HomeHome InsuranceHousing developments could be delayed amid insurance struggles – Orange County Register

Housing developments could be delayed amid insurance struggles – Orange County Register


The County of Orange is responsible for the planning of thousands of homes in the unincorporated territories to help meet state housing needs, but identifying fire-prone zones and the difficulty of insuring in those areas could be delaying the construction of the new housing here and in similar developments throughout California.

Orange County Fifth District Supervisor Katrina Foley warns there is “a clear conflict between the state’s fire prevention maps” and the mandates the county has received from the state to plan for the construction of 10,340 new homes in the unincorporated areas of OC it governs. The areas not already developed are mostly butting up against OC’s foothills and wildlands, and that can make it hard to get the necessary insurance – both for the builders and later on the homeowners.

“It’s come to my attention that the building has stopped,” Foley recently said. “Everyone is stopped until we can figure out this insurance issue.”

State law requires California cities and counties to develop housing plans at all income levels, including sufficient affordable housing. They are not responsible for building the housing, just creating a conducive planning environment for developers who might show interest. State housing officials have to sign off on their zoning plans.

As of April 19, there are 19 cities in Orange County, including the county, that are not in compliance with having an approved plan in place, according to the California Housing and Community Development. Failing to adopt a compliant housing element could lead to being sued by the state, losing some local control over making decisions on developments and fines of up to $600,000 a month.

The homes and open space in Rancho Mission Viejo on Friday, April 7, 2023. The county has been tasked with planning for the development of more than 10,000 new homes, many of them at affordable levels, in OC's unincorporated territory. However leaders are running into conflicts with the struggle in some areas with fire insurance being available at reasonable prices. (Photo by Mark Rightmire, Orange County Register/SCNG)
The homes and open space in Rancho Mission Viejo on Friday, April 7, 2023. The county has been tasked with planning for the development of more than 10,000 new homes, many of them at affordable levels, in OC’s unincorporated territory. However leaders are running into conflicts with the struggle in some areas with fire insurance being available at reasonable prices. (Photo by Mark Rightmire, Orange County Register/SCNG)

At the same time, where the state is responsible for fighting fires, California’s fire marshal is mandated to map properties into moderate-, high- or very high-fire hazard severity zones. And the maps have recently been updated for the first time since 2007.

Hazard – note, not risk – is based on the physical conditions that create a likelihood and expected fire behavior, without considering safety measures such as building homes with increased heat-resistant materials.

Lori Smith, the Orange County Fire Authority’s fire marshal and assistant chief, said people are concerned that if their homes or developments fall into the higher fire-hazard zones of the map, their insurance rates will go up or get canceled.

“Since those fires we had up north in 2017, 2018, insurance companies have been canceling people’s homeowner’s insurance (or) they’re simply leaving the state,” Smith said. “People in Orange County, as well as all over the state, are really struggling with affording fire insurance if they can get it, or are having difficulty getting insurance.”

Dan Dunmoyer, president and CEO of the California Building Industry Association, said access to home insurance has been difficult to find because of the state’s devastating fires.

“The insurance industry has had some substantial losses,” he said. “The only way insurers can respond to that, other than losing money which they don’t want to do, is they just limit the scope of their coverages, non-renew their existing coverages if they think they’re too fire risky, or they just don’t sell any new insurance.”

Dunmoyer said because of the insurance crisis, construction in less developed areas has been slowed because homebuilders can’t figure out how to insure them at a price that an entry-level customer can afford. He especially pointed out multi-family condominium projects as being affected.

“That’s obviously very problematic because this is the type of product that our entry-level buyers can afford,” Dunmoyer said. “It’s also the product that allows us to build more houses on less land, which is better for the environment and better for our climate goals. We have to find a solution here so we can in fact solve our housing crisis and solve our climate crisis and create a California that we all want to create where people can have a place to call home, at a price they can afford, in a place that’s beautiful and still environmentally friendly.”

Mike Balsamo, senior vice president at Rancho Mission Viejo, which is developing still a chunk of south Orange County that was once hilly ranch land with thousands of homes starting in the low $500,000s, said, “It is not possible to quantify exactly how many homes are being affected by this statewide insurance crisis.

“We are working together with others in our industry to resolve this complex issue with the goal of bringing the large property insurers back into the state,” he said. “We know that Rancho Mission Viejo is a highly resilient community that stands as a model for wildfire safety and prevention.”

If not fixed, Dunmoyer said new buyers who can’t afford the skyrocketing insurance premiums could be locked out of the home-owning market.

The homes and open space in Rancho Mission Viejo on Friday, April 7, 2023. The county has been tasked with planning for the development of more than 10,000 new homes, many of them at affordable levels, in OC's unincorporated territory. However leaders are running into conflicts with the struggle in some areas with fire insurance being available at reasonable prices. (Photo by Mark Rightmire, Orange County Register/SCNG)
The homes and open space in Rancho Mission Viejo on Friday, April 7, 2023. The county has been tasked with planning for the development of more than 10,000 new homes, many of them at affordable levels, in OC’s unincorporated territory. However leaders are running into conflicts with the struggle in some areas with fire insurance being available at reasonable prices. (Photo by Mark Rightmire, Orange County Register/SCNG)

“There are scores of other projects out there that are in jeopardy and the saddest part about this is that it’s not in jeopardy for the $1 million houses,” Dunmoyer said. “The irony is it’s in jeopardy for condominiums, which is the most affordable housing we build in California, and where low-income families and primarily families of color in our state buy their first home.”

But Michael Soller, California’s deputy insurance commissioner, said updating CalFire maps is not expected to substantially contribute further to the rising cost of insurance.

“And that’s for one simple reason. Insurance companies are already using their own data to make insurance decisions,” he said. “They’re taking a detailed look at what’s actually happening on your property. That’s not what California’s maps do. What CalFire is doing is really about education.”

Insurance companies alone are responsible for setting their rates and their prices, Soller said. It is then the Department of Insurance’s responsibility to ensure that those rates are fair and that Californians can get the best value, he added.

“We can and do adjust those rates if we find that they are either excessive, inadequate or discriminatory in some way,” Soller said.



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