Homeownership has been declining in the U.S. over the last decade. The foreclosure crisis turned millions of homeowners into renters and the tight housing market makes it impossible for the majority of renters to buy homes.
Demographic shifts, such as Millennials moving out of their parents’ homes, add to the renter pool, as does the rising Hispanic population. In addition, Baby Boomers show the tendency to downsize into rentals, too.
Homeownership rates were highest in the U.S. in 2005 at 69.2 percent, according to the U.S. Census Bureau. The rate has dropped to 63.7 percent in the second quarter of 2017, even though in most metros, owning is the most affordable option. The current housing situation is sustained by renter’s credit issues and down payment requirements, too high for most millennials to pay. In fact, most low-income families don’t rent by choice, and plenty of higher-income households can’t afford to buy. The affordable supply is scarce in both rental and for-sale markets.
This overhaul of the housing landscape has and will trigger an array of changes. Already properties are increasingly owned by investment corporations and they work hard on rising renter services to meet market expectations.
The new housing situation affects several other industries, including insurance. So far, the American Millennial generation holds the record for the most uninsured generation. Of course, there are good reasons behind Millennials foregoing insurance, but in light of recent events (such as the major hurricanes crippled the south and southeastern regions of the country), it’s clear that insurance is more than just a social obligation, it’s a life-saving measure.
While it’s true that not all renters are at risk of flooding, the reported flood-insurance gap between homeowners and renters in extremely wide: renters make up a fifth to almost half of residents in most U.S. communities, but only about 2 percent of the 5 million flood insurance policies in force across the country are for a rental property. This shows that renters are far less likely than homeowners to insure themselves against the risk of flooding.
Yet, flood insurance for renters is cheaper than for homeowners because renters don’t have to worry about damage to the structure of the property (usually the most expensive part of a flood insurance). Flood insurance is underwritten by the federal agency National Flood Insurance Program, but is sold by a multitude of insurance companies. Typically, one has to wait 30 days for it to kick in, after being given the policy.