Multifamily insurance costs have jumped so sharply since 2019 that they are eroding net operating income, weakening valuations, and threatening the long‑term viability of affordable housing, according to new research from Harvard University’s Joint Center for Housing Studies and the Brookings Institution. For multifamily investors, keeping deals pencil out increasingly hinges on how well they manage this line item.
Insurance Costs Become A Drag On Returns
Multifamily owners and operators have been wrestling with steep insurance hikes since the pandemic and the pressure is not easing. In a recent working paper, the Harvard Joint Center for Housing Studies finds that property insurance costs for multifamily buildings rose more than 75 percent between 2019 and 2024.
The Joint Center characterizes these escalating premiums as part of high operating costs that are a “persistent threat to the existing affordable housing stock,” and notes that decreasing insurance availability is also making it harder to bring new projects out of the ground.
A separate study prepared for the Hutchins Center at the Brookings Institution reports that insurance costs have been rising upwards of 15 percent per year since 2019. According to that research, the increases are being driven by more frequent natural disasters linked to climate change, rising reinsurance costs and spillover from tightly regulated homeowner insurance markets.
The Brookings study concludes that owners can no longer reliably pass higher insurance costs through to renters because rent growth faces too many downward pressures. Instead, the burden is showing up as lower net operating income, reduced profitability and weaker property valuations rather than higher rents.
Given those constraints, the Harvard paper focuses on practical steps owners can take now. Based on interviews with insurance professionals, policy experts and affordable housing developers and operators, the authors lay out a set of short‑term strategies that can help investors and operators limit risk, present a stronger underwriting profile and exert more control over their insurance trajectory.
Design And Development To Limit Risk
One of the first strategies the Harvard Joint Center highlights is using design and development choices to reduce perceived risk at the property level. At the site plan stage, that can mean increasing the space between buildings and incorporating firewalls to moderate insurer risk assessments.
These kinds of physical risk‑mitigation steps align with recommendations from the Insurance Institute for Business & Home Safety, which has been promoting wildfire and other resilience measures for multifamily owners.
The paper also emphasizes the role of safety improvements and retrofits in shaping an insurer’s view of the asset. Fire stops, water overflow sensors and other safety measures can materially reduce the likelihood and severity of losses.
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Equally important, according to the Harvard Joint Center, is careful documentation of all maintenance and improvements, which becomes a crucial part of the insurance application narrative.
Tightening Applications And Exploring Self‑Insurance
The Harvard paper stresses the importance of crafting an effective annual insurance application. Limiting both the number and duration of claims is central to that effort. When practical, handling smaller issues without filing a claim can help avoid a pattern that drives up premiums in subsequent years.
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