Property Insurance as an Accelerant of Material Decline

• In Event: Personal Finance and Inequality

Abstract

This study examines how property insurance institutions shape the material condition of affordable housing under increasing climate risk. Using HUD inspection data on federally assisted affordable housing and zip-code–level property insurance data from the Federal Insurance Office of the U.S. Department of the Treasury, I test whether insurance markets mitigate or exacerbate housing quality decline in hazard-exposed areas. While recent work documents rising insurance costs in the affordable housing sector (Udell and Gourevitch 2025), we lack evidence on how these costs affect building conditions. On one hand, insurers and state regulators often incentivize climate-resilient retrofits through premium discounts, potentially improving building conditions. On the other, because affordable housing owners are unable to raise rents easily, rising insurance premiums and non-renewal risk may induce disinvestment, deferred maintenance, and delayed resilience upgrades to offset increased operating costs. I assess these competing institutional dynamics using fixed effects models and a differences-in-differences design that leverages state moratoria on insurance premium increases and non-renewals as plausibly exogenous shocks to state-level insurance stress. Results indicate that increases in insurance stress are associated with statistically significant declines in inspection scores in hazard-exposed areas, suggesting that insurance market tightening accelerates material deterioration rather than resilience investment. This study conceptualizes property insurers as financialized actors embedded in housing markets, demonstrating that insurance markets allocate habitability and redistribute maintenance capacity well before disaster occurs.

Author

• Veronica Clevenstine, Princeton University