As Rhode Island faces a housing crisis, particularly with affordable units, the Wickford Village development in North Kingstown affords some relief to renters, providing about 130 units for low-income residents.
But the costs to insure these units are skyrocketing, says Frank J. Spinella, president of FJS Associates Ltd., a development firm that specializes in affordable housing projects.
“Insurance on operating facilities is absurd at this point,” Spinella said. “Rates doubled in the last year.”
At Wickford Village, the insurance premium jumped from around $87,000 to $176,000 year over year. Currently, insurance expenses are affecting operating costs at FJS’ developments more than any other financial force, Spinella says.
Spinella says he hasn’t received much communication from insurers on why rates have skyrocketed. But according to observers, it’s at least in part one crisis fueling another, as insurance companies drive up their premiums in response to climate change and increased incidents of natural disasters.
This issue is already pronounced in areas of the country more prone to catastrophic weather, such as Florida and California, says Mark W. Matrone, president of John Andrade Insurance Agency in Bristol and Warren. But these effects are also creeping into Rhode Island’s market as the Ocean State grapples with a rise in flooding and stronger storms.
“The weather patterns have created a lot of changes throughout the country, and these insurers are not making money from these claims,” Matrone said.
With Rhode Island ranked last in the U.S. for new housing development – and in the depths of a severe housing crisis that’s impacting people throughout the country – it’s another barrier to a vital but already scarce resource.
Though increasing insurance rates haven’t brought Rhode Island’s new housing construction to a complete standstill, it’s slowed much-needed production, says Brenda Clement, executive director of HousingWorks RI at Roger Williams University.
“Projects are moving, but they’re costing more,” Clement said, “which means we have to do less units.”
Likewise, developers in Rhode Island still benefit from an availability of insurance options, Clement says, compared with more disaster-prone regions.
“But the pricing of it has grown dramatically,” she added.
Rate increases are affecting developers and landlords across all income levels, she says.
But with affordable housing in particular, Spinella says, there’s not much that developers can do to offset the expenses.
“Our hands are tied because we’re trying to serve the low-income population,” Spinella said, “and you can’t pass along [expenses] like that to them.”
Observers are also taking note of this trend at the national level: At a recent roundtable discussion hosted by Bank of America Corp., Shaun Donovan, CEO of the national nonprofit Enterprise Community Partners, noted that dramatic increases in insurance costs due to factors such as climate change are “making a huge impact” on housing availability.
While rising insurance costs aren’t new, Donovan said the issue has evolved from chronic to an acute position in recent years, with the nonprofit observing an 18% year-over-year increase in insurance costs in 2023 – an increase well above anything it’s previously witnessed. And Donovan says he’s particularly concerned about how developers behind smaller and affordable properties will manage the increased expenses.
Though Rhode Island’s insurance situation isn’t currently as dire as some other areas of the country, Matrone says, the state’s disproportionately older housing stock means that insurers are often less likely to take on an existing project or redevelopment, with newer units posing fewer risks.
In addition to a heightened risk of property damage, inflation is also compounding insurance companies’ willingness to write new business, Matrone says, with costs of repairs having spiked as well.
According to HousingWorks RI’s 2023 Fact Book, more than 300,000 housing units in Rhode Island were built prior to 1980, representing 73% of the state’s overall supply.
While age is not an issue for new housing developments, insurers still see risk that “gets dicier as you get closer to the coast,” Matrone said, posing another issue for the Ocean State.
Matrone first noticed these dramatic insurance increases around three years ago, and he doesn’t see substantial relief on the horizon. Rates may eventually stabilize, he says, as with any instance of inflation, but he doubts they’ll decrease any time soon.
“It seems to be getting worse and not better at this point,” Matrone said, “because the weather patterns haven’t settled down yet, and I don’t know if they ever will.”
Kimberly Korioth, chief resilience officer for the state of Rhode Island, says the state’s environmental agencies are working to provide tools to help developers assess climate risks and create sustainable housing.
The R.I. Coastal Resources Management Council, for instance, provides an online coastal hazard mapping tool that “allows developers to walk through and really see what the risk is on their site,” Korioth said. With these types of tools, she says, developers can more comfortably make investments. n
