### Rising Insurance Costs and Climate Risks Challenge Homeownership and Renting Decisions

Homeownership and renting in states with high climate risks have become increasingly complex decisions for many Americans. While both homeowners and renters grapple with the impact of natural disasters like the recent Hurricane Milton, each group faces unique challenges. Homebuyers, in particular, are confronted with surging insurance premiums, while renters may have to contend with higher rents as property insurance costs rise.

One of the key differences between owning and renting in high-risk areas is the volatility of costs. Chen Zhao, head economist at Redfin, explains that markets in states like Texas and Florida, which experience severe storms and other climate risks, are particularly affected. Homeowners in these regions have seen insurance premiums soar, with average premiums increasing by 33% from 2020 to 2023. These rising costs don't impact renters as directly, but they can still face higher rents as landlords pass on the increased expenses.

Variations in insurance costs are also evident across state lines, even in areas with similar climate risks. For instance, Florida's high exposure to reinsurance (almost 40%) has led to significant premium hikes in zip codes near the Georgia border, with annual increases of about $1,000. In contrast, Georgia, with less than 10% reinsurance exposure, has seen more modest increases of less than $500 in similar regions. A study predicts that by 2053, households in climate-exposed areas across the U.S. will see annual insurance premiums rise by $700.

Jung Hyun Choi, a researcher at the Urban Institute's Housing Finance Policy Center, points out that the rising costs of owning a home also include rapidly increasing home prices. Despite these challenges, homeownership remains a crucial means of building wealth in the U.S., as costs can be fixed through a 30-year mortgage. Renters, however, must navigate unpredictable year-to-year price changes, which can spike following climate disasters due to reduced housing supply or landlords compensating for property damage.

Moreover, public policy tends to favor homebuyers, as demonstrated by forbearance and loss mitigation efforts designed to help them retain their properties post-disaster. After Hurricane Katrina, for example, a disproportionate amount of disaster recovery assistance went to homeowners compared to renters. This disparity highlights the need for policies that address renters' vulnerabilities, as federal funding for renters has been shown to mitigate rapid rent increases.

Despite facing the personal risks of housing instability and property loss during disasters, renters generally have more flexibility to relocate compared to homeowners. Zhao emphasizes that renters do not bear the financial risk of property damage in high-risk areas like Florida, which adds another layer of complexity to the renting vs. owning decision.

Ultimately, whether renting or owning is more advantageous in the face of climate change will depend on future policy developments. Choi suggests that without significant policy changes, renting might become a more appealing option in high-risk areas. Renters can avoid the severe financial risks associated with property damage and the rising insurance costs that homeowners must face.