Dive Brief:
- HUD, acting through the Federal Housing Administration, has updated its wind and storm disaster-related deductibles.
- Effective immediately, the FHA is raising the maximum permissible wind or named storm deductible for properties with FHA-insured mortgages to $50,000 or 5% of the insurable value per location, whichever is greater, up to a maximum of $475,000 per occurrence. Previously, the maximum deductible was $50,000 or 1% of the insurable value, whichever was greater, up to a maximum of $250,000.
- The updates are intended to provide lenders and multifamily property owners with more flexibility in obtaining and negotiating lower property insurance premiums, according to HUD.
Dive Insight:
Multifamily insurance costs have risen significantly over the past several years — up 27.7% over the 12 months ending in January and 129% since 2018, according to a recent Yardi Matrix report. Premiums have grown fastest in disaster-prone areas, particularly the Southeast and Florida.
“The increased frequency and intensity of extreme weather events have contributed to this steep rise in insurance costs,” said HUD Acting Secretary Adrianne Todman in the HUD announcement, “which is especially difficult for property owners trying to maintain affordable rents.”
The decision to raise deductibles is the latest in a series of HUD actions designed to reduce insurance costs for multifamily properties. In November 2022, it revised its methodology for calculating the Operating Cost Adjustment Factors, which would allow for better accounting of insurance costs. The department intends more action on this issue in the future.
“Raising the deductible amount provides important flexibility for lenders and property owners to obtain and maintain appropriate property insurance that covers their properties in the event of catastrophic weather damage, while maintaining appropriate safeguards to ensure that properties are adequately insured,” added Ethan Handelman, deputy assistant secretary for multifamily housing at HUD.
