Insurance & Affordability

Executive Summary

New Orleans faces an existential threat from converging economic pressures that are making the city increasingly unaffordable for residents, businesses, and civic institutions. At the center of this crisis is a collapsed private insurance market, with skyrocketing premiums driving housing costs to unsustainable levels. This report examines how New Orleans arrived at this critical juncture, assesses the current data illustrating the scale of the problem, analyzes policy failures at multiple levels of government, highlights organizations working toward solutions, and presents case studies of successful approaches from other high-risk regions.

The insurance and affordability crisis threatens to fundamentally alter New Orleans' character by forcing out long-term residents, community institutions, and small businesses that form the backbone of the city's unique culture. Without immediate, coordinated action at local, state, and federal levels, New Orleans risks becoming a hollowed-out tourist destination rather than a vibrant, living community.

How We Got Here: Historical Context

Post-Katrina Reconstruction and Recovery (2005-2015)

Following Hurricane Katrina in 2005, New Orleans began a lengthy recovery process that reshaped the city's physical landscape and economic structures. Key developments included:

• Insurance Market Transformation: Major insurance carriers dramatically reduced coverage in coastal Louisiana or exited the market entirely, leaving residents with fewer options and higher premiums.
• Property Value Increases: As some neighborhoods rebuilt, property values increased significantly, particularly in areas less affected by flooding. This led to increased assessments and property tax burdens.
• Housing Market Shifts: The city lost approximately 50% of its affordable housing stock through storm damage and subsequent redevelopment decisions. Federal recovery programs often prioritized homeownership over affordable rental housing.
• Short-Term Rental Emergence: The rise of platforms like Airbnb led to thousands of residential units converting to tourism use, further constraining housing supply.
• Infrastructure Fees: The Sewerage & Water Board implemented substantial rate increases to fund critical infrastructure repairs, adding to household cost burdens.

Climate Change and Insurance Industry Response (2016-2020)

As climate change accelerated, insurers reassessed risk models and pricing structures:

• Catastrophe Modeling Updates: Insurance companies implemented new risk models that projected higher probabilities of severe weather events in coastal areas.
• Reinsurance Cost Increases: Global reinsurance companies (which insure the insurers) raised their rates substantially following worldwide natural disasters, costs which were passed to consumers.
• Louisiana Citizens Expansion: As private insurers retreated, the state-run insurer of last resort (Louisiana Citizens Property Insurance Corporation) expanded dramatically, but with rates mandated to be higher than private market alternatives.
• Housing Cost Escalation: New Orleans experienced a 53% increase in median home prices between 2010-2020, significantly outpacing income growth.

Market Collapse and Current Crisis (2021-Present)

Recent years have seen the situation deteriorate rapidly:

• Insurance Company Failures: Between 2021-2023, at least 11 Louisiana insurance companies failed or withdrew from the market following Hurricane Ida and other storms.
• COVID-19 Economic Impacts: The pandemic devastated New Orleans' tourism-dependent economy, reducing incomes while fixed costs continued to rise.
• Inflation and Interest Rate Increases: General inflation coupled with higher interest rates further squeezed household budgets and increased housing costs.
• Assessment Increases: Recent property reassessments have significantly increased tax burdens, particularly in gentrifying neighborhoods.
• Louisiana Citizens Rate Hikes: The state-run insurer implemented multiple double-digit rate increases as it took on more policies amid market failure.

Current Data: The Scale of the Problem

Insurance Premium Increases

The insurance crisis is reflected in dramatic premium increases across the region:

• Residential Insurance: Average homeowners insurance premiums in Orleans Parish increased 134% between 2019-2024, from an average of $2,211 to $5,172 annually.
• Louisiana Citizens Growth: The state's insurer of last resort has grown from approximately 35,000 policies in 2021 to over 125,000 policies in 2024, with many New Orleans properties unable to find private coverage at any price.
• Commercial Property Insurance: Small businesses report premium increases of 150-400% since 2020, with many facing non-renewal notices.
• Flood Insurance Changes: FEMA's Risk Rating 2.0, implemented in 2021, has resulted in average National Flood Insurance Program premium increases of 45% in New Orleans, with some properties seeing increases exceeding 500%.
• Insurance-to-Value Ratio Changes: Insurers now commonly require coverage at 100% of replacement cost (versus previous 80% standards), increasing premium costs.

Housing Affordability Metrics

The insurance crisis exists within a broader affordability emergency:

• Cost-Burdened Households: 58% of New Orleans renters and 33% of homeowners now spend more than 30% of their income on housing costs.
• Property Tax Increases: Average property tax bills in Orleans Parish increased 32% between 2019-2024 due to rising assessments.
• Utility Costs: Sewerage & Water Board rates increased 92% cumulatively since 2012, with recent monthly bills averaging $115 for typical households.
• Rental Market: Average rents increased 26% between 2019-2024, while available rental inventory decreased by 14%.
• Housing Production: New housing development has slowed significantly due to increased construction, insurance, and financing costs, exacerbating supply constraints.

Economic Impact

The affordability crisis is having measurable economic effects:

• Population Decline: New Orleans lost approximately 7,000 residents (1.8% of population) in 2023 alone, with surveys indicating housing costs as the primary driver.
• Business Closures: Over 400 small businesses closed in Orleans Parish during 2022-2023, citing insurance costs as a major factor.
• Institutional Strain: Churches, cultural organizations, and community nonprofits report substantial financial stress from insurance increases, with at least 23 historic churches seeking to sell properties since 2021.
• Mortgage Denials: Mortgage applications are increasingly rejected due to insurance costs pushing debt-to-income ratios beyond qualifying limits.
• Vacancy Increases: Commercial vacancy rates along several neighborhood corridors have increased by 15-30% since 2020.

Disproportionate Impacts

The crisis does not affect all New Orleanians equally:

• Geographic Disparities: Lower-elevation neighborhoods face the highest insurance increases, often coinciding with historically Black communities.
• Income Effects: Lower-income households spend a significantly higher percentage of income on insurance increases.
• Cultural Impact: Artists, musicians, and cultural bearers report being particularly strained by housing cost increases, threatening the city's cultural fabric.
• Age Factors: Fixed-income seniors face particular challenges adapting to rapid cost increases.
• Racial Homeownership Gap: The significant Black-white homeownership gap (approximately 25 percentage points) means that property value increases benefit communities unequally.

Policy Failures: Addressing Government Shortcomings

State-Level Failures

Louisiana state government has failed to adequately address the insurance crisis:

• Regulatory Weakness: The Louisiana Department of Insurance allowed financially unstable insurers to operate with inadequate reserves, resulting in multiple company failures.
• Louisiana Citizens Limitations: State law requires Citizens to maintain non-competitive rates, preventing it from functioning as a truly effective insurer of last resort.
• Incentive Program Inadequacy: The state's Insure Louisiana Incentive Program provided only $45 million to attract insurers back to the state—insufficient given the scale of the problem.
• Building Code Enforcement: Despite adopting strong building codes on paper, implementation and enforcement remain inconsistent, preventing insurance premium benefits.
• Climate Change Denial: State leadership has resisted acknowledging climate change, hampering adaptation planning that could reduce insurance risks.

Federal Policy Gaps

Federal policies have contributed to or failed to mitigate the crisis:

• National Flood Insurance Program (NFIP) Reform: Risk Rating 2.0, while actuarially sound, was implemented without adequate affordability measures.
• Disaster Recovery Approaches: Federal recovery programs emphasize rebuilding in place rather than strategic adaptation to changing climate realities.
• Tax Policy: The $10,000 cap on state and local tax deductions (SALT) implemented in 2017 exacerbated the impact of rising property taxes.
• Affordable Housing Funding: Federal affordable housing programs remain chronically underfunded relative to need.
• Federal Emergency Management Agency (FEMA) Hazard Mitigation: Mitigation grant programs are cumbersome and insufficient to address the scale of risk reduction needed.

Municipal Challenges

New Orleans city government faces substantial constraints:

• Limited Jurisdiction: Insurance regulation occurs at the state level, giving the city limited direct authority.
• Revenue Constraints: Municipal revenue limitations restrict the city's ability to provide substantial subsidies or tax relief.
• Assessment Practices: The Orleans Parish Assessor's Office has implemented rapid valuation increases without corresponding relief mechanisms.
• Planning Fragmentation: Multiple agencies handle aspects of flood risk and housing with insufficient coordination.
• Enforcement Capacity: Limited staffing for code enforcement hinders implementation of standards that could improve insurability.

Organizations Working on Solutions

Policy Advocacy

Several organizations are working to address the insurance and affordability crisis:

• Greater New Orleans Housing Alliance (GNOHA): Advocates for comprehensive housing policy reforms and increased affordable housing production.
• Insurance Advocacy Network of Louisiana: Recently formed coalition specifically focused on insurance market reform.
• Foundation for Louisiana: Works on climate adaptation policy and equitable development approaches.
• Greater New Orleans, Inc. (GNO, Inc.): Regional economic development organization that has made insurance affordability a priority issue.
• Louisiana Fair Insurance Rates (LFIR): Grassroots organization advocating for insurance reform at the state level.

Direct Assistance Programs

Organizations providing immediate relief to affected residents include:

• New Orleans Renters Rights Assembly: Assists renters facing displacement due to rising costs.
• Neighborhood Development Foundation: Provides homebuyer assistance and counseling on insurance issues.
• Louisiana Homeowner Assistance Fund: Administers federal funding to help homeowners with costs including insurance.
• Climate Ready Home Fund: Pilot program providing grants for home modifications that can reduce insurance costs.
• Lower 9 Resilient Construction Program: Demonstrates affordable building techniques that improve insurability.

Research and Technical Assistance

Organizations developing data-driven solutions include:

• The Data Center: Provides research on housing affordability and insurance impacts in the New Orleans region.
• Tulane University's ByWater Institute: Conducts research on climate adaptation and insurance markets.
• Urban Conservancy: Implements green infrastructure solutions that can reduce flood risk and potentially insurance costs.
• Louisiana State University Real Estate Research Institute: Studies property market impacts of insurance changes.
• Insurance Institute for Business & Home Safety (IBHS): Provides technical guidance on risk reduction measures.

Case Studies: Successful Approaches from Other Regions

Florida's My Safe Florida Home Program

Florida has implemented several programs to address similar insurance challenges:

• Program Structure: Provides matching grants up to $10,000 for home hardening improvements.
• Insurance Connection: Directly links improvements to insurance premium discounts through standardized mitigation verification forms.
• Scale: Recently recapitalized with $225 million, funding approximately 25,000 home upgrades.
• Results: Participants report average insurance premium reductions of 25-30%.
• Applicability to New Orleans: Similar program could be implemented with focus on flood and wind resilience improvements.

California FAIR Plan Reform

California's approach to its insurance crisis offers lessons:

• Expanded Coverage: Recently reformed to offer comprehensive homeowners policies rather than just fire insurance.
• Mitigation Incentives: Implemented mandatory premium discounts for properties with verified wildfire mitigation measures.
• Rate Regulation: Strengthened regulatory authority over rate increases while ensuring market viability.
• Public-Private Partnership: Created structured relationship between FAIR Plan and private market to transition properties back to private coverage.
• Applicability to New Orleans: Louisiana Citizens could be reformed along similar lines to better serve as a functional market stabilizer.

South Carolina's Coastal Property Insurance Reforms

South Carolina implemented multi-faceted reforms after its coastal insurance crisis:

• South Carolina Wind and Hail Association Reforms: Improved governance and financial stability of their residual market entity.
• Tax Credits: Implemented state tax credits for insurance premium costs and mitigation improvements.
• Building Code Enhancement: Focused on consistent enforcement of building codes with insurance premium incentives.
• Catastrophe Savings Accounts: Tax-advantaged savings accounts for insurance deductibles and qualified mitigation expenses.
• Applicability to New Orleans: Tax incentives and catastrophe savings accounts could be adapted to Louisiana's context.

International Model: Flood Re (United Kingdom)

The UK's innovative flood insurance program offers valuable lessons:

• Program Structure: Reinsurance facility funded by levy on all insurance policies that makes flood insurance affordable in high-risk areas.
• Transition Plan: Includes built-in 25-year transition to risk-based pricing while funding mitigation measures.
• Property Level Focus: Directs resources to property-level flood protection measures.
• Market Preservation: Maintains private market involvement while providing public backstop.
• Applicability to New Orleans: Could serve as model for state or federal reinsurance program specifically addressing Louisiana's coastal risks.

Recommendations: A Comprehensive Approach

Addressing New Orleans' insurance and affordability crisis requires action at multiple levels:

Immediate Actions (0-12 Months)

• Louisiana Citizens Reform: Revise state law to allow Louisiana Citizens to offer more competitive rates while maintaining financial stability.
• Tax Relief: Implement circuit-breaker property tax relief for cost-burdened households.
• Rapid Mitigation Program: Create emergency funding for home hardening measures that can quickly reduce insurance risks.
• Insurance Consumer Advocacy Office: Establish dedicated office to help property owners navigate insurance challenges and appeals.
• Short-Term Rental Regulation Enforcement: Strengthen enforcement of existing regulations to return units to long-term housing stock.

Medium-Term Strategies (1-3 Years)

• State Insurance Market Reforms: Implement comprehensive reforms including stronger capitalization requirements, improved regulatory oversight, and reinsurance backstops.
• Mitigation Tax Credits: Create state tax credits for qualified home resilience improvements.
• Affordability Assessment Requirement: Require affordability impact analysis for all policy decisions affecting housing costs.
• Community Development Finance Innovations: Develop specialized loan products for resilience improvements with insurance premium benefits.
• Regional Catastrophe Pool: Create multi-state catastrophe insurance pool to spread risk more widely.

Long-Term Solutions (3-5+ Years)

• National Climate Risk Insurance Program: Advocate for federal program addressing climate risks beyond flooding, similar to the National Flood Insurance Program.
• Strategic Managed Retreat Program: Develop voluntary program for transitioning highest-risk properties to other uses.
• Infrastructure Investment: Implement comprehensive stormwater management and flood protection systems to reduce risk across entire neighborhoods.
• Insurance Regulation Modernization: Update regulatory frameworks to address climate risk while maintaining affordability.
• Diversified Economy: Reduce economic dependence on tourism through strategic sector development, improving financial resilience.

Conclusion: The Path Forward

New Orleans stands at a critical juncture. The current trajectory of insurance costs and overall affordability threatens the city's fundamental character and sustainability. Without decisive action, New Orleans risks becoming a city that preserves its historic buildings but loses the living culture and communities that give those structures meaning.

Yet there are clear pathways forward. Other regions facing similar challenges have implemented innovative approaches that balance risk management with affordability concerns. New Orleans has demonstrated remarkable resilience in the face of multiple disasters, and this crisis—while different in nature—can likewise be addressed through coordinated action.

What distinguishes this crisis, however, is its gradual nature. Unlike a hurricane that demands immediate response, the affordability emergency erodes the city's social fabric incrementally, as individuals, families, and businesses make private decisions to leave when costs become unsustainable. This creates the risk that the city will recognize the full scale of the problem only after irreversible damage to its communities has occurred.

The necessary response requires unprecedented coordination between state and local government, the private sector, nonprofit organizations, and community stakeholders. It demands both immediate relief measures and long-term structural reforms. Most importantly, it requires acknowledging that insurance and housing affordability are not merely economic issues but existential questions about what kind of city New Orleans will be in its fourth century.

This report was developed through data analysis, stakeholder interviews, and research on comparable regions facing similar challenges. It represents current conditions as of April 2025 and will require regular updates as the situation evolves.

On this page

• Insurance & Affordability
• Executive Summary
• How We Got Here: Historical Context
• Post-Katrina Reconstruction and Recovery (2005-2015)
• Climate Change and Insurance Industry Response (2016-2020)
• Market Collapse and Current Crisis (2021-Present)
• Current Data: The Scale of the Problem
• Insurance Premium Increases
• Housing Affordability Metrics
• Economic Impact
• Disproportionate Impacts
• Policy Failures: Addressing Government Shortcomings
• State-Level Failures
• Federal Policy Gaps
• Municipal Challenges
• Organizations Working on Solutions
• Policy Advocacy
• Direct Assistance Programs
• Research and Technical Assistance
• Case Studies: Successful Approaches from Other Regions
• Florida's My Safe Florida Home Program
• California FAIR Plan Reform
• South Carolina's Coastal Property Insurance Reforms
• International Model: Flood Re (United Kingdom)
• Recommendations: A Comprehensive Approach
• Immediate Actions (0-12 Months)
• Medium-Term Strategies (1-3 Years)
• Long-Term Solutions (3-5+ Years)
• Conclusion: The Path Forward