Can People Afford to Own Homes?

Housing Personal Writings

Pearl River      Our daughter lives around the corner from us and our son lives up the block.  I see my son regularly, because we work together in several of our family of organizations.  When my daughter was in high school and I would be in town and driving her to school, we would have a dad-and-daughter day when I would stop, and she would get some kind of latte or something at a local coffeehouse.  Keeping that tradition alive, every week when I’m here we lure her over near dawn to start our day the same way.  Most recently the conversation went into a fraught place over the cost of soaring home and flood insurance, with her wondering how people can continue to live in our city.  I demurred, because we’re not moving, and I don’t want her to do so either, but she is right.

The Wall Street Journal implicitly raised the same question in a recent article about the costs of homeownership soaring.  The factoids alone are sobering:

  • 10% of homeowners surveyed by Fannie Mae in 2023 “were not confident they could afford their home insurance at their next renewal.
  • Home maintenance costs averaged $6663 at the end of 2023, up 8.3% from 2022.
  • Average property tax was $4062 in 2023, up 4.1% from 2022.
  • Average home insurance costs rose 20% between 2021 and 2023 to $2377 with another 6% expected in 2024.

These are all US overall averages, so if misery loves company, there’s a lot of it everywhere.  In climate impacted areas like Louisiana, my daughter and all of our family are right to be worried.  In eight states, including Louisiana, Michigan, and Maine, rates are expected to jump 10%.

It gets worse.  The Journal quotes a New Orleans real-estate agent saying,

“The insurance really is, I think, just as crippling, if not more so, than interest rates. When you’re talking about a $500,000 property that has an $8,000 homeowners’ insurance premium and a $2,000 flood insurance premium, and property taxes on top of that, the carrying costs have exponentially increased,” Kara Breithaupt said. These higher costs have forced some homeowners to sell, she said, but good luck finding a buyer. The typical home in the New Orleans metro area that went under contract in February had been on the market for 97 days, the slowest of any major metro area, according to real-estate brokerage Redfin.

Our home insurance alone was almost $10,000, our daughter’s bill was pushing $13,000 around the corner, and our son’s house was over $7000 up the block with property taxes in our broke-butt city higher than the average even with homeowner exemptions.  Adding insult to injury, flood insurance is between $1000 and $2000 per year on top of that.  All of this is because we live in a neighborhood near the Mississippi River which was one of the 15% that did NOT flood in Hurricane Katrina almost 15 years ago.  Our good luck or good judgement, you decide, kept us dry, but meant that the value of our homes went up by many multiples putting us on the random walk with Kara’s example, where it may be hard to stay and hard to sell, no matter how much we love the city and our neighborhood.

This is when climate change becomes very personal.  Some environmentalists argue that subsidizing state and federal-based support for home insurance encourages people to live in areas at risk, and of course they are correct in many cases, but we’re all on high ground and having these conversations before the sun comes up.  There’s no solution that says move everyone out of New Orleans or other cities.   Close to 100,000 were permanently dislocated after Katrina already.  A flooding expert I interviewed argued cogently that the real problem and expense was not in cities like New York, Miami, or New Orleans where there are resources.  He contended they would force solutions, but elsewhere.

We’re organizing for communities to confront climate change everywhere these days, but in the meantime, I want our daughter to be able to live around the corner and our son to live up the street, and in my book that requires immediate action as well.