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By Sam Stragand and Amanda Nothaft

Introduction

A disproportionately high number of Detroit homeowners lack homeowners insurance, and a lack of homeowners insurance can have negative impacts both for the individual homeowner and for the larger community. Homeowners who lack insurance are more likely to face financial challenges, both directly in response to the loss of their housing and over the long term. As the authors of Exposed, a national report on homeowners insurance, point out, these financial challenges often leave uninsured homeowners with a choice: stretch their finances to make the repair or live in unsafe housing conditions that risk the long-term value of the property. A lack of homeowners insurance can also increase the risk of loss for surrounding areas, and this in turn requires others to shoulder a heavier financial burden. Significant pockets of uninsured housing can contribute to a broader decline in the community, with lack of repair leading to community-level neglect and disinvestment.

In Detroit, about 38% of homeowners without mortgages report being uninsured, which is nearly twice as high as the national average of 19.5%. One-quarter of Detroit homeowners spend more than 30% of their household income on housing-related expenses, which many consider the upper limit for affordability. The combination of relatively low incomes among city residents and relatively high housingrelated costs — including insurance, property taxes, utilities and extensive home repair needs — drives this housing cost burden.

In response, Poverty Solutions at the University of Michigan analyzed data to pinpoint which Detroit homeowners lack insurance. The analysis looked at specific reasons why people lack insurance, with the goal of developing targeted policy solutions. First, we researched the homeowners insurance market both in Detroit and nationally. Secondly, we worked with Detroit Metro Area Communities Study (DMACS) at U-M to survey a representative group of Detroit homeowners. Finally, we conducted 12 in-depth interviews with Detroit homeowners who lacked homeowners insurance or struggled to keep the insurance they had.

This brief synthesizes our findings and proposes policy recommendations to improve affordability and accessibility. Our research revealed three major categories of challenges facing Detroit homeowners: a lack of trusted information about homeowners insurance, barriers to eligibility for homeowners insurance, and, most prominently, challenges to affording homeowners insurance.

Key Findings

• Detroit’s rate of homeowners without mortgages who are uninsured is nearly twice the national average.
• Cost is the primary factor in Detroit homeowners forgoing insurance. This is driven by a combination of homeowners insurance policies costing about twice as much in Detroit as the statewide average, plus Detroiters having relatively low incomes.
• Eligibility for homeowners insurance presents another challenge. Extensive home repair needs and proximity to blighted or vacant properties leave some Detroit homeowners unable to obtain insurance.
• Some Detroiters lack access to good, trusted information about homeowners insurance options, the purpose of homeowners insurance, and the application process.

Recommendations: Interventions addressing affordability

Increase the availability and visibility of less expensive insurance policies that cover the cash value of the property or only repairs, rather than the more expensive replacement value. While some insurers do offer these more limited policies, they are not widespread and are often underutilized. Encouraging insurers to develop and market cheaper policies that cover only repairs or the cash value of a house could increase the number of homeowners who carry insurance. It is important to note that some advocates like the Consumer Federation of America tend to criticize these types of policies for “shift[ing] the burden of risk back to individual homeowners, even if they have insurance.” Thus, weighing the costs of shifting this burden with the benefit of protecting a homeowners’ largest asset must be considered alongside larger communal benefits of having more insured homeowners in the city.

Launch a program to help homeowners who pay cash for their homes purchase insurance. For homeowners who purchase a property with cash, a large one-time expense can deplete funds, making it difficult to afford insurance. This is especially true for homes bought through the Land Bank or auction, which often require additional renovations. A one-time insurance subsidy could protect these homeowners’ investments by providing crucial coverage during this financially challenging period, helping them get on track to afford insurance independently.

Recommendations: Interventions addressing the information gap

Launch a homeowners insurance education campaign in partnership with the city government and community organizations. An outreach campaign, led by trusted community partners, could explain the purpose and mechanics of homeowners insurance, the protections it offers, and how to apply through educational materials and neighborhoodbased workshops. New Orleans’ NOLA Ready campaign, which focused on informing residents about flooding risks and insurance options, is an excellent program model for its linguistic accessibility, cultural competency, and design around partnerships with neighborhood-based organizations already working on housing issues.

Incorporate homeowners insurance information into existing housing assistance platforms. Many organizations, like the Detroit Housing Network, work directly with on-the-ground hyperlocal community organizations connecting Detroiters with housing opportunities. Helping these organizations integrate homeowners insurance assistance into their existing counseling programs could improve rates of insurance among program participants. Because the insurance process is complex, providing hands-on assistance to compare quotes, understand policy details, and complete applications could make a huge difference in connecting people to homeowners insurance – especially for older homeowners or those with limited internet access.

Recommendations: Interventions addressing eligibility

Pair financial assistance for qualifying repairs with homeowners insurance information and financial assistance for insurance. Programs like the Detroit Home Repair Fund bridge the gap between the low incomes of homeowners and the high cost of essential home repairs, and, in many cases, the repairs made by the Fund – e.g., roof and foundation repairs – are the same repairs needed to make homes eligible for homeowners insurance. Even when housing conditions do not make a house ineligible for insurance, some conditions like an old roof or large tree may make insurance policies prohibitively expensive. Providing information on and financial assistance for insurance once these repairs are complete will help connect homeowners to the insurance market, especially if programs prioritize repairs that will make a home insurable or make the insurance more affordable. Insuring these houses also protects the investment of the home repair funds. The success of this approach could be limited when properties cannot be insured due to the condition of neighboring properties including vacant land. The City and its related entities, like the Detroit Land Bank Authority, should prioritize correcting issues on their properties that may be making surrounding properties uninsurable.

Provide legal assistance to clear titles and pair that assistance with homeowners insurance information and financial assistance. Organizations in Detroit that currently offer programs for estate planning and heirs property challenges could also connect residents with information and financial assistance for homeowners insurance.

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