• Trump made cuts to the Department of Education's research arm, which fuels the Nation's Report Card.
• Research and data collection at the department are critical to tracking students' math and reading progress.
• One department employee told BI the cuts amount to a "dismembering" of the agency.

The Nation's Report Card is on notice.

Employees said the Department of Education's ability to conduct its periodic measure of US students' progress in math and reading could be severely hampered after the White House DOGE office announced earlier this month that it ended more than $900 million in research contracts.

The Trump administration says the cuts will promote efficiency. Department employees BI spoke to said they'll halt crucial funding for the neediest schools and cripple its ability to measure student achievement.

The cuts impact a vast array of research that allows the agency to dole out billions in grants and other programs that education policy experts said are crucial for the most underresourced schools and students. This includes contracts that analyze data to identify rural school districts eligible for federal assistance, and those that study early childhood and school safety issues.

This also includes the Education Department's National Assessment of Education Progress (NAEP) tests, more commonly known as the Nation's Report Card, which tracks kids' progress in subjects including reading and math. NAEP has assessed student academic achievement for the last three decades. Last year, it found that eighth-grade reading levels hit a 30-year low.

"I have grave concerns about our future, even if the lights were able to turn on tomorrow, I don't know — what's already been done is just very detrimental," one employee of the Institute of Education Sciences — the Department's research and statistics arm facing severe spending cuts — told BI.

Three employees BI spoke to requested anonymity because they fear retaliation from the Education Department or DOGE for speaking with the media.

Madi Biedermann, deputy assistant secretary for communications at the Department of Education, told BI, "The agency continues to support NAEP and transparency around measures of student outcomes," Biedermann said.

Biedermann said the Department canceled the long-term trend assessments for 17-year-olds, but other tests, including those for fourth and eighth graders, are "continuing as normal."

The Education Department posted on X on February 12, "We want to ensure that every dollar being spent is directed toward improving education for kids — not conferences and reports on reports."

Still, some agency employees and experts said contracts — including those that manage EdFacts and the Common Core of Data — to collect the data necessary for those studies have been canceled, which would make conducting them much more difficult.

The IES employee insisted that NAEP could not continue without certain canceled DOGE contracts for data collection. In a February 21 letter to the Education Department, a dozen Democratic members of Congress condemned the contract cancellations and said the administration's claim that NAEP and other key programs would not be impacted "simply is not true."

"This is the absolute worst time to divest from education research," another Department employee told Business Insider, referring to the recent NAEP scores. "To just cut all of our datasets for what's leading to that, what indicators, what states are falling behind — it's so bad for being able to make any type of data-driven decisions for how to help get kids back on track."

The Institute of Education Sciences is a nonpartisan data collection and research arm that measures educational outcomes to help the department allocate funds to students with disabilities, low-income schools, and rural schools.

With the cuts underway, the IES employee said the Department's work is at a standstill.

"That essentially is like cutting off our arms, our legs, and it's essentially totally dismembering us, and it's keeping us from being able to actually do our work," she said.

Jeopardizing billions in funding

IES's research and data support a wide range of Department functions, including billions of dollars in funding for high-poverty schools and students with disabilities. Every state receives Title I funding to help low-income students, but the amounts vary on school needs.

"You can't do anything if you don't actually know where are the schools, what are the schools, are they open or closed? And how many kiddos go to them? You can't do really anything if you don't have that very first building block," the IES employee said. "Without that, everything else falls."

One of these grants — the Rural Education Achievement Program — helps rural schools that need more support than they get from their state and local governments. But without the data IES collects on students and schools across the country, the federal government won't be able to determine school eligibility and make funding allocations, said one employee of the Department's Office of Elementary and Secondary Education (OESE).

"All of sudden, this money is going to be gone because we can't make awards because they canceled this IES data contract," the employee said.

Tracking the progress of America's students in math and reading

Without studies like NAEP, Department employees and education experts said states and local governments will lack crucial information on best practices for K-12 learning and methods to improve teacher training and quality.

Weadé James, senior director for K-12 policy at the Center for American Progress, a left-leaning think tank, pointed to kids' literacy as one example, which has sunk to its lowest levels in decades.

"We know that research advances our knowledge of what evidence and research-based practices should look like in teaching and learning, and with cuts at IES, we're going to have limited knowledge around the science of reading and how to improve teaching students' literacy skills," James said.

James referred to the "Mississippi Miracle" as an example of NAEP's significance; between 2013 and 2019, NAEP scores showed that literacy in Mississippi continued to rise after it adopted better evidence-based methods for teaching reading, even in areas with high child poverty rates that usually align with lower literacy levels.

Rachel Dinkes, the president and CEO of Knowledge Alliance — a nonprofit focused on improving K-12 public education through research-based practices — told BI that some of the project cuts dealt with improving math achievement in Appalachia and improving teacher recruitment in rural areas in Alaska.

"The cancellation of this work will not only derail the current work, but leave communities, parents, teachers, looking for evidence-based information that they may not be able to find," Dinkes said.

Eliminating the Department of Education

The research cuts mark a key step toward Trump's overall aim to dismantle the Department of Education. He has not yet signed an executive order to officially begin that process, but he previously said that he wants the agency to be eliminated "immediately" and for Education Secretary Linda McMahon to put herself out of a job.

While McMahon and some GOP lawmakers have suggested shifting the Department's responsibilities to other federal agencies, like the Treasury Department, but that could be tricky now that so many contracts have been canceled this month.

"The contracts are gone. You can't just renew them," the OESE employee said. "Even if we're outsourced to other agencies to do the work, that's essentially starting from scratch."

And James said that there's no proof those efforts would actually improve the US education system.

"There's nothing that shows us that this is actually a solution that is that's going to lead to better results than we do have now," James said.

Trump has accused the Department of Education of promoting extreme ideology in the name of diversity, equity, and inclusion, part of a broader anti-DEI campaign by the Trump administration. Earlier this month, the Department ordered schools across the country to end "racial preferences" in admissions, hiring, and other areas or risk losing federal funds. The agency legally cannot shape curriculum in classrooms.

NBC News reported earlier this month that dozens of Education Department employees who attended a diversity training course during Trump's first term in office were put on paid leave. On February 20, the Department said that it had so far canceled $350 million in "woke spending" at the Department.

"They are basically Control F-ing for their buzzword," the OESE employee said. But "the entire purpose of the Department of Education is equity, not in the DEI sense, but in like, we make up the gaps in local and federal funding and regulations."

Dinkes said that the future of the US education system is too important to be making cuts across the board without acknowledging the longer-term implications.

"There's even an efficiency argument to be made of having the federal government provide these sources of support at the national level of what works for whom and where," Dinkes said. "Who's to say when we cut it that it's ever going to come back. So let's continue to work on making this better, but let's not cut short what we currently have."

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• Trump's 25% steel tariffs could drive apartment rents and condo prices even higher.
• Higher-rise buildings that require more steel are expected to see inflated construction costs.
• Developers may delay projects, hoping for stable prices, amid a severe housing shortage.

The US is facing a looming apartment crunch, and President Donald Trump's newly unveiled 25% steel and aluminum tariffs will likely inflate already elevated construction costs and raise rents.

Mid- and high-rise apartment and condo construction require more steel in their framing and foundation and will likely be more impacted by the tariffs than single-family homes and other low-density construction, which tend to be wood-framed, said Omar Rihani, executive vice president at Project Management Advisors, a real-estate development consulting firm.

"As you go up above five stories, and then you transition from wood construction to concrete construction, now you're going to have a lot more steel per square foot," he said.

Apartment construction boomed a couple of years ago amid surging demand and low interest rates. Landlords handed out free parking, signing deals, and other perks. But that's coming to an end. Multifamily construction starts already dropped to their lowest level in more than a decade last year.

Stubbornly high interest rates, a glut of higher-end apartments in many markets, and higher labor and other building costs have made building new units far less attractive to developers — and restrictive trade policies on building materials could worsen the trend. This means rents have nowhere to go but up.

Pricier steel could slow construction and raise rents

It's unclear exactly how much the tariffs, set to go into effect on all countries on March 12, will increase the price of steel in the US. Rihani predicts costs could increase in the low single digits for high-rise construction. Developers will ultimately pass higher costs on to renters and condo buyers to the extent they can, Rihani said.

In some cases, developers may choose to delay construction and wait to see if domestic steel production rises and prices stabilize. However, delaying a project is very costly, as property taxes, insurance, and interest still need to be paid. Some projects could be scrapped altogether or not pursued in the first place.

David Steinbach, global chief investment officer at the real-estate investment manager Hines, is more optimistic that strong demand for homes will keep development moving.

"While tariffs may slow some projects, we believe demand drivers are still strong enough to drive development and acquisitions," Steinbach said in a statement to Business Insider.

We've been here before. In 2018, Trump imposed 25% tariffs on steel, though he later exempted Canada and Mexico from those taxes. Despite the exemptions, the tariffs raised the commodity price of steel and increased construction costs as a result. The levies were later removed by the Biden administration. Some in the industry believe the steel prices will be tempered by the temporary increase in domestic production that occurred in the US after Trump's 2018 tariffs.

"We view steel as a medium-level risk construction material given tariffs from the President's first term had already provided significant demand for steel back to the US over the past decade," Steinbach said.

However, any increase in construction costs could hamper the effort to address the country's housing shortage and bring down costs for homebuyers and renters.

"We need to continue to build housing, and anything that holds back the creation of housing, in the long run, is not good for our nation," said Jay Lybik, director of multifamily analytics at real estate analytics firm CoStar.

A broader tariff environment

Earlier this month, Trump imposed 10% tariffs on China, which are already raising construction costs, some homebuilders report.

Meanwhile, tariffs on other key construction materials are also possible. Trump has threatened to impose 25% tariffs on Canada and Mexico, which would raise the prices of widely used building materials like Canadian lumber and Mexican gypsum used for drywall. There are also the expected downstream impacts of tariffs increasing broader inflation and keeping interest rates higher for longer, which will further raise costs for homebuilders and consumers.

The homebuilding industry urged Trump to reverse course. The National Association of Homebuilders sent a letter to Trump in January requesting he exempt "critical construction materials" from his tariffs. The major industry group has since condemned the president's metal tariffs as running counter to his pledge to bring down housing costs.

"Through an executive order on his first day in office, President Trump made it a top priority to reduce housing costs and increase housing supply to ease the nation's housing affordability crisis," the NAHB said in a statement to Business Insider. "His move to impose 25% tariffs on all steel and aluminum products imports into the U.S. runs totally counter to this goal by raising home building costs."

Even if Trump ends up coming to a deal with the US's North American partners and abandoning his proposed levies, the uncertainty surrounding his policy choices could inflate building material costs by disrupting supply chains and homebuilder timelines, even as the US struggles to build its way out of a severe housing shortage.

For now, developers are doing what they can to ensure the projects they already have in motion are protected from price hikes. Some of Rihani's developer clients are stockpiling lumber.

"Our clients are moving with a bit of urgency today, trying to get ahead of the tariffs," Rihani said. "They're looking at how do they lock in their pricing, lock in their projects, so that they mitigate future risk of tariffs."

• Japan has taken steps to make its buildings more resilient to seismic activity.
• Strategic planning, updating building codes, and a culture of preparedness have driven progress.
• Japan's approach could offer lessons for the US, where many communities are vulnerable to disasters.

Prone to major earthquakes that trigger fires and tsunamis, Japan has become a world leader in building disaster-resilient communities.

Three experts in public policy and urban development told Business Insider that, over many decades, strategic planning, a culture of disaster preparedness, and regularly updated building codes have helped Japan produce neighborhoods and cities that can better withstand seismic shocks and other disasters.

While Japan experiences more regular and severe seismic activity than most of the US, the country's approach to disaster resilience could offer a model for American communities prone to major fires, floods, earthquakes, and other destructive events, especially as they increase in frequency.

"Each disaster has served as a catalyst for deeper reflection and adaptation, and this continuous cycle of learning and adjusting is one key reason why Japan has been so proactive in addressing disaster risk," Christian Dimmer, an associate professor of urban studies at Waseda University in Tokyo, told Business Insider.

After major seismic events, Japan updates its national building codes based on what it learned from the earthquakes. Older buildings quickly become non-compliant and less attractive to renters and buyers, so they're often torn down and replaced with safer modern buildings. In America, the average age of a demolished building is 67 years, while in Japan, it's 32, per Jiro Yoshida, a business professor at Pennsylvania State University. This isn't just a result of building code reform: Japan lost a significant portion of its homes during World War II, and those that were rapidly built to replace them were often poor quality.

"Japan has gradually cranked up the expectations on housing," Daniel Aldrich, professor of political science and public policy at Northeastern University, told BI. "So a house built in the 2020s is much safer than one built in the early 1990s, than one built in the '70s, than one built in the '50s."

Strategic land-use planning can reduce deaths and destruction

New construction is both built to be more disaster-resistant and sometimes used to protect older, more vulnerable buildings. In one such case, a 15-building concrete Tokyo apartment complex, complete with steel shutters and a sprinkler system, was erected in a way that strategically protected a neighborhood of mostly wooden homes, creating a 1.2-kilometer-long firewall.

Additionally, Japan has developed various land-use strategies to reduce casualties and damage from earthquakes, fires, and other disasters. Officials identify neighborhoods and regions that are particularly vulnerable and create firebreaks around rivers, railroads, and roadways to prevent fires from jumping from one area to another, Dimmer said. Cities have created new greenspaces, including pocket parks featuring emergency water stores and rations, widened some of their extremely narrow streets, and phased out dead-end streets.

"What stands out in Japan's approach is the institutionalized mechanism of learning from disasters and translating those lessons into concrete, actionable policies," Dimmer said.

After the Great Kanto Earthquake of 1923, which also triggered massive fires and a major tsunami that devastated Tokyo and Yokohama, the country learned that green spaces are critical fire breaks and to act as evacuation zones, Dimmer said.

In the wake of Japan's 2011 earthquake, tsunami, and nuclear accident, the country invested in coastal infrastructure, including massive seawalls, and relocated residents out of particularly vulnerable areas.

"There are efforts to bring people closer to the city centers, reduce sprawl, and then also if you have built in a place that you shouldn't have built or is deemed unsafe, then there are subsidies to help you move," said Miho Mazereeuw, an associate professor of architecture and director of the Urban Risk Lab at MIT who's writing a book entitled "Design Before Disaster: Japan's Culture of Preparedness."

A 'culture of preparedness' braces residents

In Japan, schoolchildren are required to participate in regular earthquake, fire, typhoon, and other disaster preparedness drills. They study evacuation routes and learn how to take cover depending on the emergency. They also memorize a famous phrase: "Don't push, don't run, don't speak, and don't go back." But it's not just kids who are trained — residents of all ages are educated in disaster response. And, in 2015, the Tokyo Metropolitan Government produced a post-disaster survival manual, the Bosai book.

"There is this culture of preparedness that's been ingrained in every level of society, from what children are taught in schools, to organizations that are community-level," said Mazereeuw. Communities are asked "to really think through both the city design and then also how the community members interact with each other, support each other through these kinds of events."

Dimmer said this culture is based on the understanding that building a more disaster-resilient society requires collective action and major investments.

"Adequate financial resources, building civic structures, and empowering individuals to exercise foresight are crucial," Dimmer added. "Equally important, however, is addressing the underlying cultural mindset that views these efforts as essential for the greater good, rather than seeing them as burdensome or unnecessary."

Building more resilient structures can keep people safe

Government officials in Japan have worked to keep people safe from disasters like tsunamis and volcanoes by consistently pushing construction firms to improve resiliency. And so far, it's been working.

When a 7.5 magnitude earthquake struck the Noto Peninsula in the central prefecture of Ishikawa, Japan, in January 2024, at least 57 people were killed and hundreds of homes were destroyed. Robert Geller, professor emeritus of seismology at the University of Tokyo, told CNN that modern buildings fared better than older houses.

When a 7.8 magnitude earthquake struck Kahramanmaras, Turkey in February 2023, at least 230,000 buildings were damaged or destroyed, and more than 4,800 people died. Damage from earthquakes can vary significantly depending on where they occur, which makes it difficult to compare two events. However, experts told BI that Japan's resiliency measures have helped the country reduce building damage and save lives.

To be sure, Japan's approach to disasters isn't foolproof. Big earthquakes in recent decades have damaged or destroyed many buildings and had high death tolls. There are also high environmental costs of tearing down older structures and rebuilding as much as Japan does, such as creating significant carbon emissions and waste that can be detrimental to the environment. There are also cultural costs. Many older, often wooden buildings in Japan have been demolished in order to rebuild more disaster-resilient structures.

"Of course, I believe in human safety being the most important thing, but I lament a bit the loss of many more traditional homes," Mazereeuw said, adding that she hopes buildings can begin to be retrofitted more frequently rather than torn down.

Aldrich said the US may struggle with this strategy without first reforming its "patchwork" building codes that are different across cities and states. In comparison, he said Japan's national government has made changes to building codes that apply to the entire country, a model that he said the US should take some lessons from.

"The US should work to create updated federal standards for designing built structures — both residential and commercial — that can withstand floods and fires," he said.

• Thousands of federal workers have been fired across multiple federal agencies.
• The layoffs target probationary workers, who typically have been in a role for less than two years.
• It comes as the Trump administration targets spending in the federal government.

Mass layoffs swept through federal agencies on this week, as the Trump administration's efforts to shrink the federal workforce led to thousands of workers being terminated.

Agencies from the Office of Personnel Management to the US Forest Service notified probationary employees on Thursday of their termination, multiple sources inside each of those agencies told Business Insider.

Workers classified as "probationary" typically have less than two years of experience in their roles. The layoffs came one day after a federal judge ruled that the Trump administration's buyout offer could proceed.

David Rice, a probationary employee at the Department of Energy, received his termination notice — reviewed by BI — on Thursday night. He was hired in September after serving in the Army for 25 years, and he said that had he not checked his email before he was locked out of the system, he never would have known.

"I would have tried to log in on Tuesday morning and found out that I can't log in," Rice said. "I never would even been notified because no one's called me. No one's told me anything other than just sending me an email after hours."

Here's a look at which agencies have been affected.

Forest Service

About 3,400 probationary workers at Forest Service were fired on Thursday, Dennis Lapcewich, the vice president of the Forest Service Council of the National Federation of Federal Employees union, told BI.

The USFS employs about 35,000 people.

A USFS spokesperson did not respond to a request for comment.

"It's like watching the enemy advance and seeing that the next town over just got razed," a National Park Service employee told BI.

A USFS employee who has worked in the federal government for six years told BI that he's most worried about the long-term effects of the cuts on those who rely on the forest service's resources.

"I worry about myself personally, but I'm a public servant. I care about the public. I took an oath to the Constitution," he said. Though he's not a probationary employee and wasn't fired, he said he learned on a group video call on Thursday about the terminations and that some senior leadership in the Washington office would be immediately reassigned.

"These are the next generation of public servants. Obviously, with anything in life, you want to have some type of succession plan. We're missing out on building the succession plan," he told BI.

Office of Personnel Management (OPM)

OPM, which is essentially the US government's HR department and oversees the retirement accounts for about 2.8 million active federal workers, fired dozens of probationary employees on Thursday.

On the call, which took place around 2:40 PM ET, an OPM official announced that affected employees had until 3 PM ET —approximately 20 minutes — to gather their belongings before their access to the office and IT systems would be terminated. BI reviewed a recording of the call.

"Professionalism my ass," one probationary employee who was laid off told BI over text. "Definitely wasn't treated with dignity."

Department of Education and Small Business Administration

Termination notices were also sent to probationary workers at the Department of Education and Small Business Administration on Tuesday and Wednesday, according to letters that were viewed by BI.

A letter sent to one Department of Education employee whose identity was verified by Business Insider said the agency found that the worker did not demonstrate their employment would be "in the public interest."

At least 60 probationary employees with the Department of Education received the letters or received phone calls from management, union officials told BI.

An SBA spokesperson did not immediately respond to request for comment from BI. A representative from the Department of Education declined to comment to BI.

Centers for Disease Control and Prevention

A probationary employee at the CDC told BI that she and her colleagues spent much of Friday anxiously waiting to hear if they were being fired. At 4:00 p.m. ET that day, she joined a group video call, which BI reviewed an audio recording of. On the call, senior leadership said that around 750 probationary employees would be terminated that day. Employees were not allowed to ask questions.

The speaker said they learned of the terminations this morning and that those impacted would receive their termination notices from the Health and Human Services Department today. Some temporary appointment employees might also be laid off, the speaker said on the call. Senior leadership said they'd received a list of impacted workers and could flag any "errors" to HHS

"If an individual receives those notifications, their access to their government systems here at the agency as well as their badges — they're going to be turned off today once those notices go out," the speaker said on the video call.

As of 15 minutes after the call, neither the employee nor any of the colleagues they spoke to had received a termination notice, and their boss didn't know if they were on the list of impacted workers.

Veterans Affairs

The Department of Veterans Affairs announced the termination of 1,000 employees on Thursday.

The VA press release said that it dismissed "non-bargaining unit probationary employees" who had served two years or less in their appointments, and the agency estimated the terminations would save it more than $98 million per year.

"This was a tough decision, but ultimately it's the right call to better support the Veterans, families, caregivers, and survivors the department exists to serve," VA Secretary Doug Collins said in a statement.

"To be perfectly clear," Collins said, "these moves will not negatively impact VA healthcare, benefits, or beneficiaries. In the coming weeks and months, VA will be announcing plans to put these resources to work helping veterans, their families, caregivers, and survivors."

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau terminated dozens of probationary employees on Tuesday, according to two sources familiar with the matter.

The termination notice, reviewed by BI, stated: "The Agency finds that you are not fit for continued employment because your ability, knowledge, and skills do not fit the Agency's current needs."

The agency also terminated temporary staff, known as term employees, who are on contracts that are set to last between two and four years, another source told BI.

An analyst on a two-year fellowship that began in June 2023 said she was informed of her firing in an email to her personal email address at around 7 pm on Thursday. By the time she got the termination letter, she'd already been locked out of her work email.

"I was at a party, and I found out through my coworkers first," she said.

The ex-employee's contract was set to end in June of this year, and she was exploring opportunities to stay at the agency. Now, she's most concerned with making sure she has health insurance.

"I have upcoming appointments, and I'm thinking, do I have to reschedule them? Do I have to schedule certain things earlier that aren't recommended by my doctor?" she said.

It's not clear how long terminated employees will be able to keep their health insurance.

The terminations follow CFPB's acting director, Russell Vought, directing all employees at the agency to stop working and obtain written permission to perform any of their duties.

Environmental Protection Agency

The Environmental Protection Agency on Friday said it had laid off roughly 400 federal employees.

"EPA has terminated 388 probationary employees after a thorough review of agency functions in accordance with President Trump's executive orders. EPA has followed standard protocols and procedures, ensuring impacted staff received notification of their status," the agency said in a statement. "President Trump was elected with a mandate to create a more effective and efficient federal government that serves all Americans, and we are doing just that."

The EPA employs roughly 15,000 people, according to its 2024 budget.

'Fork in the Road' offer in action

The mass layoff of probationary staff occurred one day after a federal judge allowed the administration to continue its deferred resignation program.

Known as the "Fork in the Road" offer, more than 2 million employees were given the choice in January to resign in exchange for pay and benefits until the end of September or remain in their roles without guarantee that they will keep their jobs. Over 75,000 employees took the buyout.

Multiple legal challenges have been raised in response to the flurry of executive orders from the Trump administration.

On February 7, a federal judge temporarily blocked the US Agency for International Development from placing 2,200 employees on paid leave. The block is set to end on Friday at midnight.

Lapcewich, the union representative for the US Forest Service, told BI that legal avenues are being explored in response to the latest layoff of probationary workers.

"All I can tell you is that legal issues are being pursued by union lawyers," he said.

Do you work at a federal agency? Share your experience and thoughts with these reporters at [email protected] and [email protected] or via Signal at alicetecotzky.05 and asheffey.97.

• Some red states might see a federal funding bump due to their higher birth and marriage rates.
• Trump's transportation secretary suggested pushing more infrastructure money to such places.
• More conservative states like Utah and the Dakotas could benefit from that plan.

Red states with high marriage and birth rates could see a big funding bump from President Donald Trump's new administration.

The day after Transportation Secretary Sean Duffy was confirmed, he released a memo with an unusual provision: Federal transportation grants and loans should give preference to projects in "communities with marriage and birth rates higher than the national average."

If implemented, the directive would likely redistribute federal funds to more conservative parts of the country, which tend to have higher fertility and marriage rates.

Utah, North Dakota, and South Dakota, which are red states, had some of the country's highest birth rates in 2022. Vermont, Oregon, and Rhode Island, which are blue states, as well as Washington, DC, had the lowest fertility rates that year.

Idaho, Utah, and Wyoming, all of which are red states, had the highest marriage rates in 2023 based on the share of each state's 15-year-old and older population who are married and not separated. Blue states New York and New Mexico were among the places with the lowest rates of married residents.

A DOT spokesperson said in a statement to Business Insider that "strong population growth" would be a factor in prioritizing funding. While birth rates contribute to population growth, internal migration and immigration tend to be larger factors. The department didn't say how it's measuring birth or marriage rates.

In a statement released alongside the memo, Duffy said his directive would restore "merit-based policies" at DOT. "The American people deserve an efficient, safe, and pro-growth transportation system based on sound decision-making, not political ideologies," he added.

The DOT memo appears in line with a desire for higher birth rates expressed by Trump administration leaders, including Vice President JD Vance and Elon Musk. Vance and Musk have for years voiced concerns over the US' falling birth rate, and Vance has denigrated political opponents who don't have children. Vance has also lamented the rise in divorce and the decline in marriage rates.

There's precedent for the federal government to leverage transportation funds to pressure local governments to take certain policy actions. The National Minimum Drinking Age Act, signed by President Ronald Reagan in 1984, required all states to set their drinking age for alcohol to 21 or risk losing some amount of federal funding for highway construction.

• California's insurer of last resort will get a $1 billion bailout to cover LA wildfire damages.
• The bailout will likely lead to higher insurance premiums for California homeowners.
• This situation could escalate the state's insurance crisis and convince more insurers to leave.

Property owners across California will likely pay higher insurance premiums to help cover the damages of the Los Angeles wildfires after the state's insurance plan of last resort said it doesn't have enough funds to pay out its claims.

State regulators on Tuesday approved a $1 billion bailout of California's insurer of last resort, the FAIR Plan, which covers those who can't find insurance on the private market. The bailout will be funded by private insurers licensed to operate in the state — and under a new rule enacted last year, they can pass up to half of the cost on to their customers.

The FAIR Plan said it was set to run out of money by the end of March as losses piled up from the Palisades and Eaton fires. It would be the first time in 30 years that it had been unable to pay its claims.

The bailout comes after California's largest home insurer, State Farm, this month asked state regulators for emergency permission to raise homeowners' rates by an average of 22%, starting May 1, to avert a "dire situation" for the company's finances. As of February 3, State Farm had paid out $1 billion and said it expected to spend far more.

It's all part of a worsening home insurance crisis in California that was already underway before the LA blazes destroyed more than 12,000 buildings. Back-to-back fires in 2017 and 2018 decimated insurers' profits, prompting companies including State Farm, Allstate, and Farmers Insurance to either stop writing new policies, pull back coverage, or, in some cases, drop tens of thousands of property owners in the state. Insurers cited growing losses from wildfires and other disasters coupled with inflation and more expensive home repairs.

Most recently, beginning in July, State Farm dropped nearly 70% of its policyholders in the affluent Pacific Palisades neighborhood.

All of this has forced hundreds of thousands of homeowners into the FAIR plan, designed to be a backstop for those who can't find insurance on the traditional market. Participation more than doubled between 2020 and 2024 to nearly half a million homes — many of which were in areas devastated by the Palisades and Eaton fires.

Measures to keep home insurers from fleeing California

The bill for the bailout will be divided among private insurers based on their market share in the state. As of 2023, State Farm, Farmers Insurance, and CSAA Insurance held the largest percentage of policies in California, according to S&P Global data. They have 30 days to pay the FAIR plan and — under a rule change made by California Insurance Commissioner Ricardo Lara last year — insurers can request approval to pass up to half those costs onto residential and commercial policyholders.

The change was part of Lara's broader strategy to lure private insurers back to California to help stabilize the market. The rules also should make it easier for companies to raise premiums and factor in the costs of reinsurance and risks of future disasters. In exchange, insurers will have to expand coverage in communities most at risk of wildfires.

Lara said he approved the FAIR Plan bailout to protect consumers and blamed 30 years of stagnant regulations for putting more people at risk.

"The FAIR Plan must pay claims just like any other insurance company," he said in a statement. "I reject those who are hoping for the failure of our insurance market by spreading fear and doubt. Wildfire survivors can't cash 'what ifs' to pay for food and rent, but they can cash FAIR Plan checks."

Some consumer advocates on Tuesday threatened legal action to stop private insurers from surcharging customers.

"This gift to insurance companies rewards bad behavior and will only incentivize insurers to drop even more homeowners and force them onto the FAIR Plan in the future because there's no consequence for abandoning these families," said Carmen Balber, executive director of Consumer Watchdog in Los Angeles.

Are you a homeowner with a story to share? Reach out to these reporters at [email protected] and [email protected].

• Skyrocketing home costs have made it harder for Americans to live where they want.
• New laws in some states allow denser housing, enabling friends and families to live closer together.
• New companies are cropping up to respond to the demand for affordable, community-focused housing.

Phil Levin got an idea that would later inspire his next business venture when he and his wife, Kristen Berman, decided to move out of their San Francisco group home to have more space for kids.

One big hangup was that the real estate founder and behavioral scientist couple didn't want to leave the friends with whom they shared their lives.

Suspecting others felt the same, they founded a compound in Oakland, California, named Radish, where they live with about 20 adults and several babies in a variety of houses and apartments on a one-third-acre lot. They share an outdoor space, hot tub, trailer for guests, and a few communal indoor spaces. The friends watch each other's kids, cook together, and just hang out.

That personal experiment inspired Levin to start a company called Live Near Friends, which helps clients who want to live closer to family and friends find suitable real estate, such as a duplex or a lot that can house multiple small homes.

Levin is convinced that having a support network within a five-minute walk is the key to a happy life.

It might also be the key to more affordable housing. States and cities nationwide have legalized so-called "missing middle housing," which includes duplexes, townhomes, small apartment buildings, backyard tiny homes, and converted garages, creating a business opportunity for entrepreneurs like Levin.

These diverse housing types offer cheaper options and more housing diversity — and they're more conducive to communal living than the detached single-family homes on large lots that dominate the American urban landscape. This can help urban dwellers stay in their neighborhoods rather than being priced out of the city to isolating suburban subdivisions.

"We're sort of opening up these new categories and types of real estate for people and trying to show them how they apply them to their own fantasy of living near friends and family," said Levin, who previously co-founded a car-free real estate development company called Culdesac. He connects his clients with real estate agents, developers, and architects, who can bring their vision to fruition.

Levin says he wants to show developers and city planners that there's growing demand for more community-oriented, medium-density housing. He compares his business model to Airbnb, which has aggregated and juiced the demand for short-term rentals and reshaped housing markets around the world.

"We want the people that build real estate and actually determine the physical form of our built environments" to think of housing and neighborhoods "as a web of social connection, rather than just a bunch of isolated, atomic housing units," he said.

A family in Fremont, California, is taking advantage of the new state laws to keep their multigenerational household together. Anjan, a Silicon Valley software engineer, wanted his parents as close as possible, so he and his wife are building a second home on the same lot their single-family house sits on so his parents can live steps from their two grandchildren.

Having his parents so close "makes a huge difference in the quality of life," said Anjan, who asked to go by just his first name to protect his privacy. "It really does help having the person close by or live right next to you."

A demand for community-focused housing

Catherine Woodiwiss is evidence of that demand. The 38-year-old design researcher spent her 20s and early 30s living in a series of group houses with fellow creatives and do-gooders in Washington, DC. When she moved to Austin for graduate school, she built her new community around another shared house. It was more affordable to live with housemates, but it was also fun and supportive, she found. She built some of her closest relationships with her housemates and collaborated on projects like activist trainings and music nights.

"I made friends with people I never would have found or made friends with otherwise," she said.

But that came to an abrupt end in 2023 when Woodiwiss' Austin group house disbanded. She wanted to stay in her neighborhood, but there were few affordable options outside of an apartment designed for one.

For the first time, Woodiwiss moved into her own place — a smaller apartment in a large building. There are perks of living alone that she's since grown to appreciate, chiefly the time, energy, and "headspace" she's reclaimed. But 18 months in, she still doesn't know the names of anyone in her building, as she said her new neighbors keep to themselves and the building lacks spaces that could foster casual social interactions.

Recently, Woodiwiss visited friends who live at Radish. The community offers the kind of casual, but structured connection she craves.

"I'm both really happy with where I am and can feel that there is a level of commitment and a level of intentional community or intentional collective living that I still really long for," she said.

Legalizing missing middle housing

In recent years, California has loosened zoning restrictions to facilitate more infill housing across the state as part of its effort to address soaring home prices and rents caused by a housing shortage.

Some real estate companies and developers are already responding to the demand — and the changing laws. The Oakland-based firm BuildCasa was founded in 2022 in response to a California law making it easier to subdivide lots and build additional homes on them. The company works with homeowners — including Anjan — who want to split or purchase lots, and with developers who want to build starter homes and other infill housing.

The houses and condos built on properties like Anjan's tend to be between 800 and 1,200 square feet and sell for between 30 and 40% less than the average single-family home in the same neighborhood, said BuildCasa's co-founder and CEO, Ben Bear.

BuildCasa co-founder and architect Paul Steidl grew up in an old mixed-use neighborhood of townhomes in Pittsburgh that he says informs his support for missing middle housing. "When I was younger, when my parents were both working, I could go over to a neighbor's house right next door, or be able to walk down the street to the corner store," Steidl said. "That's an important aspect of my upbringing that I realized growing up wasn't really common for a lot of people that grew up in the US."

Bear and Steidl said they've seen growing demand from developers and philanthropic organizations, which view infill construction as both a business opportunity and a way to address the housing shortage and affordability crisis.

Greenville, South Carolina, is one of the places expanding more sociable living options. Grant Taleck, a content creator who's made videos about communal living for Live Near Friends, is starting the process of building an ADU in his backyard. The city's recently loosened development code makes this possible.

Taleck realized he wasn't alone in wanting to live near friends when his videos about so-called "cottage courts" — clusters of starter homes — and how Americans love the college experience because campuses are walkable communities went viral. The Florida native has already convinced his mother and one of his best friends to move to Greenville, selling them on the city's plentiful "third spaces," walkability, and mixed-use design. He hopes a friend will move into his ADU.

"It's not that hard to convince people," he said. "Once they visit here, they're like, Okay, I want to be here. It's really special."

Do you live near or with friends or in a communal living arrangement? Or do you aspire to? Share your story with this reporter at [email protected].

• State Farm wants to hike insurance premiums in California to help pay for LA wildfire damage.
• Insurance affordability has deteriorated with intensifying disasters and home-repair inflation.
• This hurts housing affordability and long-term property values.

The aftermath of the Los Angeles wildfires could exacerbate a mounting challenge for California homeowners: ever-higher insurance costs.

California's largest home insurance provider, State Farm, has asked state regulators for emergency permission to raise homeowners' rates by an average of 22%, starting May 1, to avert a "dire situation" for the company's finances following the fires, according to a Monday letter to the state's insurance commissioner. The company also asked to raise premiums for renters and condo owners by 15% and by 38% for landlords.

State Farm said it had fielded more than 8,700 claims related to the LA wildfires and paid out about $1 billion as of Saturday but expected to spend far more. The fires destroyed some of the city's priciest real estate, including in the Pacific Palisades, as well as Malibu's. They're set to be the costliest in US history. The company says wildfire payouts are placing "very significant pressure" on its ability to pay claims.

Some analysts estimate the damage could total between $250 and $275 billion, a bill that will be split among local and federal governments, insurers, and residents. But the full cost won't be clear for years.

State Farm said its finances were already strained from previous years' losses, leading one rating agency to downgrade it.

"Insurance will cost more for customers in California going forward because the risk is greater in California," the company said in the letter, adding that an emergency rate hike is "essential to more closely align costs and risk" and allow the company to rebuild capital.

A spokesperson for State Farm pointed Business Insider to its letter when asked for comment.

Intensifying home insurance market instability

California has long faced home insurance issues spurred by surging costs from more frequent and intense disasters coupled with rising home-repair costs and inflation. Since 2022, major insurance companies — including State Farm, Allstate, and Farmers Insurance — have either stopped writing new policies in the state, pulled back coverage, or in some cases, dropped tens of thousands of property owners.

State Farm in May 2023 stopped writing new homeowners policies in California. The following March, the company dropped about 29,000 homeowners in the state — including nearly 70% of policies in Pacific Palisades, where January's blazes caused some of the worst losses. That nonrenewal process is ongoing but was recently paused in Los Angeles County due to the wildfires. As of February 1, State Farm said it has more than one million homeowners policies in California.

State Farm said its finances had taken a hit over the nine-year period ending in 2024. During that period, the company paid out $1.26 in claims and expenses for every $1 collected in premiums. Its after-tax net losses totaled $2.8 billion. State Farm said its financial position will be further weakened by the LA wildfires.

State regulators last August approved Allstate's request to hike home insurance premiums by an average of 34%. State Farm said it filed for a 30% rate increase for homeowners policies last June, which is still pending. That would be on top of rate increases State Farm got approved in 2023, including a 6.9% bump in January and a 20% bump that took effect in March.

Ripple effects on housing across the country

The rising cost of insurance and the growing cancellations of private insurance policies are compounding housing affordability issues across the country.

A Senate Budget Committee investigation found that private insurers' nonrenewals spiked threefold in more than 200 counties between 2018 and 2023. Homeowners who are denied private insurance can often opt for their state's insurer of last resort, though these policies tend to offer more restricted coverage and higher premiums.

Rising insurance costs hurt homeowners and potential homebuyers alike, as well as renters who face increased costs passed along by their landlords. Some retired homeowners and others on fixed incomes are already struggling to deal with rising premiums, which, combined with rising property taxes, add up to more than mortgage payments for a growing number of homeowners.

Rising insurance costs are also expected to hurt property values in the longer term. A recent study from the research firm First Street found that a combination of rising home insurance premiums and falling demand, particularly in areas hardest hit by climate change, will erase almost $1.5 trillion in US real estate values by 2055. The report found that 40% of property-value losses will occur in communities it calls "climate abandonment areas," which are the most at risk of out-migration and insurance premium spikes.

This trend is particuarly alarming given that Americans are increasingly moving into parts of the country most vulnerable to extreme weather. In 2023, tens of thousands more people moved into the most flood—and fire-prone areas of the US rather than out of them, the real estate company Redfin reported.

Have you been impacted by rising insurance premiums or lost your coverage? Reach out to these reporters at [email protected] and [email protected].

• Trump's trade plans for Canada, Mexico, and China could raise home prices, industry experts say.
• Tariffs affect key building materials, including Canadian lumber and Mexican gypsum for drywall.
• Even though Trump delayed tariffs on Canada and Mexico, the uncertainty could still inflate costs.

In order to set prices and plan for the future, businesses need clarity on trade policy. That's why even the threat of President Donald Trump's tariffs could increase US housing costs.

Even if Trump ends up coming to a permanent deal with the US' North American partners and rescinding his proposed levies, the uncertainty surrounding his policy choices could inflate building material costs by disrupting supply chains and homebuilder timelines, even as the US struggles to build its way out of a severe housing shortage.

"Uncertainty is an impediment to investment, particularly those involving those large capital outlays," Matt Saunders, a senior VP at John Burns Research and Consulting, told Business Insider. "If there's persistent uncertainty, that risk has to be priced into markets."

Meanwhile, housing economists and homebuilder industry groups say the president's new tariffs on Chinese imports will inflate homebuilding costs by raising prices for certain electronic appliances required in many homes.

Canada, Mexico, and China are the US's top trading partners, and they provide a significant portion of the materials the construction industry needs. Canadian lumber, Mexican gypsum used for drywall, and Chinese electronics are among the most critical building materials impacted by the new and potential levies, industry experts said.

While Trump announced on Monday that he would pause 25% tariffs on Mexico and Canada for 30 days after reaching agreements with the countries involving enhanced border security, 10% tariffs on China went into effect just after midnight on Tuesday. Beijing retaliated by imposing tariffs on some US goods, including coal and gas, and announcing an antitrust investigation into Google.

Higher prices for imported building materials would push housing costs up and result in a slower rate of construction and fewer homes being built, compounding housing affordability issues, they said.

For example, as uncertainty around Trump's trade moves persists, a Canadian lumber company could hold back on growing its capacity, Anirban Basu, chief economist at the construction industry trade group Associated Builders and Contractors, told Business Insider. This would further reduce supply and inflate consumer prices.

"Even if the tariffs are not implemented, as long as there's the threat of them, it's inflationary," Basu said. "One of the things I hear from business leaders is this: all we want is certainty. Give us certainty about your zoning decisions. Give us certainty about your regulatory decisions. Whether it's state, local, or federal, give us certainty."

$40,000 more for the typical new home?

If the 25% tariffs on imports from Canada and Mexico go into effect after the temporary pause, in addition to the tariffs on Chinese imports, they would increase the cost of the average newly constructed home by an estimated $40,000 — about a 10% price hike, Basu said.

Basu estimates tariffs on lumber would raise the cost of building a typical new US home by $8,000 to $12,000. The US imports about 30% of its softwood lumber — used in the framing of most homes — from Canada, and lumber costs make up between 15 and 20% of the total cost of building a typical home, Saunders said. At the same time, tariffs on Chinese products like plumbing fixtures, appliances, windows, and doors would add about $8,000 to the cost of construction, while increased concrete and cement would add around $3,000.

"If you reduce supply at the time when you're trying to increase construction — simple math, you're going to make it more expensive and harder to source," Brian Turmail, VP of public affairs at the industry group the Associated General Contractors of America, told Business Insider. "And if people can't source it, then they're going to put longer timelines in their bids."

This is particularly challenging given that home-building materials are already 40% more expensive than they were pre-pandemic, Saunders added.

There's historical precedent for price hikes as a result of tariffs. Trump's 2018 tariffs on washing machines from China and his 2019 tariffs on Chinese furniture sent consumer prices for those products soaring, Saunders said.

The vast majority — 87% — of homebuilders said variability in materials costs would have a negative impact on their operations, according to a recent survey by research firm John Burns.

The National Association of Homebuilders, a major trade group, slammed Trump's proposed tariffs on Saturday, saying they would do the "opposite" of the president's promise to lower housing costs and boost the supply of homes.

"Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices," Carl Harris, chairman of the NAHB, said in a statement.

Basu believes tariffs could have a long-term inflationary impact as they could hurt smaller foreign suppliers and weaken industry supply chains.

"All of a sudden, industry capacity is constrained, it's diminished, and that leads to more market power among those who survive in the industry, which leads to higher prices," he said.

• New York City recently made it legal to add a housing unit to certain one- and two-family homes.
• But both city and state regulations will drastically limit construction, experts say.
• A state law severely restricts the addition of ADUs to two-family buildings.

One of the solutions to New York City's housing shortage — adding extra units in attics, basements, and backyards — is already running into a slew of regulatory hurdles.

Under the city's zoning reforms, certain one- and two-family building owners will be allowed to add a so-called "accessory dwelling unit" to rent out, house a family member, or live in themselves. Homeowners could boost the value of their property and bring in extra income while creating more homes in a city facing a dire housing shortage. The change would also help bring many of the city's tens of thousands of existing basement units into compliance with health and safety codes.

But the city's new law restricts ADUs in several ways, including by banning ADUs on lots with attached rowhomes or townhouses and on lots more than half a mile from a mass transit station. The law also prohibits ground-floor and basement ADUs in areas prone to coastal flooding and inland flooding during heavy rain. A backyard ADU can cover no more than a third of the yard and can't be added in historic districts.

A state law that could block a lot of building

ADUs aren't just subject to city regulations. New York State's Multiple Dwelling Law (MDL) requires that buildings with three or more units have features one might associate with a large apartment building. For example, the law requires sprinklers in every unit and a certain ceiling height in basements, both of which can be prohibitively costly to add to an existing building.

"A lot of the sites that might be able to add an ADU would trigger the MDL and, therefore, wouldn't really be viable from a design perspective," said Marcel Negret, the director of land-use planning at the Regional Plan Association, a pro-housing nonprofit focused on the tri-state area.

Casey Berkovitz, the press secretary for the Department of City Planning, said the City is still examining how the MDL will apply to ADU construction, but agrees it would make it harder to add basement and attic ADUs in existing two-family homes.

There are exceptions. Building a new detached ADU wouldn't implicate the MDL because it's not part of an existing building, Berkovitz noted. And certain neighborhoods across the city are part of a new basement legalization effort that exempts them from certain MDL restrictions.

The state legislature could amend the MDL to reduce barriers for ADUs in New York City — something the City has asked it to do, said Eric Kober, a senior fellow at the conservative Manhattan Institute and former planner with the City. But he's not optimistic state lawmakers will get on board, adding, "There's no indication that it's on their radar or something that they're interested in doing."

Kober argued that the City's requirement that homeowners live on the lot they add an ADU is the most counter-productive of the regulations because it would prevent private developers from building ADUs.

The NYC government last fall said it expected that fewer than one in 200 eligible homeowners would choose to add an ADU to their property in a given year.

Negret estimated just a few thousand of the 82,000 additional homes the city is expected to add over the next 15 years under City of Yes will be ADUs. That's down from between 26,000 and 40,000 ADUs the city expected to add under the original version of its reforms, which were significantly reined in by the city council.

"My conclusion is, yes, ADUs are technically legal, but there's still a long, long way to go before they could be a much more significant share of a growing housing stock," Negret told Business Insider.

Legalization is just the first step

The city is still developing new rules that will impact ADU construction. This includes creating updated flood maps, which will likely further restrict where ADUs are allowed. It's unclear when the City will finalize the rulemaking process.

Eventually, the City says it will create a "one-stop shop" website to guide homeowners through the ADU construction process, including a set of pre-approved designs.

New York is following in the footsteps of cities such as Los Angeles and Seattle that view ADUs as low-hanging fruit in the quest for more affordable housing. After California loosened its restrictions on ADUs, the extra units made up nearly 20% of new homes built in 2023.

But progress tends to be slow. ADU legalization alone isn't usually enough to prompt lots of new construction. In some cities and towns, local land-use laws, permitting, and other regulations have stood in the way. Owner-occupancy requirements, off-street parking mandates, and discretionary permit reviews are among the most burdensome rules.

Just over a year ago, the NYC government rolled out a pilot grant program — called "Plus One ADU" — that awarded 15 homeowners with up to nearly $400,000 in funding per household to build an extra dwelling in their backyard, basement, or attic. The city has since expanded that program, but it applies only to lots that are already zoned to accommodate another unit.

"ADUs are a proven tool in cities across the country to support working families with extra space, additional income, and the opportunity to age in place," Dan Garodnick, the director of the New York City Department of City Planning, told Business Insider in a December statement.

• As LA looks to rebuild, it remains vulnerable to future wildfires.
• Solutions include fire-resistant building materials and designs, higher-density housing, and relocating residents.
• But rebuilding communities will have to contend with a housing shortage and political pressure.

LA's wildfires have displaced thousands of residents, and the city's leaders will have to decide how to rebuild in places where blazes are becoming more frequent and intense.

Experts in fire mitigation and climate science say LA should use this as an opportunity to design more resilient communities, given the growing risks of urban sprawl at the foothills of mountains and homes tucked into steep canyons that are vulnerable to fire.

They suggest relocating people out of areas most likely to burn, using more fire-resistant materials, establishing bigger buffer zones around homes and neighborhoods free of flammable vegetation and materials, and building more densely in safer areas.

But as the rebuilding effort begins to take shape, orders from city and state officials suggest they may not be taking that advice. LA Mayor Karen Bass issued an executive order on January 13 clearing the way to "rebuild homes as they were."

The order states that to be eligible for an expedited permitting process, a home must be rebuilt at the same location as it was before burning down and can't be converted from single-family to multi-family. A home also can't expand its footprint by more than 10%. The directives could leave those rebuilt homes just as vulnerable to the next fire.

Detailed below are some of the approaches experts said could help LA rebuild more safely.

Moving people to safer places

For decades, Americans have been moving into communities nestled next to and within forests and hills. A 2022 study published in Nature found that 45% of California's homes lie in those areas, more than in any other state.

Michael Wara, director of the climate and energy policy program at the Stanford Woods Institute for the Environment, said incentivizing people to move out of those risky areas and into safer zones — or managed retreat — is one of the most aggressive policies to mitigate the risk of wildfires and other disasters. The idea is "largely theoretical" in places like Pacific Palisades and Aldatena, he added, in part because they had vibrant economies.

To date, managed retreat programs have mostly focused on residents in a few flood-prone areas, including on Staten Island following Hurricane Sandy. In Alaska and on the Gulf Coast, communities disappearing due to melting permafrost and erosion and rising sea levels, respectively, were relocated.

A California program last year offered up to $350,000 in forgivable loans to people who were displaced by fires in 2018 and 2020 to move out of high-hazard areas, and the funds were quickly depleted.

Managed retreat is often "politically toxic," Stephen Smith, executive director of the Center for Building in North America, said. Asking longtime residents and homeowners to leave their properties and communities — or even just redesign them — is challenging and expensive. Some researchers also warned that buyouts in wildfire-prone areas could make the problem worse if abandoned lots become piles of kindling.

An alternative strategy is building more housing in safer parts of the city. Most of the greater LA area is dominated by very low-density, single-family detached houses. Restrictive zoning that prohibited multifamily buildings helped encourage residential sprawl.

But in recent years, California has passed a slew of laws designed to make it easier to build more dense housing. A new state law legalizing duplexes and lot-splitting in single-family neighborhoods across California could help boost density in single-family neighborhoods in LA further from the most fire-prone wilderness areas.

Making homes and neighborhoods more fire-resistant

LA officials should be considering community-wide plans for hardening homes and managing vegetation in yards and surrounding hillsides, said Erica Fischer, an associate professor at Oregon State University College of Engineering who studies fire resilience.

That's because fires can easily jump from one house to the next, both from embers carried by high-speed winds or radiant heat that ignites materials — two factors that caused the Palisades and Eaton fires to spread so fast.

"A lot of this comes down to not rebuilding quickly, taking the time to really make a community-wide plan, and then enforcing and enacting that plan," she said. "But that costs money and is daunting."

In 2008, California passed some of the strictest building codes in the country for homes in moderate-to-high-risk wildfire zones. They mandate fire-resistant materials for roofs, siding, and windows. Vents must have screens that shield embers from entering the home. So-called "defensible space" rules require homeowners to remove flammable materials like trees and shrubs starting 30 feet from the edge of buildings. The state fire agency, CalFire, also has the authority to fine homeowners who don't follow the rules.

However, older homes account for a large portion of those in LA County and weren't built to those strict codes, which added to the devastation.

Zach Seidl, a spokesperson for Bass, said in an email that the mayor wants to rebuild the Palisades to be more resilient but didn't say what measures she was considering. Seidl noted that current building codes are safer than decades ago and pointed to Bass' strategy to tackle LA's affordable housing crisis, which the mayor said has spurred more than 400,000 new housing units across the city.

A spokesperson for CalFire told Business Insider that since 2020, the agency has funded nearly $20 million in wildfire prevention grants to neighborhoods and homeowners and reduced fuels on more than 1,300 acres in LA County.

Smith said much of the risk stems from the combustible materials — namely wood framing — most American single-family homes are built with. "An urban fire is fueled by the actual structures, and we build our structures out of fuel in America," Smith said.

That makes the US an outlier, he added. Many countries have evolved to rely mainly on concrete, which is less likely to catch fire. The abundance of wood construction in the US is a result of both tradition and the lower cost of wood.

But the need to quickly rebuild might mean taking the path of least resistance

If the rebuilding efforts after other recent fires in California are any indication, homes in the Pacific Palisades, Altadena, and elsewhere in LA will be rebuilt in more fire-resistant ways, but communities won't be designed is a drastically different manner.

LA's booming economy and acute housing shortage intensify the need for a quick recovery. Rebuilding what previously existed is often the path of least resistance after disasters, as it's easier to obtain the necessary permits and homeowners may be cost-limited by inadequate insurance payouts and rising construction costs.

"This is no time for urban planning exercising. That'll delay it by 15 years. We need people back in their houses," Steve Soboroff, a real estate developer and former police commissioner tasked with managing the city's rebuilding efforts, said at a news conference.

Wara said LA officials' plans are setting people up for another disaster. He noted that Pacific Palisades and Altadena — which saw some of the worst damage — were laid out decades ago without wildfires in mind. Winding roads head toward the coast and in the direction of the powerful Santa Ana winds that blow flames from east to west into densely populated towns.

Climate change is only making catastrophic wildfires more likely, Wara added."

In 2023, LA saw record rainfall and abundant vegetation. Then last year, during a scorching hot summer, it quickly dried up, setting the stage for the current wildfires. A recent study by UCLA found that rising global temperatures are making this kind of "whiplash" between rain and drought more common.

After a disaster like the fires in LA, there's enormous pressure on political leaders to rebuild affected communities as quickly as possible. And that crunch — and the elevated costs that come with surging demand for construction resources — might not leave time for rethinking how the rebuilding happens to better protect communities going forward.

"You would think this would be an opportunity to harden the properties, to maybe not build on some lots that were immediately in the wildland interface. But what we see time and time again is the political realities going in exactly the opposite direction," Ben Metcalf, a housing policy researcher at the University of California, Berkeley, told Business Insider.

Ultimately, the affected communities will likely be built back to look much as they did before the fires. "We're left with the same strategy we've got, just a little beefier," Smith said.

• Sue and Ken Allen's Palo Alto home, bought for $63,000 in 1975, is likely worth $3-4 million.
• The threat of capital gains taxes and higher property taxes discourages them from selling.
• Instead, they're planning to downsize to a tiny home accessory dwelling unit in their backyard and rent out the main house.

Sue Allen and her husband, Ken, moved to Palo Alto in the 1970s, just as the South Bay was beginning to be known as Silicon Valley.

Allen, 75, and her husband, 77, bought their home in South Palo Alto for about $63,000 in 1975. These days, surrounded by Stanford University and the headquarters of a slew of the biggest tech companies in the world, the home is likely worth close to $4 million.

The home is large — in the mid-1980s the couple added a second story to the house to accommodate four additional bedrooms and two bathrooms as their family grew.

In the early 2000s, they rebuilt the single-story cottage in their backyard — also known as an accessory dwelling unit — to include a bedroom, kitchen, and bathroom. They've rented out the cottage ever since.

But the Allens have no plans to sell their home, despite the fact that it's larger than what they need. That's because they plan to eventually downsize to their backyard cottage and rent out the main house.

The Allens aren't alone in relying on an ADU for housing in their older age. Backyard tiny homes — or other accessory units in basements or attics — are an increasingly common way for homeowners to add living space, boost the value of their property and earn extra income through rent, and even create a place to age in. California is one of 14 states that have broadly legalized ADUs and more than 60,000 have been permitted in the state since 2016.

When selling will cost you

In addition to having a backyard home to downsize to, it doesn't make much financial sense for the Allens to sell their property and buy a smaller home to age in.

If they sold the property, they'd be on the hook for hefty capital gains taxes, which apply to couples who make more than $500,000 in profit and individuals who make more than $250,000. They'd also likely have to pay significantly higher property taxes if they purchased a new home, not to mention a relatively high interest rate on any new mortgage.

Like other California homeowners who purchased their properties decades ago, the Allens benefit from exceedingly low property taxes as a result of Proposition 13, which mandates that property taxes are just one percent of the home's purchase price and can't rise by more than two percent each year until the next sale.

The California law has contributed to the so-called homeownership "lock-in effect," which intensifies over time as home values rise and the property taxes someone would have to pay on a newly purchased home rise.

"We're living in this $4 million house, and we don't downsize because it's kind of not worth it," Allen said. "We'd have to pay so much in taxes."

Allen's story reflects a broader trend of boomer homeowners who've grown significant wealth through their home equity. And she's quick to acknowledge that she's both benefited from and perpetuated "generational wealth" through homeownership. She could afford her own $12,500 downpayment only with help from her mother. In turn, she's helped her five adult children with their down payments. But the Allens' kids have all left California to live in other states — Texas, Idaho, Utah, and Nevada — where housing is more affordable.

Zillow estimates the Allens' property is worth about $3.1 million, while Redfin puts it at nearly $3.5 million. Allen thinks it could be sold for closer to $4 million, based on what similar homes in her neighborhood have fetched in recent months. A much smaller home down the street from the Allens' house sold for $3.6 million in August.

"People spend three to $4 million for a house, knock it flat, and build a big new house on the lot," she said.

Allen still works part-time for the East Palo Alto school district doing tech support, but her husband, a former patent attorney, is fully retired.

If Allen's husband, who has Parkinson's disease, develops dementia and she can no longer take care of him, they plan to move into assisted living in Utah, where two of their kids live and where long-term care is cheaper than in California. But they hope to stay in their neighborhood, where they have strong ties with neighbors and friends, for as long as they can.

"Our support system, our friends — we have a really strong church community here," Allen said. "We really want to stay here."

• Trump's mass deportation plans could hinder LA wildfire rebuilding efforts.
• Immigrants form a large part of California's construction workforce, already facing shortages.
• Deportations could worsen housing shortages and increase costs in the construction industry.

Housing policy and immigration researchers say President-elect Donald Trump's plans for mass deportations could hamper efforts to rebuild the thousands of homes destroyed by the wildfires in Los Angeles and intensify the region's housing shortage.

Data from the National Association of Home Builders shows immigrants, including those living in the US illegally, make up a significant portion of California's construction workforce, which is already suffering from a shortage of workers.

The extent and scope of possible deportations after Trump takes office on January 20 is still unclear. However, researchers expect even the threat of immigration crackdowns to shrink the available construction workforce.

"When Trump is sworn in, there will be a chilling effect," Ben Metcalf, a housing policy researcher at the University of California, Berkeley, told Business Insider. "We don't know how big it will be, but it is 100% certain that there will be fewer undocumented folks showing up at the job lines to try and get on construction jobs."

As of January 15, at least 25 people had been killed by the wildfires in LA County, and the Palisades and Eaton fires — the two largest — were still only partly contained. Over 12,000 structures have been destroyed, while over 40,000 acres have been burned. Nearly 90,000 people are still under evacuation orders.

Housing policy researchers and economists warned that the wildfire destruction will deepen California's already acute housing shortage. LA County was short about 337,000 homes as of 2022, per a report published last year from Zillow.

Any immigration restrictions will hurt labor availability for developers, contractors, and others involved in LA's future rebuilding effort, Eric Finnigan, vice president of demographics research at John Burns Research and Consulting, told Business Insider.

"Everyone in and around Southern California that's in the housing market is going to feel this in some way or another," he said.

An industry built on immigrant labor

The exact number of immigrants who work in the country's construction industry varies among researchers, but foreign-born workers — particularly those living in the country illegally — make up a disproportionate share of the workforce. An estimated 15 to 23% of that overall construction workforce live in the country illegally.

In California, immigrants made up 41% of the construction workforce in 2023, the National Association of Home Builders found. It's unclear what share of LA's construction workforce is in the country illegally.

The construction industry is already facing a significant nationwide labor shortage — estimated at about 500,000 workers last year — that has also increased building costs. The shortage has slowed the pace of new home construction, repairs, and renovations and driven up labor costs.

Some economists and homebuilders have previously told BI that Trump's plans to curtail legal and illegal immigration could further restrict the construction workforce, slow the rate of building, and inflate prices. Many immigrants working in the industry are protected under certain special legal programs, like Deferred Action for Childhood Arrivals and Temporary Protected Status, which were bolstered under President Joe Biden but may be cut by Trump.

Deportations would mean "fewer workers to build the housing that we need, and to some extent, some homes would become vacant because members in their home got deported," said Shane Phillips, housing initiative project manager at UCLA's Lewis Center for Regional Policy Studies.

Sixty-one percent of home builders surveyed by John Burns Research and Consulting in December said they expect potential deportations under Trump to hurt their operations. At the same time, 87% of home builders said they're concerned about Trump's plans to raise tariffs, which economists expect would inflate the costs of building materials imported abroad.

Immigrants who live in the US illegally are also more likely to work in single-family home construction than in larger apartment buildings, multiple experts told BI. This is in part because small, custom home construction projects tend to employ smaller contractors better able to skirt regulations, Metcalf said. Most of the homes that have been destroyed or damaged by the fires are single-family.

"Particularly in the renovation and rebuilding kind of space, where you're just doing a one-off home, that is exactly where the construction industry is particularly reliant on those undocumented workers," Metcalf said.

Chloe East, a fellow at the Brookings Institution who studies topics like immigration, said slowing the pace of construction by shrinking the immigrant workforce would also hurt the US-born construction workforce.

"When companies cannot find laborers for a building contract, they will also not hire architects and managers for the contract either," she said.

There is precedent for deportations negatively impacting the construction industry. During President Barack Obama's first term, about 400,000 people were deported through the Secure Communities program, a Department of Homeland Security program that identified deportable immigrants in US jails. Research on its impacts found deportations had negative impacts on new home builds. East added the threat of mass deportations causes people who are living in the country illegally to work less to avoid deportation risks.

"Three years after the start of mass deportations, the average county has about 2,000 fewer new housing units built than it would have if mass deportations had not occurred," East told BI, citing an October 2024 paper. "Because there are fewer new homes built, the price of the average new home also goes up."

An unpredictable future with immigration

While Trump and Vice President-elect JD Vance have pledged to deport millions of immigrants as part of a broader crackdown, it's not clear that their ambitious plans are feasible. Tom Homan, Trump's border czar, told The Wall Street Journal he doesn't know how many people may be deported in the first 100 days and said the administration will likely first go after immigrants who are living in the country illegally and with criminal records rather than broad sweeps of immigrant-heavy neighborhoods.

During his first term, Trump oversaw an initial uptick in removals. Still, his administration deported about 1.5 million people — significantly fewer than the 2.9 million people Obama deported during his first term.

On the campaign trail, Vance argued that deportations would lower housing costs, and American-born workers not in the workforce could take on construction jobs.

However, some economists and homebuilders told BI that these conclusions may not hold up. During the pandemic, many older, experienced workers retired, and the pipeline of younger US-born workers isn't sufficient, homebuilders have told BI.

"The only way that we as a country are going to get through our issues with homelessness, the housing price bubble, and the housing crunch issue is to construct more housing," Jennie Murray, president and CEO of the immigrant advocacy nonprofit group National Immigration Forum, told BI. "If we're actually thinking about removing so many of those workers and decimating that industry, it would have a domino effect on our housing shortage issues."

Chad Blocker, a Los Angeles-based immigration attorney, said his firm's clients in the construction industry are attempting to reassure their immigrant workers even as they anticipate a major federal immigration crackdown.

"The immigration enforcement environment is going to change dramatically," Blocker told Business Insider. "There's just a lot of general anxiety among the immigrant communities, including those who are here with lawful status."

Are you a home builder or immigrant construction worker concerned about the impacts of shifting immigration policy? Share your story with these reporters at [email protected] and [email protected].

• The growing population of older Americans is facing unaffordable long-term care.
• These costs will also burden many younger people caring for older relatives and kin.
• Government incentives and public insurance could help address care affordability, experts say.

As the population of older Americans balloons, the financial costs associated with aging are, too.

Many millennials and Gen Xers are facing a stark reality: their parents and grandparents don't have the means to pay for long-term care — and they'll need to help foot the bill, especially since government aid often doesn't cover large parts of this care.

Many younger people end up leaving their jobs or working less in order to care for their aging family members — and that sacrifice can hurt them financially both today and in the future, including by shrinking their income and Social Security benefits, experts say.

"The bigger issue is you can create almost a cycle of poverty," Marc Cohen, a professor of gerontology at the University of Massachusetts Boston, told Business Insider. "It's not something that just sticks with one generation. The costs are borne communally."

Unprepared for a predictable crisis

Much like other forms of care — from emergency rooms to daycares — the labor and facilities needed for long-term care don't come cheap. A shortage of long-term care workers, coupled with inflation, has sent prices up in recent years. As the oldest members of the baby boomer generation near 80, the demand for these services is expected to rise sharply — putting upward pressure on costs.

Privately-provided long-term care — including assisted living communities and home healthcare — is largely out of reach for the broad middle class. Fewer than 15% of people 75 and over living alone in major US cities could afford to pay for assisted living or daily home health aide visits without dipping into their assets, per a 2023 report from Harvard Joint Center for Housing Studies.

"It's the affordability issue, particularly in the middle market, that concerns us the most," Lisa McCracken, head of research and analytics at the National Investment Center for Seniors Housing & Care told Business Insider.

Retirees and their families may not be able to rely on the government to help. Medicare, the government's health insurance program for older people, doesn't cover most long-term care, including assisted living, home healthcare, and nursing homes. Medicaid largely doesn't cover assisted living and home healthcare, and there are often long waitlists for the nursing home care it does cover. Some assisted living residents have been evicted after they spent down their savings and were forced to rely on Medicaid.

"A lot of people thought, 'Oh, well, doesn't Medicare pay for this?' and it does not," Cohen said. "And so people find out late in life that they don't have any protection against these costs."

That's what happened to Erika Gilles and her family. After Gilles' 78-year-old mother, Karen Proctor, was hospitalized for her chronic kidney disease last year, she quickly realized her mother's Medicare coverage wouldn't be enough to cover her long-term care. Overnight, her mother went from living independently in the house she's long owned to requiring dialysis treatment and constant care. But Gilles couldn't purchase private long-term care insurance because of her mother's pre-existing conditions.

Gilles, 57, found a group assisted living facility for her mother, who applied for a state subsidy to help cover the cost. If the subsidy doesn't come through, Gilles is worried they'll have to sell her mother's house in Sun City, Arizona.

"It's totally turned my life upside down. It's absorbed all of my time," Gilles said. "I don't think I'm ever going to retire."

It's not just a boomer problem

Gen X, many of whom are sandwiched between caring for their aging parents and dependent children, has fallen behind in their financial savings. A study conducted by Nationwide showed that 56% of Gen Xers were financially supporting either their parents or their kids. About a fifth of Gen Xers taking care of a parent said they had a significant amount of debt, and a similar portion said they were unable to save for retirement, the study found.

The number of US adults who care for a spouse, older parent or relative, or child with special needs has grown from 43.5 million in 2015 to 53 million in 2021, per a report from the insurance provider Guardian.

A separate survey of 35- to 60-year-olds conducted by Carewell found that 75% of those taking care of both a parent and a child said they struggled to save for retirement, while 63% said they lived paycheck to paycheck. Meanwhile, adult caregivers provided around $600 billion worth of unpaid labor last year, noted a separate report from the AARP.

Brandon Goldstein, a financial planner at Prudential, said he frequently works with clients struggling to care for their parents as they get older. In some cases, his clients are experiencing financial stress as a result of caretaking and have been forced to cut back on saving.

Some of them may need to bank on their own children taking care of them in the future, he suggested, given how much they've sacrificed in their own retirement savings.

"Having to reduce what you put towards retirement is going to put you in a situation where you might not have assets now, and you could — I don't want to call it a burden — but you might become this responsibility if you don't have assets to cover a facility," he told BI, adding that some may need to consider working for longer than they originally expected.

Ultimately, through ballooning Medicaid costs, taxpayers may be on the hook for the growing long-term care crisis. An increasing number of older people don't have kids or spouses to take care of them as they age, and those that end up needing long-term care may have to rely on Medicaid. About a fifth of baby boomer women don't have any children, and those who do have kids have fewer, on average, than previous generations.

A government-aided solution for long-term care?

Cohen argues that the private long-term insurance market is suffering from "a clear market failure" and policymakers need to step in to create a public option for middle-income people and their families.

McCracken said that in order to scale some of the most effective models of assisted living and other long-term care, private providers will need more government incentives and partnerships.

Cohen argued that public long-term care insurance would work well if most people paid into it because a relatively small number of older people require the most expensive care, like 24/7 nursing.

That option could resemble an earned benefit, like Social Security and Medicare, funded by a mandatory tax that people pay throughout their lives and collect when they retire. Rep. Tom Suozzi, a New York Democrat, has proposed legislation that would create a public insurance program for catastrophic long-term care funded by a payroll tax.

Some states have begun to address the issue. Washington State recently passed a 0.6% payroll tax to fund a new universal long-term care insurance program called WA Cares, which provides $36,500 in care per person, and will increase with inflation in future years.

Gilles said she wants to see the government or care providers figure out a way to lower costs.

"They've got to provide more support to families going through this," she said. "They've got to either make it more affordable, or they need to provide more resources, or not make it so expensive so that it's attainable for anybody at any income level."

Are you or someone you care for struggling with long-term care costs? Email this reporter to share your story: [email protected].

• Thousands of LA County homeowners face a volatile home insurance market.
• In recent months, State Farm — California's largest home insurer — dropped thousands of policyholders.
• Some have turned to the state's insurer of last resort.

Thousands of California homeowners at risk due to the Los Angeles County fires find themselves exposed in a volatile home insurance market.

Last year, California's largest home insurer — State Farm — canceled thousands of policyholders' plans across LA County, including the Pacific Palisades and parts of Santa Monica and Calabasas, that are under evacuation orders and warnings as the fires rage. Nearly 70% of State Farm policyholders in the affluent Pacific Palisades neighborhood were dropped by the company beginning in July 2024.

The following table shows the ZIP codes that were under evacuation orders or warnings as of Wednesday afternoon that had the highest rate of nonrenewals from State Farm last year.

Several other major insurers have dramatically restricted their coverage across California in recent years, citing surging costs from more frequent and intense disasters coupled with rising home repair costs and inflation.

Thousands of LA County homeowners who haven't been able to obtain private insurance have joined the ranks of those covered by the state's insurer of last resort — the Fair Access to Insurance Requirements (FAIR) plan. The FAIR plan is regulated by the state government and backed by a slew of private insurance companies. But its premiums tend to be much higher than typical private insurers and its coverage is often more restricted.

This table shows how FAIR insurance coverage has changed in the above ZIP codes between 2023 and 2024.

As private insurers have stepped back in recent years, the number of residential FAIR plan holders across the state jumped 123% between September 2020 and September 2024. The FAIR plan's dollar-value residential exposure surged from $271 billion in September 2023 to $431 billion in September 2024.

It's not clear how many homeowners impacted by the LA County fires are uninsured. Most mortgage lenders require homeowners to purchase insurance, and some require additional insurance for specific disasters, including fires.

Some major home insurers, including Farmer's — the second-largest in California — have recently begun to expand their offerings in California after the state announced new regulations requiring insurers to cover a certain percentage of homes vulnerable to fire in exchange for allowing them to use future risk modeling to calculate premiums.

In 2023, California had the fourth-highest home insurance nonrenewal rate among states, according to a recently released Senate Budget Committee report. Six of the top 10 counties in the country with the highest rates of nonrenewals by large home insurers in 2023 were in California, the report found.

But rising home insurance costs and rates of dropped policies are nationwide problems. The National Bureau of Economic Research recently reported that average home insurance premiums spiked by 13%, adjusted for inflation, between 2020 and 2023. The share of home insurance policies from large insurers that weren't renewed increased last year in 46 states, the Senate report found. And more than 200 US counties saw their non-renewal rates spike threefold between 2018 and 2023.

Areas more vulnerable to disasters, including flooding, wildfires, and hurricanes, have seen the biggest spikes in premiums and dropped policies.

"Our number one priority right now is the safety of our customers, agents and employees impacted by the fires and assisting our customers in the midst of this tragedy," a representative for State Farm told BI.

A representative from the California FAIR Plan Association also told BI in a statement that the insurer is "prepared" to handle the wildfire impact, and "has payment mechanisms in place, including reinsurance, to ensure all covered claims are paid."

Representatives for Farmer's did not respond for comment.

Have you been dropped by your home insurance company or are you facing a steep premium increase? Email this reporter to share your story: [email protected].

• Older people, including homeowners, are increasingly facing housing insecurity.
• The phenomenon is in part due to housing shortages, inflation, and an aging population.
• Some homeowners told BI they live in fear of losing their properties.

Owning a home has long been a pillar of the American dream, but for many older homeowners, it's no longer providing the retirement security it once did.

Many baby boomers are struggling with rising home repair costs, insurance premiums, and property taxes while also facing a scarcity of affordable retirement housing options. And working all their lives isn't enough to prevent a growing number of older people from experiencing homelessness.

Rising rents and home prices, largely caused by a housing shortage and other cost-of-living spikes, are hitting older adults especially hard. Overall homelessness surged to its highest level on record last year, according to the federal government's most recent count conducted in January 2024. And older people make up a growing share of those losing their homes: The portion of homeless single adults 50 or older is estimated to have grown from about 10% to 50% over the past three decades.

"The cost of housing and the cost of everything, quite frankly, is getting more and more expensive," Marcy Thompson, vice president of programs and policy at the National Alliance to End Homelessness, told Business Insider. "And this is particularly true for older adults who are on fixed incomes."

Homeowners on the brink of homelessness

Valerie Miller, 67, has owned her mobile home in San Bernardino, California for almost 35 years, but she's still struggling to pay rent for the plot her home sits on and can't afford needed repairs and maintenance.

Miller, who never married or had children, is planning to wait until she's 70 to collect Social Security but has already begun dipping into her meager retirement savings and worries she'll never be able to leave her job at a truck-permitting company. Miller has considered selling her home, but she doesn't know where she could find more affordable housing.

"Sometimes I lie awake at night and I'm so worried," she said. "I don't want to use up all my savings, and then what do I do? Live off credit cards or go with the homeless people?"

The increase in homelessness among older Americans is a result both of demographic shifts — the baby boomer generation is getting older — and rising housing and other costs. The number of older homeowners and renters who spend more than 30% of their income on housing costs has surged in recent years.

Allison Nickerson, executive director of LiveOn NY, a nonprofit group focused on improving living conditions for aging people, argued that Americans tend to underestimate the number of older people suffering. A fifth of Americans 50 and older have no retirement savings.

"There's this feeling that baby boomers and older people are pretty comfortable," she said. "But when you actually look at the the amount of people who are struggling, and then looking at the cost of living that has gone up, inflation that's gone up, people are just getting left behind."

Barbara Willing, 69, an artist who's worked on and off at Walmart and Lowe's, has struggled to make a steady income in recent years as she suffers from an autoimmune disease. She bought her home in Victor, Montana — a small town 35 miles south of Missoula — more than twenty years ago and is still paying off her mortgage.

"I have to keep the place I'm in, even though it's inadequate in a lot of ways, because to move would cost me so much more," Willing said, noting that her home has electrical and plumbing issues. She said that the fear of losing her home "continues to loom and gnaw on my conscience and nerves."

Willing has been out of work since July and is looking for her next sales job, but she worries her aging car won't last long traveling the nearly two-hour roundtrip commute to Missoula should she find a job there. Without any retirement savings, she said she's relying largely on her small Social Security checks, a local food bank, SNAP, and disability benefits to make ends meet.

"I've gotten over the anguish, the humiliation of having to go to the food bank," she said. "I actually like going there now, and I tell them how great they're doing."

• An extra tax on home sale profits over $250,000 was designed to target wealthy homeowners.
• But as home values have soared, the tax is impacting middle-income people, too.
• Two older homeowners said they wanted to downsize but had been discouraged by the tax.

Many older homeowners have benefited from soaring home prices in recent years, but as they look to cash in and downsize, some are discouraged by a federal tax that applies to a growing number of home sales.

Since 1997, home sellers have had to pay federal capital-gains taxes on profits above $250,000 for a single person and $500,000 for a couple. The policy was designed to target the most affluent. But because the tax isn't indexed for inflation and home values have climbed so much, it's begun to impact middle-income people too.

Some older Americans who have retired or are near retirement told Business Insider that the tax had deterred them from downsizing and that they feared it would eat into crucial savings. The tax may be discouraging empty nesters from selling their larger homes to growing families, worsening a shortage of starter homes.

The share of home sales subject to the tax has more than doubled in the past few years. In 2023, 8% of US sellers made more than $500,000 in profit on the sale of their homes, the property data firm CoreLogic found. That's up from 1.3% in 2003 and 3% in 2019. If the threshold had been adjusted for inflation, the $250,000 cutoff for individual home sellers in 1997 dollars would be about twice as high — $496,000 — in 2024 dollars.

"What we know, anecdotally, is that people are feeling locked in," Selma Hepp, the chief economist at CoreLogic, told BI. "There are a good share of people for whom this is the only source of wealth savings."

Some retirees are reluctant to sell

David Levin, 71, has lived in Manhattan Beach, California, since 1978. Now retired, Levin and his wife want to sell their four-bedroom house and buy a smaller home in their neighborhood that they can grow old in.

Their housing investments have paid off — the couple paid $632,000 for their home in 1991, and it's now worth an estimated $2.8 million, according to a local real-estate agent Levin consulted. While they've benefited from their soaring home equity, selling at that price or higher would come with an extra-large tax bill.

Levin estimates that he and his wife will have to pay several hundred thousand dollars in capital-gains taxes when they sell their home. Because the couple is relying on cash from their home sale to support them through retirement, Levin doesn't think they can afford to stay in Manhattan Beach — or live anywhere close by.

"If we sell our house, pay the capital gains tax, with what we're left over with we can't find anything to buy that's anywhere as nice as the home we're in," he said.

Levin, who operated retail stores before he retired, and his wife, a homemaker, both volunteer at their local community college, and they live on Levin's Social Security checks and retirement savings. But they're relying on their home equity to help support them as they age. "Our house has been a piggy bank, so the house is what secures our retirement," he said.

Levin was quick to point out that he felt these were "rich people's problems," but they're indicative of how even well-off boomers are struggling to retire comfortably in the communities in which they've built their lives.

"How can you feel sorry for us? I mean, we have so much more than most people have," Levin said. "It's just the circumstances of our lives make us stuck in our home."

Relief may be on the horizon

Some Washington policymakers are taking note of the strain on some of their constituents. Democratic Rep. Jimmy Panetta, whose district includes several pricey coastal California housing markets, has introduced a bill that would double the tax exclusion to $500,000 for individuals and $1 million for joint-filing couples and index it to inflation. The More Homes on the Market Act is designed to incentivize more homeowners to sell and boost the housing inventory.

"I firmly believe that such a simple, straightforward fix would allow homeowners to downsize, sell their homes, and secure their nest-eggs," Panetta said in a statement to BI. "It's also a commonsense way to help expand the housing market, tackle housing affordability issues in our communities, and better ensure that more families have access to owning a home."

Raising the threshold for the capital-gains tax on primary home sales and indexing the tax for inflation would be a boon for buyers and sellers alike, Hepp said.

"It would provide some velocity in the market and maybe release some inventory that's not efficiently utilized, like baby boomers living in a really large home when they would prefer a smaller home," she said. The real-estate company Redfin reported that as of 2022, empty-nest boomers owned twice as many homes with three or more bedrooms as millennials with kids.

Andrea S., a 60-year-old homeowner in the Los Angeles neighborhood of Sherman Oaks, hopes Congress will pass Panetta's bipartisan bill before she sells her home to pay for her retirement.

"I'm kind of hanging on for that, quite frankly, and hoping they get it through," she said.

The former agent and producer, who requested partial anonymity to protect her privacy, bought her two-bedroom bungalow in 1994 for $245,000. A Zillow estimate reviewed by BI says the home is now worth about $1.3 million. She's weighing a slew of different factors in deciding when to downsize, including rising home insurance premiums and mounting home maintenance costs.

"I'm gambling," she said. "Do I wait for that big write-off? What happens if they don't insure houses anymore? Is that going to make the cost of my house go down?"

• Homeowners are increasingly being dropped by their private home insurers.
• Regions with the highest nonrenewal rates are most prone to wildfires, hurricanes, and other disasters.
• A new Senate report warns of economic risks as climate change destabilizes insurance markets.

Homeowners across the country are increasingly facing a stark new reality: they're losing their home insurance.

The share of home insurance policies from large insurers that weren't renewed increased last year in 46 states, a report released Wednesday by the Senate Budget Committee found. The increasing frequency and intensity of disasters like wildfires, hurricanes, and flooding and the rising cost of rebuilding have pushed many insurers to drop customers or hike premiums. This has left thousands of homeowners scrambling to find new insurance policies or joining the growing ranks of those going without insurance.

More than 200 counties saw their non-renewal rates spike threefold between 2018 and 2023. Counties in Northern California and South Florida saw among the highest rates of nonrenewals. Coastal counties in Massachusetts, Mississippi, and North Carolina also saw dropped policies soar. Manhattan ranks 20th, with rates of dropped policies rising from 1.25% in 2018 to 4.11% in 2023.

The national scale of home insurance nonrenewals was previously unknown because insurance companies are regulated at the state level. The National Association of Insurance Commissioners said not all states collect granular data about the availability and affordability of coverage in some areas. The association in March announced an effort with state insurance regulators to try to fill the gap.

Senate Budget Committee Chairman Sheldon Whitehouse launched his own investigation into the homeowners' insurance market last year. He received nonrenewal data from 23 companies accounting for about two-thirds of the market. In testimony on Wednesday, Whitehouse said he demanded nonrenewal data because experts suggested policies being dropped were an early warning sign of market destabilization. He also said they correlated with higher premiums.

The American Property Casualty Insurance Association, a lobbying group representing insurance companies, said nonrenewal data doesn't provide "relevant information" on climate risks. Many factors, including a state's litigation and regulatory environment, factor into nonrenewal decisions, the association said.

The association added that more costly weather disasters, combined with inflation and overbuilding in climate-risk regions, are making insurance less affordable for many Americans.

Home insurance premiums are rising in many regions across the country. The National Bureau of Economic Research recently reported that average home insurance premiums spiked by 13%, adjusted for inflation, between 2020 and 2023.

Most mortgage lenders require homeowners to purchase insurance, and some require additional insurance for specific disasters, including flooding. Insurers refusing to offer coverage can hurt home values because homes that can't be insured in the private market are less desirable to potential buyers.

The Senate Budget report warned that the insurance crisis will get worse as the climate crisis fuels more frequent and destructive disasters, including hurricanes, wildfires, and flooding. A destabilized insurance market could "trigger cascading economy-wide financial upheaval," the report said.

"The failure to deal with climate change isn't just driving up the cost of homeowners' insurance, it's making it harder for families to even find homeowners' insurance, and that makes it harder to get a mortgage," Whitehouse said in a statement to Business Insider. "When the pool of buyers is limited to only those who can pay cash, it cuts off pathways to homeownership—particularly for first-time homebuyers—and risks cascading into a crash in property values that trashes the entire economy."

Have you been dropped by your home insurance company or are you facing a steep premium increase? Email these reporters to share your story: [email protected] and [email protected].

• Private home insurers are dropping a growing number of customers in most states, a Senate report found.
• That leaves homeowners at risk, turning to more expensive last-resort options or going uninsured.
• While Florida has managed to reverse the trend somewhat, the risk to homeowners is set to intensify.

As Americans flock to places in the US vulnerable to natural disasters, private home insurance companies are running the other way.

The problem has left a rising number of homeowners with just one option to cover property damage: insurers of last resort.

The scale of homeowners losing their plans became clearer on Wednesday after a Senate Budget Committee investigation found that private insurers' nonrenewals spiked threefold in more than 200 counties between 2018 and 2023.

"What our new data reveal is that the failure to deal with climate change is also affecting whether families can even get homeowners insurance, which threatens their ability to get a mortgage, which spells trouble for property values in climate-exposed communities across the country," Senate Budget Chairman Sheldon Whitehouse said in releasing the report.

A recent study by Harvard University's Joint Center for Housing Studies found that between 2018 and 2023, the number of properties enrolled in California and Florida's insurers of last resort more than doubled. A similar trend is playing out in Louisiana. While Florida has reduced participation this year, it still has the highest enrollment in the country.

The problem isn't isolated to the most predictable states. The Senate Budget Committee found that the rate of homeowners losing their private insurance also rose in Hawaii, North Carolina, and Massachusetts.

Policymakers and insurers are trying to stabilize the private market, by enacting new laws and overhauling regulations. However, with scientists predicting that climate-fueled disasters will become more frequent and severe for the foreseeable future, the risk to America's homeowners is mounting.

Growing insurance risk has some states looking for solutions

In nearly three dozen states, insurers of last resort, known as Fair Access to Insurance Requirements, or FAIR, are available to homeowners and businesses who struggle to find insurance on the private market.

The numbers are rising because private insurers are pulling back coverage and hiking premiums in areas at risk of wildfires, hurricanes, flooding, and other disasters often made worse by climate change.

While state-mandated FAIR plans are designed to be a backstop, insurance regulators and private insurance companies are alarmed by how many homeowners and businesses are enrolling, especially in California and Florida. The plans are often more expensive and provide less coverage. Plus, saddling one insurer with the riskiest policies increases the chances of one major disaster sinking the system and leaving taxpayers and insurance companies with the bill.

Florida and California are trying to reverse the trend, and Florida has seen some progress. The state's insurer of last resort, Citizens Property Insurance Corporation, said on December 4 that its policy count dropped below 1 million for the first time in two years.

Mark Friedlander, a spokesperson for the Insurance Information Institute, said the drop reflects a series of changes in recent years to stabilize the state's private insurance market after more than a dozen companies left the state or stopped writing new policies.

The Florida legislature passed laws to curb rampant litigation and claim fraud that drove up legal costs for private insurers. Friedlander said insurance lawsuits in the first three quarters of 2024 are down 56%, compared with the first three quarters of 2021 — the year before the new laws were enacted. Citizens also started a "depopulation" program that shifts customers to the private market. State regulators in October said they had approved at least nine new property companies to enter the market, and premiums weren't rising nearly as much as last year.

In California, many of the deadliest and most destructive wildfires have occurred within the last five years. As a result, some private insurers are hiking premiums and limiting coverage in risky areas, pushing more homeowners to the insurer of last resort. The Harvard study found that policies in the state's FAIR plan doubled between 2018 and 2023 to more than 300,000. As of September, the California Insurance Commission said policies totaled nearly 452,000.

The commission is working to overhaul regulations to slow the trend, including requiring private insurers to sell in risky areas. In exchange, it should be easier for companies to raise premiums that factor in reinsurance costs and the risks of future disasters. That should help stabilize rates, said Michael Sollen, a spokesman for the commission.

Sollen added that in the past, private insurers could seek approval for higher premiums but weren't required to offer coverage in wildfire-prone areas.

"In a year from now, what's happening with the FAIR plan will be a key measure for us," he said. "We expect to see those numbers start to stabilize and go down."

A mounting home insurance crisis

Still, a reduction in state-backed plans isn't necessarily a sign of progress, Steve Koller, a postdoctoral fellow in climate and housing and author of the Harvard report, told Business Insider.

A growing number of homeowners in places like Florida, Louisiana, and California are purchasing private insurance from nontraditional providers barely regulated by state governments. These so-called "non-admitted" insurers don't contribute to a state fund that guarantees homeowners will have their claims paid even if the insurance provider fails, leaving their customers without access to this backup coverage.

"Someone could be moving to a private insurer from Citizens, and that insurer might have higher insolvency risk," Koller said.

He added that more homeowners are opting out of insurance altogether. The number of US homeowners going without insurance has soared from 5% in 2019 to 12% in 2022, the Insurance Information Institute reported.

Plus, Americans are increasingly moving into parts of the country most vulnerable to extreme weather. Tens of thousands more people moved into the most flood—and fire-prone areas of the US last year rather than out of them, the real estate company Redfin reported earlier this year.

As insurers of last resort try to shift more risk to the private market, home insurance premiums are expected to keep rising. That's especially true in the areas hardest hit by climate-fueled disasters.

If private insurers exit hard-hit regions en masse in the future, Koller said states might need to become the predominant insurance provider in the same way the National Flood Insurance Program took over after the private market for flood insurance collapsed in the 1960s. Most flood insurance plans are still issued by the federal government.

"My guess is states are going to work very, very hard to avoid that and ensure the existence of a robust private market, but that's a parallel that I can't personally unthink about," he said.

Have you struggled to get home insurance, moved to an insurer of last resort, or gone uninsured? Contact these reporters at [email protected] or [email protected].

• Three baby boomer homeowners told BI they want to downsize but can't find suitable options.
• Rising home prices have led to a big increase in their home equity over the years.
• But those rising prices also make it harder to find affordable homes for retirement.

As many baby boomer homeowners look to cash in on their home equity and downsize, some are grappling with a shortage of suitable homes.

Older homeowners are increasingly staying put, as mortgage rates and housing costs remain stubbornly elevated and inventory— particularly of affordable and accessible homes — is scarce. Some simply can't find a suitable home that would leave them with enough cash to retire on, while others simply don't feel downsizing is a savvy financial move with housing and borrowing costs so high.

Kim Cayes is one of those boomers who feel stuck. The 67-year-old always banked on selling her four-bedroom house in Parsippany, New Jersey, to help support herself in retirement.

"My plan had kind of been: save everything I can, and then when I retire, move someplace cheap and use the equity in my house to buy a house in cash to reduce my costs," she told Business Insider.

Cayes bought her home for $245,000 in 2000 after her divorce. She added a major addition and has since benefited from New Jersey's soaring home prices — the house was recently appraised at nearly $700,000, according to documents reviewed by Business Insider.

But Cayes, now semi-retired from corporate communications, is no longer interested in leaving northern Jersey for a cheaper part of the country. Two of her three adult children live with her, and she doesn't want to leave her community.

"I would hate to move somewhere and leave one of my kids behind because, not being married, my kids are all I've got," she said. "Especially as you get older, you need a network of people."

Cayes is looking for a single-story home in the $400,000 to $450,000 range. But she hasn't had any luck finding something suitable. She says the homes she's looked at would need a lot of work and aren't in familiar neighborhoods.

"Thinking I'm going to spend the final years of my life in a worse situation than I've ever been in — that's just so depressing," Cayes said. "Especially when my friends are all traveling around the world with their spouses and constantly posting on Facebook which countries they're in."

'A lateral financial move'

Some boomers who can afford to stay in their homes don't want to endure the costs and possible stress associated with downsizing. Even those who are still paying off their homes often have much lower mortgage interest rates than what they could get on the market today, hovering around 6.5%. And leaving a familiar home and neighborhood can be emotionally taxing.

Dorothy Lipovenko, 71, and her husband love the single-family home in a well-connected neighborhood of Montreal where they've lived for nearly 25 years. But the options to downsize in their area seem limited to pricey new condos and old homes that need major repairs. Lipovenko doesn't want to live in a modern condo without green space, but she also doesn't want to take on a home renovation project.

"It becomes a lateral financial move, and that is what has us saying 'no,'" she said. "Downsizing is a huge undertaking, physically and emotionally, and a one-for-one trade makes no sense."

Ideally, Lipovenko and her husband would move to a smaller, single-floor house — she dreams of a Levittown-style suburban starter home, she said.

"It's not just giving up possessions and going into a smaller space; it's shrinking a lot of things to fit a new mindset," she said. "I just can't see my husband and I spending the last decades of our life in a little apartment."

'I'm lucky I have this house'

Andrea S., 60, already lives in a single-story starter home in Sherman Oaks, California, that's well-suited for a retiree. But Andrea, who requested partial anonymity to protect her privacy, isn't sure she can afford to stay in it.

The former agent and producer bought her two-bedroom bungalow with her ex-partner in 1994 for $245,000. She's lived in the home ever since, hasn't made any major improvements, and has a housemate to split the bills with. The Zillow estimate, reviewed by Business Insider, found the house is now worth about $1.3 million.

"I'm lucky I have this house," she told Business Insider. "I just hate the fact that the house is pretty much my pension fund."

Andrea's income is lower than she expected it to be at this point in her life — she's struggled to work since suffering from a head injury in a car crash in 2021. Meanwhile, the pandemic and Hollywood writers' strike killed off some of her projects, she said. At the same time, maintenance and repair costs for her nearly 75-year-old house are daunting: the HVAC system needs to be replaced, and the pool and large yard are expensive and energy-intensive to maintain.

"If I can't get a job that covers me enough to cover my bills, then I have to think about do I sell the house," she said.

But she's concerned that she won't be able to find an affordable home in a neighborhood as pleasant and walkable as hers, especially on a budget that makes sense. After her crash, she gave up driving and wants to keep living in a place with bus access and grocery stores within walking distance. Plus, she's concerned about the capital gains tax she'll need to pay if she sells the home.

"I'm realizing now, at age 60, all the things that you become very vulnerable to, especially when you're a woman and you don't have a life partner," she said.

Andrea and her friends joke about their dream of retiring together in the British seaside town of Port Isaac — the idyllic setting for the early-2000s TV show "Doc Martin."

"You get some nice little cottage in town. They don't have big yards. And you walk out your door, and you see the lovely English coastline," she said. "That sounds good to me."

Are you struggling to downsize or find a suitable home to retire in? Are you otherwise affected by the cost of retirement housing? Reach out to this reporter at [email protected].