In recent years, homeowners’ insurance costs have skyrocketed in parts of the country facing the most acute climate risks, such as the hurricane-prone Southeast. While that’s put a serious dent in home values in those areas across the board, a new study has found the insurance crisis has hit particularly hard in ZIP codes with higher percentages of Black and brown homeowners. 

The study, published by the National Bureau of Economic Research, found that the ZIP codes most affected by the climate change-driven insurance crisis stretch along the Gulf Coast, from western Florida to southern Texas — a region that is not only routinely beset by hurricanes but is also home to around half of all Black Americans.

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Insurance premium increases “are capitalized into home values, reducing home price growth by over $40,000 in the most exposed ZIP codes,” according to the study. “The premium and home price effects are larger in areas facing rising climate risk.”

Homeownership in Harm’s Way

There are, of course, plenty of people who live in the Southeast who are not Black. But the numbers are uniquely stacked against Black residents, in terms of actual risk of major storms — and the financial hit that they’re taking because of that risk. 

Black communities in the Southeast are nearly twice as likely to be hit by hurricanes as other communities in the same part of the country. That’s not only a dramatically higher risk even within states that are routinely hit by hurricanes, but also speaks to how redlining and other racist housing practices have put Black people in harm’s way. 

Not all communities with more Black people and more storm risk are the most exposed ZIP codes in the new story on homeowners’ insurance and home values. But it stands to reason that those communities are disproportionately represented in parts of the Southeast where the insurance crisis has pushed home values down by as much as $40,000. 

Credit Score Squeeze

Black households are taking a long-term hit to the wealth-generating machine that is homeownership, and are likely paying more month to month as home-insurance premiums skyrocket for the same reason that they’re more prone to being affected by hurricanes: because they’re Black.

There are, unfortunately, many different reasons that Black communities end up with a higher insurance cost burden. 

The average credit score for a Black American is about 100 points lower than it is for the average white American. Credit scores across a Black community are likely to have a lower overall average, too. 

Home insurers, meanwhile, base their rates in part on credit risk: the lower a homeowner’s credit score, the higher the premium. One study found that individuals with subprime credit pay around 30% more for home insurance than individuals with high credit scores.

Taking a Huge Risk

In a report on the home insurance crisis, The New York Times interviewed Cristal Holmes, a homeowner in Bogalusa, Louisiana, a city of about 10,000 where roughly half the residents are Black. She told The Times her mortgage is about  $700 per month, but her homeowner’s insurance is $500 a month. 

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Across the country, 13% of homeowners are now uninsured. It’s a huge gamble, especially for residents living in areas likely to experience increasingly powerful hurricanes. 

But as solutions to the insurance premium crisis go, going without is a luxury too: to get a mortgage on a home, banks require that properties be insured. The only way to avoid the rising cost of insurance is to own a home outright.