Surging insurance costs are presenting significant challenges for affordable housing developments reliant on the Low-Income Housing Tax Credit (LIHTC) market, according to syndicators in the sector. The sharp rise in insurance expenses, up by as much as 30% to 100% in some regions, has impacted project underwriting and cash flow for both new developments and stabilized properties, notes Amy Dickerson from Hunt Capital Partners. Julie Sharp of Merchants Capital highlights that these cost increases are particularly burdensome in coastal and fire-prone areas where insurance carriers have reduced coverage options. Syndicators like R4 Capital are actively analyzing regional insurance cost increases to assess potential impacts on property cash flows and debt-service coverage ratios. Despite these challenges, LIHTC pricing remained steady in the second quarter of 2023, with investors maintaining yield targets around 5.5%. Looking ahead, concerns persist regarding the availability and cost of insurance, exacerbated by recent bank failures impacting investor confidence and ongoing pressures from inflation and interest rates.

https://www.housingfinance.com/finance/insurance-costs-weigh-on-lihtc-deals_o