Climate Has Reshaped Housing Insurance: Homeowning Less Unaffordable

"Insurance is the climate canary in the coal mine, and the canary is gasping for breath right now,"

Dave Jones, California's former insurance commissioner and the director of the Climate Risk Initiative at the Center for Law, Energy & the Environment at UC Berkeley Law

Climate change is making homeownership less affordable as extreme weather increases housing damage and drives up insurance costs. With over a quarter of U.S. homes facing severe climate risks, government-backed insurance plans offer an alternative for homeowners in high-risk regions but provide limited coverage and remain financially unsustainable. Building resilience will require stronger coordination between the private sector and federal and state governments to protect households, stabilize communities, and safeguard the housing market.

Why This Matters          

• Property values in high-risk regions may decline, threatening households and investors wealth as well as local tax bases.

• Government-backed insurance programs face increasing financial stress, raising concerns about their ability to respond to catastrophic losses.

• Without coordinated action, the housing market may become increasingly instable, undermining broader economic stability.

Climate Change Makes Home Owning Less Affordable

Climate-related extreme weather—such as hurricanes, floods, and wildfires—is damaging and destroying homes, fueling housing instability, widening existing inequalities, and threatening property values. Families are often displaced immediately after disasters, and recovery for neighborhoods can take a median of more than three years.

The insurance sector is also under pressure. Major insurance companies have stopped issuing new policies in climate-vulnerable states like California, Florida, and Louisiana. At the same time, premiums continue to rise in high-risk areas, making homeownership more expensive to maintain and more difficult for prospective buyers to afford.

For decades, property and casualty insurance provided a safety net, allowing families, communities, and investors to rebuild after disasters. That guarantee is now disappearing. In high-risk regions, premiums have skyrocketed, non-renewals are increasingly common, and in some cases, coverage has become unaffordable—or unavailable altogether.

How Big Is the Climate Risk Facing U.S. Housing?

According to a recent report from Realtor.com, 26.1% of U.S. homes—representing $12.7 trillion in value—face at least one severe or extreme climate risk, such as flooding, high winds, or wildfire.

These realities raise urgent questions for policymakers, developers, and urban planners. New housing development must carefully consider climate risks, and governments at both the state and federal levels must expand support for households facing displacement. This could include offering insurance options in high-risk areas and designing policies to shorten recovery periods for both renters and homeowners affected by extreme weather.

Are Government Insurance Plans a Real Alternative?

Many states currently operate Fair Access to Insurance Requirements (FAIR) Plans, which provide basic coverage to homeowners and businesses who cannot secure insurance through the private market. However, these government-backed plans often come with higher premiums and limited coverage. In addition, many programs are financially unsustainable. Years of undervalued risk, artificial price controls, and expanding responsibilities have left some state plans deeply in debt, raising doubts about their ability to cover catastrophic losses fully.

Government insurance programs were not intended to be permanent solutions. Building resilience in the housing sector requires stronger coordination between the private sector and state and federal governments. Together, we must find ways to protect households, stabilize communities, and strengthen the housing market against the growing challenges of a changing climate.