Insurance creates a barrier to workforce housing
The demand for attainable housing in Florida continues to grow, even more so in communities like ours in Central Florida hit hardest by recent hurricanes. In order to keep Florida the best place to live, work and raise a family, our state must keep up and ensure the backbone if its economy — people in the workforce — have homes they can afford. The cost of insurance exacerbates problems with access to affordable workforce housing.
Our population climbs because people choose Florida as a place of opportunity. Florida’s business-friendly climate, lower taxes and job opportunities are attractive for many lower- and middleclass Americans. But the gap between the price of attainable or “workforce” housing and homes hurts working people the most. While we can’t control some of the reasons — inflation, windstorm risk and sea level rise — there are other reasons that can be reined in such as lawsuit abuse, which has exacerbated Florida’s reinsurance challenges. According to the Office of Economic and Demographic Research’s latest forecast, “between April 1, 2022 and April 1, 2027, population growth is expected to average 294,756 net new residents per year (808 per day), representing a compound growth rate of 1.29% over this five-year time horizon. These increases are analogous to adding a city about the size of Orlando every year.”
Yet, according to research from Apartment List, Florida leads the nation in rental unaffordability, with almost 57% of renters considered cost-burdened. Many in the service and tourism industries can’t meet soaring rents with the rising costs of other basic needs.
To keep attainable housing construction going, specialty insurance solutions are often needed to support developers and contractors. This unique type of insurance behind the scenes is known as “surplus lines” insurance, and it plays an important role in providing insurance for hard-toplace, unique or high-limit risks.
From supporting high rises and halftime shows, to flood insurance and food trucks, surplus lines have a lower profile in the insurance world. Still, they support businesses, hard-to-insure homes, and non-traditional risks behind the scenes every day. This type of insurance is needed when other, more traditional carriers do not have the knowledge or specialty expertise on how to cover a particular risk. Surplus lines can offer innovative solutions like large commercial property risks and umbrellas.
An important piece in Florida’s diverse insurance marketplace puzzle, surplus lines insure risks that are declined by standard insurance carriers and frequently support contractors by insuring new affordable, workforce housing building projects in Florida.
Surplus lines continue to be the main insurance solution for workforce housing: According to affordable home providers, surplus lines insurance almost exclusively writes their coverage. Many of these projects would have had a difficult, if not impossible, time obtaining insurance at all. The “safety valve” of the insurance industry, surplus lines fill in the unique coverage needs of the marketplace.
The basic need of housing availability is of great importance to Florida’s economic development and economic sustainability, and it is an issue lawmakers are already discussing in the legislative session. Lawmakers will have an opportunity to work on reforms that support attainable housing, and will hopefully recommend reforms related to lawsuit gamesmanship, which increase litigiousness and drive up verdicts. These litigation loopholes also create a cooling effect on insurance capacity, which can compound pricing problems for affordable housing owners and their tenants. “We are hopeful the Legislature will build on past attempts to reign in excessive litigation,” says Scott Macdonald, chair of the Coalition of Attainable Housing Providers’ Insurance Committee. “Reforms are needed to attract the admitted market back into our sector, as well as increase capacity and improve affordability in the surplus lines market.” Members of the Florida Surplus Lines Association look forward to working with lawmakers.