Why affordable housing providers say they’re facing an ‘existential’ crisis

Jeff Guyett was sitting at his computer last May when he opened an email from his insurance broker. It revealed his new premium: over $400,000 annually. More than double the year before. 

“I really didn’t even know how to respond at first,” Guyett said. “I was flabbergasted.” 

Guyett is the executive director of the Community Action Center in Pullman. His organization owns about 200 affordable housing units across Whitman County. For years, the agency broke even on them. But, with the higher premiums, Guyett said he’s going to have to raise rent. And it still won’t cover costs.

Guyett is also having difficult conversations with his staff about whether his organization can hold on to the units. “It’s very troubling, and it’s the one thing I do lose sleep over,” he said. 

Affordable housing providers across the state — and country — are facing similar challenges. 

Jeff DeLuca is the executive director of the Washington State Community Action Partnership. Its members operate about 3,500 affordable housing units in the state. 

The organization said its members’ premiums have increased by an average of around 300% in the past year. But not all of them can raise rents in response, because they’re already charging the maximum rent allowed by regulatory agencies. 

“This insurance crisis is the biggest issue in the future of the affordable housing landscape that nobody is talking about and could cause an astronomical increase to homelessness,” DeLuca said.

Skyrocketing premiums are only part of the problem. About half of DeLuca’s members have received letters stating their policies will not be renewed.

If housing providers can’t find — or afford — insurance, DeLuca worries they might be forced to sell their units. Some could continue to be designated as affordable housing, but others could have their rents raised to the market rate.

Washington desperately needs more housing: about 1.1 million more units in the next two decades, according to the state Department of Commerce. But DeLuca fears the insurance dilemma will affect future projects, too, as it’s making it even less appealing to build affordable housing. 

As for the insurance companies, they say they’re just trying to stay in business. Eric Goldberg is an attorney for the American Property Casualty Insurance Association, a national trade group. 

“The price of insurance is really like the canary in the coal mine,” he said. “It’s reflective of other factors that are going on in the market.” 

There’s climate change. There’s the rising cost of labor and goods, which makes repairs more expensive. And there’s an increasing number of lawsuits that insurers have to defend against. 

Then there’s the fact that affordable housing might be built in areas with higher crime rates. And that some tenants might have what Goldberg calls “higher risk profiles.” 

“Insurers can’t be overexposed,” he said. “They need to be around and solvent to pay for all of their policyholders’ losses.” 

Affordable housing providers shoulder those increased costs. 

Jason Wicklund, executive director of the Christian Aid Center in Walla Walla, remembers the last claim his organization filed. It was more than a decade ago, when a windstorm damaged its roof. 

Still, it took months to find a company that was willing to insure the construction of the center’s new shelter at a reasonable price. Wicklund found the process both frustrating and disheartening. 

“It didn’t matter how good of a customer we were,” he said. “They just did not want to insure us.” 

Blue Mountain Action Council, also in Walla Walla, has had challenges, too.

Earlier this year, CEO Danielle Garbe Reser said that several national providers refused to even provide bids to cover the organization’s affordable housing — despite the fact that it has historically had few claims. 

“In the end, only one firm provided a bid for coverage, and luckily it was a competitive bid,” Garbe Reser said. “But it was very challenging to go into the renewal process not knowing if we could even find insurance.” 

Amber Johnson works at SNAP, an affordable housing provider in Spokane. In the past few years, her organization’s property insurance rates have more than doubled. She’s heard of other providers whose deductibles have been raised to half a million dollars per incident.

“We’re running on shoestrings already,” she said. “And those shoestrings are just kind of getting pretty thready these days.” 

Johnson is also on the board of the Non Profit Insurance Program, a statewide insurance pool. 

“There are partners across the state who are already contemplating whether they can continue to provide affordable housing as a service,” she said. 

Last fall, Washington’s Office of the Insurance Commissioner studied the affordable housing market’s insurance challenges. It determined that the insurers’ rates were not excessive — and were backed by actuarial data. 

DeLuca has a hard time believing that. He also noted that things have worsened since that report came out. Regardless, he wants help from the state. 

“It’s existential, frankly, to the affordable housing market in the state of Washington — probably throughout the region and the country as well,” he said. 

The insurance commissioner’s report offered a dozen policy solutions, such as: insuring the insurers, subsidizing costs for the housing providers and improving buildings so they’re less likely to flood or burn.

But none of the ideas are easy. Or free. And so far, there’s been no movement in the Legislature.

CORRECTION: An earlier version of this story stated that members of the Non Profit Insurance Program had their deductibles raised to half a million dollars per incident. This story has been updated to reflect that some affordable housing providers have had their deductibles raised to that amount — but they are not members of the pool.