Overview
Escalating insurance costs are exposing critical vulnerabilities in the U.S. housing system, prompting urgent calls for coordinated policy intervention. Without strategic investment in resilience, the growing coverage gap could destabilize housing markets and undermine economic security.
- Regulators face mounting pressure as insurers exit high-risk states, leaving homeowners with fewer, costlier options and threatening mortgage accessibility.
- Policy-driven resilience strategies — including stronger building codes, retrofitting incentives, and unified insurance standards — are essential to prevent a housing shock.
- Federal, state, and local coordination is needed to align funding, regulation, and infrastructure planning to protect communities and preserve long-term housing stability.
Rising insurance costs are testing the foundations of the U.S. housing system. Premiums are climbing as major storms and other catastrophic events intensify, leaving many owners struggling to cover both their mortgage and their insurance. Affordable housing projects are also stalling as higher insurance costs inflate budgets and deter investment.
Insurers are pulling out of high-risk states, while regulators scramble to keep pace. The result is fewer coverage options, higher bills, and widening gaps in protection. Left unchecked, this strain could trigger a housing shock with echoes of the last financial crisis — only this time, the fault line runs through insurance.
Strain spreads through the system
Homes across the country are facing an environment they were never built to withstand. For homeowners, that means paying more for less coverage. Some insurers are collapsing under the pressure, leaving buyers with limited or no options. When insurance becomes unattainable, lenders are left with fewer qualified borrowers. That weakens demand, which threatens the $29 trillion in wealth created since 2012.
Even where coverage is still available, costs are spiraling. Rebuilding expenses for single-family homes have risen 38.5% in five years, Cotality data shows. If specialist materials or labor are needed, costs climb another 12%. Builders are pausing projects that no longer add up financially, narrowing choice in a market already short on supply.
As these pressures stack up, cracks spread across the housing system.
The ripple effect
Homeownership was once shorthand for stability. Today, insurance is making it feel precarious.
But, not all states are feeling the pressure equally. Areas where natural disasters have long been part of the fabric of life are revealing just how many ways a shift in insurance cost and availability can strain the property ecosystem and ripple through the U.S. economy.
Homes at extreme risk for a combination of three perils
Data source: Cotality, 2025
Weathering a storm is a pricey proposition. Just retrofitting a home to decrease the chances of damage can range from a few thousand dollars to more than $100,000 for top-tier protection. Additional protection is not a guarantee of coverage though. In South Carolina, 14 insurers ran out of funds between 2020 and 2023 leaving homeowners with fewer, more expensive options to stay in place.
While many can still afford these increases, Florida underscores how a double-digit increase in premiums can incentivize out-migration to cheaper areas. In recent years, fewer people are applying for mortgages in the Sunshine state, and a Cotality analysis found more Floridians are applying for loans elsewhere — particularly in Georgia, North Carolina, South Carolina, Tennessee, and Texas.
While Texas remains a popular destination, increasing storm severity is fracturing its system of protection.
More hailstorms hit Texas than any other state, with Cotality finding that over 180,000 homes felt the impacts of hail stones larger than 2 inches. This swelling number of damaging storm events is compounded by the 38.5% increase in average single-family reconstruction costs over the last five years. More events with inflated costs are creating a gulf that is only partially bridged by reinsurance, a reality that is threatening the whole system.
Cyclical crashes
Housing fragility ripples into the wider economy. Nearly 20 years ago the Great Recession wiped out $5.8 trillion in housing value. The market has since recovered, bringing wealth to millions, but insurance may be today’s overlooked fault line that could shake the market’s foundation again.
“What surprised me the most [about buying a home] was the homeowners insurance plans and where there is not a lot of coverage,” a member of Gen Z told us in Cotality’s From House to Home survey.
That surprise hasn’t yet translated into urgency for a better, more sustainable alternative. In the survey, only 23% of recent homebuyers found finding homeowners insurance to be overwhelming. This is less than half of those who were overwhelmed by finding a home or a mortgage. But as insurance becomes more expensive and harder to find, it will only add to buyers’ stress.
For nearly half of the Gen Z and Millennial homebuyers surveyed, buying a home was more stressful than they anticipated. That stress is further compounded by the perceived need to accelerate the insurance process since finding a policy can be a bottleneck to closing on a home.
But speeding up access to insurance isn’t the full answer. There is also a need for answers to questions like what is the long-term cost of coverage? Are there ways to retrofit a home to access a better policy? Without guidance arriving at the right time to pinpoint available and affordable policies, younger buyers could be left shouldering homeownership costs that jeopardize their financial futures or lock them out of the mortgage market altogether.
Finding insurance is becoming a critical barrier that cannot be ignored. Without it, an entire generation risks sitting on the sidelines.
Counting costs
The costs to insulate a home from environmental threats can seem steep, making it tempting to simply lower reinsurance costs and allow insurers to pay claims and stay in high-risk markets. The problem is, it’s not a long-term fix.
“The current fix won’t work. It’s like covering the cost of an expensive dinner by splitting it across multiple credit cards. It may help you get through the night without going broke, but it does nothing to lower the bill. You have to lower the bill itself," said Cotality Principal Policy Analyst Russell McIntyre. “That’s where resilience comes in. Investments in resilience are not negligible, but they are significantly cheaper than the cost of a market correction.”
According to Cotality, 12% of today’s housing stock has a very high risk of damage from natural disasters. Without adaptation to the changing environment, that number jumps to 20%. Rebuilding all of these structures would cost $7.2 trillion; a significantly larger cost than the hundreds of billions of dollars it would take to integrate resilience into the property market.
Resilience means more than insurance access though. It means preserving wealth, communities, and stability.
This starts by reducing claims to increase stability and give buyers more opportunities to find a home, take out a mortgage, and invest. Investment through homebuying quickly translates into a burgeoning tax base that can support community-level resilience measures that reinforce individual stability — an important consideration since disasters don’t respect property lines.
While it’s easy to imagine what that looks like — stronger building codes, and shared infrastructure projects, and managed retreat programs — it’s much more difficult to coordinate.
The bigger picture
Homebuilders and developers are often left to deal with the cost of creating more resilient structures. But coordination between federal, state, and local governments alongside their private partners is a powerful level that can reframe the future of housing.
Prioritizing funding to incentivize the use of resilient materials, encourage holistic mitigation planning, and provide a foundational unified strategy to regulate what resilience means will help absorb the shocks brought about by each natural catastrophe.
Without it, the cracks that are beginning to show will only widen.
