Mark Cuban, the billionaire entrepreneur, has emphasized a major but often overlooked factor contributing to the housing affordability crisis in the United States, particularly in Florida. While debates usually center around mortgage rates, zoning issues, immigration, and construction, Cuban believes the primary issue will be home insurance costs, especially in areas prone to natural disasters.

He explains that the skyrocketing cost of home insurance, particularly in places like Florida, will be a critical factor in housing affordability over the next few years, potentially even influencing political campaigns. According to Cuban, the problem is largely driven by two factors: rising inflation and climate change.

Post-pandemic, the costs of building materials and labor have surged, making home reconstruction more expensive. The increase in material costs, such as drywall, concrete, and steel, is still significant, even as prices for lumber have stabilized. This creates a problem for homeowners with replacement cost insurance policies because insurers must adjust premiums to cover the higher cost of rebuilding homes.

Additionally, climate change has exacerbated the risk of natural disasters like floods, hurricanes, and wildfires, which in turn forces insurers to raise their rates to cover the increased risk. From 2017 to 2022, home insurance premiums grew at a rate 40% faster than inflation, according to the Consumer Federation of America. Major insurers like Farmers and Progressive have scaled back operations in high-risk states, including Florida, which has led to a growing number of uninsured homes. By 2022, data indicated that 10% of Florida homeowners had no property insurance.

To mitigate the risks, prospective homebuyers should consider climate risks when choosing where to live. Tools like Redfin’s climate risk score and FEMA’s flood maps can help assess the risks in different areas. For homeowners in high-risk zones, making their properties more resilient—such as installing storm shutters or elevating homes in flood-prone areas—can reduce insurance costs. In cases where private insurance is unaffordable, state-backed insurance programs like California’s FAIR Plan or Florida’s Citizens Property Insurance Corporation may offer a safety net.

In summary, the soaring costs of home insurance, due to inflation and the increasing frequency of natural disasters, pose a significant challenge to housing affordability, particularly in disaster-prone states like Florida. Addressing this issue will be crucial for homebuyers and homeowners alike in the coming years.