prone Florida. Still, a warmer planet is intensifying the bad weather they do get, especially thunderstorms that bring tornadoes, damaging winds and giant hail. These severe convective storms now produce more insured losses each year than any other type of disaster in the U.S., according to the Insurance Information Institute. Those losses rose from less than $10 billion in 2015 to $52 billion last year.

At the same time, insurers are raising deductibles to keep premiums from spiraling further. That leaves homeowners paying more of their own repair bills, deepening affordability problems. In some of the hardest-hit areas, uninsured property losses can amount to 5% or more of total county GDP, based on Stevenson’s measure. One estimate puts the gap between home-insurance costs and potential losses from floods and wildfires alone at as much as $2.7 trillion, enough to weigh on the entire housing market.

Policymakers around the world often act as if affordability and climate stability are locked in a zero-sum fight. A familiar response to higher fossil-fuel prices, including those linked to conflict in the Iran war, has been to make it easier to buy more fossil fuels, backed by more than $1 trillion in government subsidies on top of the roughly $7 trillion a year those fuels already receive.

That approach is environmentally unsound and economically questionable. Paying people to use more of a scarce resource does not make it less scarce. A better solution would be direct aid for families that need help, while speeding the move to energy sources that are not vulnerable to the Strait of Hormuz and do not heat the planet. The same principle applies to insurance: any response to the crisis has to keep housing affordable while also discouraging new building and rebuilding in high-risk disaster zones.

Moving away from fossil fuels would ultimately address many of these pressures. But in the short run, that transition can also be costly and may raise electricity bills, adding another layer to the affordability problem. Yet the usual answer, even in places that present themselves as climate-conscious such as New York and Canada, is to spend more on fossil-fuel infrastructure and less on renewable energy.

That means mistaking the symptom for the disease. Safe access to shelter, water, food, energy and other necessities is endangered when the environment becomes more dangerous. Making those essentials more affordable and available, like confronting climate change itself, is politically and logistically difficult. But they are really the same problem.