Passing on rising property insurance costs in multifamily is getting harder, and the burden is shifting from renters to owners as new supply, rent concessions and climate risk compress net operating income and property values, according to a new study for the Hutchins Center at The Brookings Institution.
The study finds that commercial property insurance costs have been rising about 15% per year since 2019, driven by more frequent natural disasters linked to climate change, rising reinsurance costs and spillover from tightly regulated homeowner insurance markets.
According to the study, authored by University of Texas at Austin PhD students Minjoo Kim, Prateek Mahajan and Zirui Wang, those increases are putting significant pressure on owners’ operating results, with net operating income in the hardest-hit areas falling by more than 25% over the last decade.
The researchers focused on multifamily because they had access to a large, novel set of property-level operating statements from agency CMBS deals, which allowed them to see how insurance costs move through the income statement.
Early in their study period, closer to the pre-pandemic years, landlords could pass roughly half of their higher insurance costs on to tenants by raising rents, particularly in markets with constrained housing supply. Owners still absorbed a sizable share of the increases, but tenants bore much of the remainder in higher monthly payments.
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New Supply Ends The Pass-Through Era
By 2024, that pass-through dynamic had largely broken down. Multifamily tenants had already absorbed years of rent growth tied to refinancing costs, rising replacement prices, higher property values and the market was hitting resistance. At the same time, record volumes of new-unit construction in 2024 and 2025 sharply increased inventory, eroding the scarcity that had given landlords leverage to raise rents.
With more options available, renters are choosing among competing properties and operators are now using rent discounts and concessions at the highest levels seen in more than a decade to fill units. According to Brookings, the rising insurance burden is now showing up primarily as lower net operating income, reduced profitability and weaker property valuations rather than higher rents.
In markets facing the steepest insurance increases, NOI is down by as much as 25% and potentially more, with direct implications for leveraged owners and investors who count on cash flow to support debt service.
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