Urban Institute links rising premiums to income, geography, and credit score
Homeowners insurance has crossed a critical threshold in the American affordability crisis. A May 2026 Urban Institute report — combining loan-level mortgage and insurance data — found that roughly one in six new homebuyers is now spending more than 3% of household income on insurance alone, before accounting for mortgage payments, property taxes, or maintenance costs.
Between 2018 and 2024, the average annual homeowners insurance premium at origination climbed from $1,270 to $1,856. That's a 46% increase that outpaced the 25% general inflation rate over the same period, according to the Urban Institute's Property Insurance Affordability report.
Measured as a share of income, premiums rose from 1.87% on loans originated in 2018 to 2.27% on those closed in 2024. The share of new mortgages where premiums exceeded 3% of household income grew from 10.5% to 16.2% over the same window.
For mortgage brokers, the numbers land directly in the pipeline. Darshit Chokshi, president and CEO of Aequitas Mortgage in Texas, previously told Mortgage Professional America about a client who walked away from a purchase contract after receiving an insurance quote of $11,000 for a 4,000-square-foot home.
"The borrower said, 'I spoke with my wife, and I think we are going to terminate this contract. This is not something we can afford,'" Chokshi said.
He has also called on state regulators to scrutinize whether insurers are applying inflated replacement cost estimates that push premiums beyond what local market values can support.
Low-income borrowers face a compounding disadvantage
The Urban Institute data reveals a structural penalty for buyers with less income. Borrowers earning above 120% of area median income (AMI) pay approximately $2.10 less per $1,000 of home value than those earning below 50% AMI. That means the households least able to absorb cost increases are paying the highest effective rates relative to what they own.
As the homeowners insurance crisis has been reshaping mortgage origination for years, brokers say insurance costs are now directly affecting debt-to-income ratios, delaying closings, and in some cases disqualifying buyers entirely.
Geography drives diverging outcomes
The Urban Institute found no single explanation for rising insurance burdens, ruling out a uniform policy fix.
Houston, widely regarded as one of the more affordable large markets in the country, ranked second among major metropolitan statistical areas for the share of insurance-burdened households in 2024. Its significant flood and wind exposure, combined with modest home values, leaves borrowers with little income cushion to absorb high premiums.
As surveys show that 71% of homeowners say their insurance costs have increased, the geographic variation in who bears the burden is becoming one of the defining characteristics of the problem.
Los Angeles saw the fastest premium growth among the MSAs studied — 59% between 2018 and 2024 — though higher local incomes have kept the share of burdened homeowners relatively contained for now.
Tampa Bay's experience is more direct: elevated climate risk tracks closely with the second-highest premiums as a share of income among major markets.
Minneapolis and Denver, by contrast, carry high premiums despite only moderate climate peril scores, pointing to local underwriting dynamics and claims history that brokers dealing with soaring insurance costs on the front line say are poorly understood by national policymakers.
The Urban Institute plans further market-level analysis in the months ahead, with the goal of equipping lenders and policymakers with geography-specific data to design targeted responses.
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