How Louisiana’s insurance crisis affects rental markets

NEW ORLEANS (WVUE) – While homeowners have been at the forefront of Louisiana’s ongoing insurance crisis, landlords might be facing an even tougher battle.

As property insurance rates skyrocket across the state, landlords are increasingly feeling the squeeze, which in turn is pushing up rent prices for tenants.

“The insurance crisis hit landlords first,” said Andreanecia Morris, executive director of HousingNOLA, a New Orleans-based affordable housing advocacy group. “People got forced onto (Louisiana) Citizens with investment property first. That started about four years ago.”

Drew Remson, president of America’s Mortgage Resource and a landlord with 20 rental properties, said the insurance industry’s increases to cover losses have been harder on the investment side than the residential side. He says the sky-high cost of property insurance is upending virtually every facet of housing in New Orleans.

“Both the rental market and the sales market are struggling right now because of insurance,” said Remson.

There is no question homeowners are paying outrageous prices for insurance premiums. Some property owners have seen their insurance premiums double or even triple. Remson says landlords often see even higher costs.

“Frankly, your risk is higher with rental property. An owner/occupant is going to take really good care of their property because it’s their property. If something needs to be fixed that’s going to cause long-term damage, they’re typically going to do it immediately. When you’re talking about rental property, you got a tenant in a property and you got a small leak in a window, water is getting in, they might not even tell the landlord,” Remson said.

Renters may think they’re protected from higher property taxes and property insurance, but landlords say that’s not the case. If a landlord’s cost of maintaining their property goes up, chances are they’ll raise the rent to cover that cost. Morris says that has been happening for some time.

“Triple-digit increases almost annually for the last four years across the board. So, we’ve been seeing a hundred dollars more a month across the board, so about $1,200 more a year,” Morris said.

INSURANCE CRISIS

Morris is a tenant herself. She says her rent recently went up $150/month. An increase she says she can absorb.

“It didn’t make me worry for myself, it made me worry for other people who aren’t as fortunate as I am to have a good landlord, to have someone who I knew I could trust,” said Morris.

Despite the stereotype of the uncaring or calloused landlord, Morris and Remson said most landlords in New Orleans are atypical. Morris said many landlords have been upfront when they’ve decided to raise rents. Remson said he’s mindful of his tenants’ financial situations.

“Landlords I know who have done that said ‘I have no choice, this is what’s happening, I need you to understand what’s going on.’ We do have a lot of good landlords, a lot of people who understand this is a business relationship. So, you do need to explain to your customers why you are hiking up your prices,” Morris said.

“This market is made up of a lot of small landlords, mom-and-pops who own two or three properties, maybe somebody like myself who owns 15-20 properties,” Remson said. “It’s not the super-landlords with large buildings. So, from a standpoint of being able to survive this, the mom and pops simply don’t have any choice but to increase rents to be able to cover their own mortgage and not lose money on the property. So, typically my formula is I never raise rents on a tenant as long as they’re with me. So, I wait until the tenant leaves and move on to another property and then I raise rents to whatever the market will bear. The problem is, no one can leave to go anywhere else because it’s expensive.”

According to Apartments.com, the average rent in New Orleans is $1,282 per month as of August of this year. That’s a 3.1% increase from last year according to the website. It’s unclear how much of that increase can be attributed to the rising cost of property insurance.