Opening Renewal Village, a 215-unit supportive and transitional housing property in Denver’s Globeville neighborhood, in August 2024 was a milestone accomplishment for the Colorado Coalition for the Homeless.

It took about 18 months to renovate the former Clarion Hotel into a supportive housing complex in the rapidly gentrifying neighborhood. The property, the 23rd the Coalition has opened since the organization began operating in 1984, provides additional housing opportunities for people who would otherwise fall into homelessness.

But a crisis looms behind the scenes for Renewal Village and the rest of CCH’s portfolio. Insurance costs for CCH’s properties have nearly doubled since the pandemic began, up to $2 million per year. The organization’s deductible has increased five-fold, which means it has to pay for most maintenance or repairs out of pocket. CCH used to rely on a single insurance carrier to insure their properties, but over the last year, the organization has had to open policies with 12 different carriers to keep costs down.

“Permanent supportive housing providers operate on very, very small margins and just don’t have the additional revenue to pay for more insurance or property damages out of pocket,” Cathy Alderman, CCH’s vice president of communications and policy, tells Next City.

Permanent supportive housing providers across the country face similar challenges as insurance costs rise due to human-caused climate change. These issues have become especially pressing in states like California, Colorado, Louisiana and Florida, where insurance costs have risen significantly due to the increased risk of climate-related disasters. Large insurers like AIG and Farmers have pulled back from these states due to increased property risk, forcing property owners to get more expensive policies from smaller insurers or state-level plans.

Rising insurance costs pose challenges to everyone, from renters to homeowners and businesses. However, unlike other landlords, PSH providers have limited options to mitigate the impact. They are legally prohibited from passing rising insurance costs to their tenants. There are also few funding sources for these properties to provide on-site services to offset the rising cost of maintenance and insurance.

These rising costs also threaten to speed up the decline of one of the best ways to provide housing stability to people exiting homelessness. America has lost more than 21,000 PSH beds since 2019, representing an overall decline of 11.5%, according to the federal Housing Inventory Count. Over the same period, America’s homeless population has increased by 35%, up to more than 771,000 as of 2024. That’s more than 203,000 additional people living in homelessness.

Lindsay Brugger, vice president of urban resilience at the Urban Land Institute, tells Next City that many of the issues PSH providers face are emblematic of the broader issues within the insurance industry itself. Insurers are writing fewer policies in climate-disaster-prone areas, and reinsurance companies (firms that reimburse insurance companies) are also providing fewer reimbursements.

Federal agencies like the Department of Housing and Urban Development and the Federal Emergency Management Agency are keenly aware of these issues, Brugger adds. That is one reason why HUD created its Green and Resilient Retrofit Program, which helps HUD-supported properties afford upgrades that make them more insurable. FEMA also has grants available for similar work. However, it is unlikely that funding for these programs will continue under the Trump administration.

Read more: A Little-Known Federal Program Is Keeping Senior Housing Affordable in Denver

Dave Jones, the former insurance commissioner for the State of California, says the challenges in the insurance market pose an existential risk for the global economy. Financial regulators broadly agree that climate change poses the biggest risk to the financial system, he says. In turn, insurers are shifting the risk from themselves to property owners.

“This is not a question of if, but when,” Jones said during a call with reporters.

Dora Gallo, CEO of the Los Angeles-based nonprofit supportive housing provider A Community of Friends, says these insurance issues have been brewing for several years. A Community of Friends operates 49 apartment communities across Los Angeles and has another five properties under construction.

Since 2023, insurance premiums for all of ACF’s properties have jumped from $1.4 million to $3.95 million, Gallo says. The nonprofit has also had to get policies from six non-admitted insurance agencies to have the same level of coverage it had two years ago. Non-admitted agencies do business through wholesale brokers and do not have state insurance licenses. They are not eligible for state reimbursements in cases when payouts exceed revenues.

The dramatic increase of insurance costs has hit ACF’s operations hard, Gallo adds: the nonprofit had to take out a loan at 6% interest to pay its insurance premium upfront instead of spreading the cost out over the year, and ACF has also taken more time to pay its vendors for services and building maintenance to ensure it has the cash flow to continue operating.

ACF has also drawn capital from the reserves for half of the buildings in its portfolio to pay for insurance costs, Gallo says. That includes depleting the reserves for six buildings entirely. That means there is no additional money to pay for maintenance and upkeep at those properties until the reserves can be replaced. These issues have made Gallo consider selling some of the properties, but she says that decision is a last resort.

“It’s a pretty horrific situation. I don’t know how much longer we can keep this up,” Gallo tells Next City.

Rising insurance costs also harm CCH’s balance sheet, Alderman explains. Rising insurance costs inflate the organization’s expenses, which impacts CCH’s ability to borrow money and requires CCH to rely more on gap financing, which often carries higher interest rates. That strains CCH’s current operations and also limits its future development.

CCH has set up an internal risk mitigation committee and worked with its insurance brokers to identify upgrades for its properties – including leak and fire protection devices – to reduce risk for insurers. But Alderman says those upgrades have not resulted in lower insurance costs.

CCH has also considered cutting expenses from property security to free up additional cash for insurance costs. But that creates a Catch-22 where the organization could end up paying higher liability insurance risk, she adds. CCH has also considered selling properties to reduce its insurance costs, which Alderman described as an option of last resort.

“You never want to have those conversations,” Alderman says.

Deacon Jim Vargas, CEO of Father Joe’s Villages in San Diego, says the insurance crisis supportive housing providers face could upend the progress made toward building more affordable housing nationwide. According to the National Low Income Housing Coalition, there is a shortage of 7.3 million affordable homes for the nation’s lowest-income earners, a total that has remained relatively stable over the last couple of years.

Father Joe’s Villages has a mix of more than 1,000 affordable and supportive units in its portfolio, Vargas says. Over the last 12 months, the organization’s insurance premiums have increased from $1.1 million to $4.4 million. Deductibles for water damage increased to $500,000; anything that is not water-related carries a deductible of $100,000. Those costs effectively ensure that Father Joe’s Villages has to pay for damages out-of-pocket, Vargas adds.

“It just adds insult to injury,” Vargas tells Next City.

Vargas says that the increased costs have not caused Father Joe’s Villages to cut back on resident services, which include emergency shelter, health care, behavioral health services and therapeutic child care. However, Father Joe’s Villages has had to delay some maintenance for its buildings to maintain its cash flow, Vargas says.

There are still some issues that could derail this stability, he notes. For instance, the organization is in the process of adding another 600 units of housing across five new buildings. While most of the funding for those projects comes from state and local grants, rising insurance costs could force Father Joe’s Villages to rethink their growth strategy, Vargas says.

“When you don’t have enough affordable housing, you will more than likely have more homelessness within the community, and that impacts the community as a whole,” Vargas says.

This post was originally published on Next City.