Landlords of NYC affordable housing launch new venture to combat spiking insurance costs

Several affordable housing landlords are fighting back against skyrocketing insurance rates with a new strategy that they say will get costs under control and improve conditions for tenants: insuring themselves.

The owners of a combined 80,000 apartments — all with regulated rents and government financing — launched an insurance collective last month after a series of dramatic spikes in the cost of property and liability insurance, which covers damages and lawsuit settlements.

One of the collective's members, John Crotty, said the ever-increasing insurance costs are threatening the ability to repay loans and are eating into other expenses, like building repairs and maintenance that can make life worse for tenants.

“It's had a very adverse effect on the housing stock of New York, on the housing operators, and put into real question the future of what affordable housing could be in New York,” said Crotty, who founded the Bronx affordable development firm Workforce Housing Group and served as a top housing official in the Bloomberg administration.

“If you don't solve this insurance cost problem, you will not have affordable housing,” Crotty said.

A March report from the policy group New York Housing Conference found insurance rates more than doubled for affordable apartments in New York City between 2019 and 2023, reflecting a national trend .

The average insurance cost for a single affordable unit rose from $869 in 2019 to $1,770 last year, according to the report. The policy group found insurance rates reached as high as $3,081 per apartment in the Bronx. It defines “affordable housing” as apartments subject to rent stabilization and government agreements.

The new insurance venture, called Milford Street Association Captive Insurance Company, officially formed last month. Members of the collective pool their money to cover claims.

Crotty said the members must be New York-based, must have an agreement capping rents and must receive some form of government financing. The participants include Wavecrest Management, which runs more than 30,000 New York City apartments, and Workforce Housing Group, which has about 2,000 units, including more than 100 at 1520 Sedgwick Ave. — a building known as the birthplace of hip-hop.

Gloria Robinson, president of the 1520 Sedgwick Ave. Tenants Association, said the savings and stable pricing for the property owner should lead to better overall conditions in buildings like hers because landlords have more money to spend on repairs and maintenance.

“We need money invested in keeping our rents affordable and our building in a state of good repair, not in usurious insurance premiums that suck money out of our neighborhood,” Robinson said in a statement.

The venture comes as the state also attempts to combat discrimination in the property insurance industry contributing to higher rates, as detailed in a Gothamist investigation last year . The state’s Department of Financial Services began warning insurers to stop asking landlords whether they rent to tenants with housing vouchers or about their tenants’ monthly earnings to comply with a new anti-discrimination law approved as part of the state budget.

Crotty said members of the new collective compiled and shared substantial information on past claims and insurance payouts to prove they were spending too much on premiums given their limited risk histories. He said government-financed housing is subject to strict oversight and must meet safety requirements.

“They get lumped into this concept of, ‘It's sort of like a slum. It's an old deteriorated building,’” but that's not what the reality is,” he said. “These buildings are maintained more like a mixed-income or luxury rental building.”

The group began strategizing to create the collective more than two years ago, with guidance from the late Richard Ravitch, a former lieutenant governor and real estate developer.

Before his death last year, Ravitch told Gothamist he wanted to start the project because insurers were raising rates or denying coverage for properties in low-income neighborhoods, especially in the Bronx.

“It’s a form of redlining,” Ravitch said in May 2023. “We’re trying to fix it by creating a whole structure to provide insurance so the owner will have the same protections they had before and won’t pay these crazy premiums they’ve been forced to pay.”

The new venture is earning praise from high-ranking elected officials, including Senate Majority Leader Chuck Schumer.

“In the midst of a housing affordability crisis in New York, the spike in insurance costs for multi-family housing is making it harder to build the affordable housing we need for healthy families and a prosperous city,” Schumer said in a statement.

Comptroller Brad Lander said the rising insurance costs are an “insidious threat” to the city’s affordable housing stock and praised the new collective. to New York City’s affordability housing stock

The program also has support from top city and state housing officials.

“We need every idea at the table when it comes to addressing our city’s affordability crises,” said Leila Bozorg, the executive director for housing in the mayor’s office.