Renters and small businesses in California impacted by insurance crisis

The rising costs of insurance in California are not just affecting single-family homeowners but also landlords who are now facing the dilemma of passing on these increased costs to their tenants. Many insurance companies have stopped writing policies in the state due to heightened wildfire risks and the overall increased costs of replacing residential and commercial properties in the event of a catastrophe. This has left landlords scrambling to find alternative insurers or resorting to the expensive FAIR Plan, the insurer of last resort mandated by California law.

Josh Hoover, an insurance broker in Los Angeles, highlighted the challenges landlords are facing in finding coverage for their properties. He mentioned that insurance companies now require buildings to have been updated within the last 30 years, including new roofs, electrical systems, and plumbing, making it difficult for many landlords to meet these criteria.

For landlords like Uwe Karbenk, who owns a 33-unit apartment building in San Bernardino, the insurance crisis is adding to the financial strain. After his policy was canceled by Farmers, he had to find coverage from an out-of-state insurer, resulting in a significant increase in premiums. Coupled with state laws that limit rent increases, being a landlord in California has become a challenging endeavor.

Similarly, Mike Placido, a small landlord with two rental properties, is also feeling the impact of rising insurance costs. After State Farm canceled his policy, he had to find alternative coverage, which led to a substantial increase in premiums. To offset these costs, he plans to raise rents in January, acknowledging that he has no choice but to pass on some of the burden to his tenants.

The situation is not just affecting landlords but also renters, who make up almost half of California’s population. With the median rent in the state already significantly higher than the national average, any further rent increases due to rising insurance costs could push many renters into severe financial burdens. Shanti Singh from Tenants Together expressed concerns about the lack of transparency from landlords regarding rent increases tied to insurance costs.

As the effects of climate change continue to exacerbate insurance challenges in California, experts are warning about the potential implications for housing affordability and availability. Sarah Karlinsky from UC Berkeley emphasized the need to rethink development patterns to avoid building in high-risk areas. Laurie Johnson, an urban planner, highlighted the importance of insuring multifamily properties to prevent displacing residents in case of disasters.

In conclusion, the insurance crisis in California is not just a problem for landlords and tenants but also for the overall housing market. As insurance costs continue to rise, the affordability and availability of housing are at risk, necessitating proactive measures to address these challenges and ensure the stability of the housing sector in the state.