Approximately 38% of Detroit homeowners lacking mortgages indicate they are uninsured, nearly double the national average of 19.5%, according to a recent University of Michigan study.

Price was the most commonly mentioned motive for Detroit homeowners to avoid homeowners insurance, as revealed by a representative survey completed by U-M’s Detroit Metro Area Communities Study, backed by Rocket Community Fund. The median expenditure for homeowners insurance in Detroit is $2,327 per year, compared to an average of $1,422 for homeowners across Michigan.

“Comprehending who owns homes, the methods of their acquisition, and the level of insurance access is vital for enhancing and broadening initiatives to foster homeownership in the city,” stated Amanda Nothaft, director of data and analysis at U-M’s Poverty Solutions, co-authoring an insight brief on the survey results.

Poverty Solutions has previously investigated Detroit’s exceptionally high auto insurance rates as a hindrance to economic advancement and is now collaborating with Rocket Community Fund to examine the influence of homeowners insurance on the financial challenges of homeownership in Detroit.

The insight brief, “Experiences of Detroit Residents with Homeowners Insurance,” marks the initial publication in an ongoing research initiative.

“Homeownership should serve as a route to stability and generational wealth, not a cause for financial strain,” remarked Laura Grannemann, executive director of Rocket Community Fund. “This research sheds light on the often-overlooked costs that frequently jeopardize housing stability in Detroit. By collectively addressing obstacles like the affordability of homeowners insurance, we can assist residents in safeguarding the homes they have diligently acquired.”

A quarter of Detroit homeowners allocate over 30% of their household income on housing-related expenses, a threshold many consider excessive for affordability. The interplay of relatively low incomes among city inhabitants and comparatively high housing costs—including insurance premiums, property taxes, utilities, and significant home repair requirements—contributes to this housing expense burden.

“It’s not surprising that so many Detroiters lack homeowners insurance when considering the numerous household expenses they are managing. However, without homeowners insurance, individuals risk losing their property investment, many of which have been facilitated by city, philanthropic, and community financial assistance,” stated Sam Stragand, senior program manager for Poverty Solutions’ Detroit Partnership on Economic Mobility, who co-authored the insight brief with Nothaft.

Homeowners without insurance are also ineligible for specific home loans which could enhance property values or increase monthly cash flow. On a community level, low rates of homeowners insurance can perpetuate a cycle of disinvestment as homes deteriorate and property values decline.

The survey indicated that 45% of Detroit homeowners are currently financing their home with a mortgage, lower than the national average of 61%. An additional 22% of these homeowners initially acquired their property with a mortgage but now possess it “free and clear,” with 13% receiving their house as a gift or inheritance, 8% using cash, and 3% acquiring their home through the land bank or auction, usually requiring cash on hand.

The limited availability of mortgage funding in Detroit may contribute to the elevated rate of uninsured homeowners, as residents pursue alternative methods to purchase homes that do not impose homeowners insurance requirements as mortgage lenders do. Detroiter’s who bought homes through land bank or auction exhibited the highest likelihood of being uninsured (78%), followed by land contract (61%), other means (61%), and purchases made from family or friends (56%).

By age group, homeowners aged 35 to 54 have the highest uninsured rate (57%), contrasting with 39% of individuals aged 18 to 34, 29% for those aged 55 to 64, and 27% of those aged 65 and above. Lower income and lower educational attainment linked to higher rates of uninsured homeowners.

Among homeowners lacking insurance, 41% cited cost as too prohibitive, while another 3% mentioned it was unaffordable, indicating that cost is the principal reason given by Detroiters for not having homeowners insurance. Additional motives included: not having applied for the insurance (21%), previously having insurance but now lacking it (16%), and insurer denial of applications (7%); another 13% of uninsured homeowners provided various reasons for not carrying insurance.

Cost was reiterated in responses to follow-up inquiries regarding why homeowners did not apply for insurance (46% felt it was too expensive or not worthwhile) and why they allowed prior insurance policies to lapse (59% stated it had been too costly).

Regarding homeowners who did not apply for insurance, 32% claimed it was due to unfamiliarity with it. For those who previously had insurance but no longer do, 22% mentioned they paid off their mortgage and no longer wished for insurance, with 14% stating the insurer terminated the policy.

Property conditions influenced the termination of policies and denial of insurance applications, according to uninsured Detroit homeowners who took part in the survey. A previous DMACS survey revealed that 38,000 households in Detroit—representing over 1 in 7 occupied properties—were living in homes requiring at least one major repair.

The most recent survey showcases that many homeowners lacking insurance also express concerns regarding their ability to pay property taxes. Eighty-two percent of those who are consistently worried about paying their property taxes cited financial strain as a factor in not having homeowners insurance, which contrasts with those who occasionally worry (60%) and those who never worry about property taxes (46%).

To gain a deeper comprehension of the intricacies surrounding Detroit homeowners’ decisions and their experiences in obtaining homeowners insurance, U-M researchers aim to conduct interviews with uninsured homeowners. These interviews will remain anonymous, and participants will receive compensation for their time. Key insights will be disseminated in an upcoming report. Reach out to Sam Stragand at [email protected] for further information.