Issue brief: Detroiters' Experiences with Homeowners Insurance
About 38% of Detroit homeowners without mortgages report being uninsured, nearly twice as high as the national average of 19.5%, a new University of Michigan survey shows.
Cost was the most frequently cited reason for Detroit homeowners to forgo homeowners insurance, according to a representative survey conducted by U-M's Detroit Metro Area Communities Study and funded by Rocket Community Fund. The average Detroit homeowner spends $2,327 annually on homeowners insurance, while the average Michigan homeowner spends $1,422 annually.
"Understanding who owns homes, how they purchased their homes, and what access they have to insurance is key to improving and expanding efforts to support homeownership in the city," said Amanda Nothaft, director of data and analysis at U-M's Poverty Solutions, who co-authored an issue brief on the survey findings.
Poverty Solutions has previously studied Detroit's highest-in-the-nation auto insurance rates as a barrier to economic mobility and is now partnering with Rocket Community Fund to explore the role of homeowners insurance in the financial burden of homeownership in Detroit.
The issue brief, "Detroiters' Experiences with Homeowners Insurance," is the first publication in an ongoing research project.
"Homeownership should be a pathway to stability and generational wealth, not a source of financial vulnerability," said Laura Grannemann, executive director of Rocket Community Fund. "This research helps illuminate the invisible costs that too often undermine housing security in Detroit. By working together to address barriers like homeowners insurance affordability, we can support residents in protecting the homes they've worked so hard to obtain."
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 housing-related costs-including insurance, property taxes, utilities and extensive home repair needs-drives this housing cost burden.
"It's not surprising that so many Detroiters lack homeowners insurance when you consider all the household expenses they're juggling. But without homeowners insurance, people risk losing their investment in their property, and many of these investments have been made possible by city, philanthropic and community financial assistance," said Sam Stragand, senior program manager for Poverty Solutions' Detroit Partnership on Economic Mobility, who co-authored the issue brief with Nothaft.
Uninsured homeowners also are disqualified from certain home loans that could improve property values or monthly cash flow. At the community level, low rates of homeowners insurance coverage can contribute to a cycle of disinvestment as houses fall into disrepair and property values sink.
The survey found 45% of Detroit homeowners are currently purchasing their home with a mortgage, which is lower than the national average of 61%. Another 22% of Detroit homeowners initially purchased their house with a mortgage and now own it "free and clear," 13% were gifted or inherited their house, 8% paid cash, and another 3% purchased their house through the land bank or auction, which typically requires cash on hand.
Limited mortgage lending in Detroit may be a factor in the higher-than-average rate of uninsured homeowners, as Detroiters pursue other avenues to purchase houses that do not require homeowners insurance the way mortgage lenders do. Detroiters who purchased their homes through land bank or auction were most likely to lack homeowners insurance (78%), followed by land contract (61%), other means (61%) and purchased from a family or friend (56%).
By age group, 35-to-54-year-old homeowners had the highest uninsured rate (57%), compared to 39% of 18-to-34-year-olds, 29% of 55-to-64-year-olds, and 27% of people 65 and older. Lower incomes and lower educational attainment correlated with higher rates of uninsured homeowners.
Among homeowners who do not have insurance, 41% said it was too expensive and another 3% said they couldn't afford it, which makes cost the most common reason Detroiters said they lack homeowners insurance. Other reasons included: haven't applied for the insurance (21%), had insurance but no longer do (16%) and the insurer denied the application (7%); another 13% of uninsured homeowners gave other reasons for not carrying insurance.
Cost came up again in responses to additional questions about why homeowners did not apply for insurance (46% said it was too expensive or not worth it) and why they let prior insurance policies lapse (59% said it had been too expensive).
Among homeowners who didn't apply for insurance, 32% said it's because they are not familiar with it. For homeowners who previously had insurance but don't anymore, 22% said it's because they paid off their mortgage and no longer wanted insurance, and 14% said the insurer ended the policy.
Property conditions were a factor in insurers ending policies and denying insurance applications, according to the uninsured Detroit homeowners who responded to the survey. A previous DMACS survey found that 38,000 Detroit households-which equates to more than 1 in 7 occupied houses-lived in housing in need of at least one significant repair.
The latest survey shows many homeowners without insurance also worry about paying their property taxes. Eighty-two percent of those who always worry about paying their property taxes said expense plays a role in not having homeowners insurance, which is not as common among those who rarely worry about paying property taxes (60%) and people who never worry about paying property taxes (46%).
