Chicago — Stuart Handler, CEO of TLC Management, oversees a portfolio of 47 properties comprising 6,000 apartments across the Chicago area. For 2024, Handler faced a staggering 150% increase in insurance premiums, while deductibles soared from $100,000 to $1 million. Despite a decade-long record of minimal claims, Handler describes the situation as a crisis, emphasizing that insurance costs, once a negligible expense, now significantly impact affordability and contribute to rising rents.
Handler’s firm has seen rents on some units spike by as much as 20%, while others have remained stable or even decreased by 10%. His company employs a rent optimization tool from Yardi Systems, which is currently embroiled in a class-action lawsuit alleging collusion to fix rent prices.
Though Handler has been assured that his insurance costs will not increase further in 2025, he joins a growing number of housing providers lamenting the surge in insurance premiums and its impact on rent levels.
Data on insurance rate hikes typically focuses on homeowners’ policies rather than those for multifamily buildings. However, experts report that rental property insurance costs have surged by 10% to 20% recently, with some property owners experiencing increases between 11% and 150% from 2023 to 2024.
Insurance groups attribute these hikes to rising expenses from climate-change-induced natural disasters, increased construction costs, and heightened reinsurance costs. Unlike many states, Illinois’ Department of Insurance cannot approve or reject rate changes, leading to calls for greater regulation of the insurance market.
Eric Goldberg of the American Property Casualty Insurance Association argues that increased regulation could be detrimental. “Approval of rates by regulators impedes the insurance industry’s ability to set rates that reflect true risk, especially in an inflationary environment,” Goldberg said.
The rising rates are driven by heightened climate risks, construction costs, and liability claims. While Illinois lacks the natural disasters seen in other states, the industry is still grappling with increased costs across the board. Corey Oliver, CEO of Strength in Management, which operates 500 affordable housing units, reports that some owners are seeing their insurance rates double, making it challenging to maintain profitability.
Oliver noted that insurance costs for one of his 12-unit buildings in Englewood jumped from approximately $7,000 to nearly $13,000 between 2023 and 2024. To offset these rising costs, some property owners are increasing rents by around $100 per month, although this does not always fully cover the increased expenses.
Jonathan F.P. Rose, president of his namesake development company, experienced a more modest insurance rate increase of about 11% for his national portfolio. He attributes this to his focus on green building practices, which he believes are beneficial both environmentally and in terms of insurance costs.
Major insurers like Allstate and State Farm have declined to provide specific details on rate hikes. Nationwide, another major provider, acknowledged the impact of inflation and market disruptions on its rates but did not specify exact increases.
Alexandra Glickman of Gallagher reports a national average increase of 15% to 20% in insurance rates for apartment building owners due to surging liability and property-related costs. She notes a shortage of insurance coverage as companies withdraw from high-risk markets.
Miguel Chacon, a Pilsen housing provider, has seen his insurance rates double, from $2,177 in 2023 to $4,575 in 2024. To cope, he has increased rents by about 4% to 5%.
Local housing providers are calling for increased oversight of Illinois’ insurance industry. Doug Heller of the Consumer Federation of America points out that Illinois lacks regulatory frameworks seen in other states, leading to an unregulated market with fewer consumer protections.
The Illinois Department of Insurance, which cannot set insurance rates, has indicated a willingness to work with consumer advocates and legislators to enhance regulatory authority. However, local legislators have not yet commented on potential reforms.
State Senator Dave Syverson suggests that increased regulation could drive insurers out of the state, exacerbating the issue. Goldberg echoes this concern, arguing that regulatory approval could discourage investment in Illinois.
As insurance costs continue to climb, some local owners are being forced to sell their properties. Oliver warns that rising expenses are pushing local and minority property owners out of their own communities.
