I periodically give updates on the Housing Opportunity Index, which gives the percentage of homes sold that would be affordable to a family earning the median household income.

As a refresher, as recently as 2019 that index showed that 71.4% of homes sold in Colorado Springs were affordable to the median household income. That index at the end of 2023 stood at 21.5% of homes being affordable.

The deficiency in residential construction after the Great Recession is largely to blame for the supply shortage and resulting price increases. Higher interest rates have stacked on top of higher baseline prices, exacerbating affordability.

But something that is not talked about as much is the increase in homeowner’s insurance. Even renters are subject to higher insurance premiums because apartments and multifamily buildings have experienced some of the largest premium increases, which get passed onto renters through higher lease rates.

Last year, the Colorado Department of Regulatory Agencies released a report on homeowners’ insurance. It highlighted that Colorado is the sixth most expensive state to insure homes. Much of this is due to the high risk of wildfires, most recently in

Grand and Boulder counties.

From 2019 to 2022, the average homeowner premium is up 51.7%. Colorado rates of increase are about double compared with the rest of the nation, and each year those premium increases are higher than the year before. Hail and other climate issues are also cited in the report.

The increase in the costs to build, which are still elevated compared with pre-pandemic levels, further escalate repair or rebuilding costs.

The study also highlights that there has been consolidation of the Colorado insurance market as smaller carriers can’t take the large losses experienced in many pockets across our state.

Colorado, as a high-risk state, is seeing the number of policies written negatively impacted, and some areas might not be able to get homeowner’s insurance, bringing overall instability to the market. Many high-risk areas are creeping closer to densely populated areas such as Denver and Colorado Springs.

The skeptic in me assumed that these large insurance carriers must be making solid profits from these premium increases.

According to this study, Colorado is also one of the worst states for insurance company profits. This is why many carriers are exiting the Colorado market.

As our state population grows, we will need more housing and we will need it to be affordable. Yet, increasing homeowner’s insurance premiums are stacking on top of high housing costs. Homeowners in some very high-risk areas are even finding it difficult to find an insurer.

Some measures such as fire mitigation can help, but the general trend of more natural disasters, particularly in densely populated areas, is in play, and that is unfortunately another headwind for state and local housing affordability.