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Rising Insurance Costs and Availability Threaten U.S. Condo Market

by Kaia

Across the U.S. – Homeowners’ associations (HOAs) are facing rising insurance costs and a shrinking pool of available coverage, posing new challenges for the condo and multifamily housing market.

As insurers grapple with escalating losses from extreme weather events and aging buildings, they are either raising premiums significantly or exiting the HOA insurance market entirely. These steep price hikes are often passed down to individual homeowners in the form of higher monthly dues, further complicating homeownership for many Americans.

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HOAs, which manage the shared property and amenities of residential communities, rely on master insurance policies to cover common areas such as sidewalks, playgrounds, and the roofs and exteriors of multifamily buildings. Despite being a niche market for insurers, these policies are essential for the 74 million Americans living in HOA-governed communities.

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The rise in insurance costs is part of a broader trend of increasing homeownership expenses. In many areas, HOA communities now constitute a larger portion of local housing stock, making these issues particularly impactful.

“All of the catastrophes and the disasters have contributed to rising premiums,” said Dawn Bauman, executive director of the Foundation for Community Association Research. “It’s not just condominium associations or community associations — it’s every piece of the insurance market.”

After Surfside: A Shift in Coverage

The 2021 condo collapse in Surfside, Florida, marked a pivotal moment in the industry, particularly for condo associations. According to Bauman, the incident made it more difficult for these communities to retain coverage, especially as insurance providers became increasingly cautious. While HOAs covering single-family homes are also affected, the impact is most severe in communities with shared infrastructure, such as apartments, townhomes, and rowhouses.

Insurance brokers across the country, from Florida to Minnesota, are reporting significant challenges in securing policies for their clients. In states like Minnesota and Colorado, insurers are particularly concerned about hail damage, which can cause significant destruction to roofs.

“The days of having two, three, or four options are long gone,” said Eric Skarnes, an insurance broker who insures about 500 HOAs. “Most associations are just lucky to get a renewal.”

Premiums Soaring, Options Shrinking

The impact is felt sharply in regions like Lakeville, Minnesota, where Mark Foster serves on the board of an 84-unit HOA. Since 2021, premiums for his association’s master insurance policy have quadrupled to $236,000. Despite being spared from several severe hailstorms in the area, the HOA was dropped by its insurer when the value of the insured property exceeded $60 million.

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“We got booted to the secondary market,” Foster said. “It’s terribly expensive.”

The difficulties facing HOAs highlight a broader challenge for American homeowners, as increasing insurance costs add to the financial strain of maintaining homes, especially in communities with shared properties and amenities. As the trend of rising premiums and reduced coverage options continues, many homeowners are left facing higher costs and fewer choices for protecting their properties.

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