Opinion: Protect housing affordability by confronting New York’s looming insurance crisis

New York has set bold goals to expand affordable housing, but there’s a quiet crisis that threatens to derail it: the skyrocketing cost of insurance.

New York is aiming to build 800,000 new homes over the next 10 years. But nearly 1 in 5 affordable housing developers say they’ve had to pause projects due to insurance challenges. Insurance premiums are now the fastest-growing operating cost in affordable housing, surpassing utilities and maintenance.

For affordable housing developers, soaring insurance rates on an already tight budget are an existential threat. It’s time that New York treats it like one.

According to the New York Housing Conference, between 2019 and 2023, the average insurance cost per affordable unit jumped 103% from $869 to $1,770 in New York City. In the Bronx, where I proudly serve in the Assembly, insurance premiums for affordable units have skyrocketed to over $3,000 per unit. Several insurers have even left the market entirely, refusing to provide coverage for buildings that use Section 8 vouchers in the Bronx and across the city. This is creating unfair market power for insurance companies, who are getting a free pass to raise insurance costs without reason.

These increases also put a financial strain on tenants, driving up the cost of rent. Renters currently pay close to 25% of their rent on insurance alone. And when I speak with my in-district homeowners, their top concern is the unjustified rise in their property insurance, year after year. In Bronx County, homeowners paid an average of $2,221 last year, which is 49% more than in other counties with the same level of very low risk, according to recent data from the National Bureau of Economic Research.

Insurance is a non-negotiable expense for nearly everyone; lenders, including government agencies, won’t provide mortgages or other loans without it. Renters pay insurance even though it is not a clear line item in their rent statement. Owners of larger buildings, including affordable housing developers, must purchase property and liability insurance for the purpose of covering damages to the property and lawsuits. Increasingly, owners of multifamily units have to take out excess liability coverage because they can’t find insurance that covers all of their assessed risk.

Worsening natural disasters fueled by climate change – from storms and flooding to tornadoes and wildfires – are undoubtedly playing a role in rising premiums. But for far too long, policymakers have accepted that climate change impacts alone are driving up the rates – without asking more questions and demanding more data from both insurers and regulators on what goes into underwriting risk, the different types of claims, what states pay and more. 

The lack of transparency in underwriting likely contributes to a very profitable property insurance market. These insurers use proprietary catastrophe and risk models that function as completely opaque systems, enabling them to raise rates without any independent verification. Without comprehensive checks, it’s no surprise that an industry valued at nearly $1.1 trillion this year would make it impossible to pinpoint the root causes for insurance premium increases.

Furthermore, the trend of insurance companies refusing to reinsure affordable housing units and abandoning neighborhoods altogether – particularly those neighborhoods where many low-income communities of color predominantly live and work – raises very serious concerns about modern-day redlining. Constituents across New York state deserve answers on how insurance companies are operating in our state.

Insurers are regulated by the state Department of Financial Services. A recent DFS report in 2022 mandated by the Assembly about property insurance leaves much to be desired; it promised insurer surveys on pricing by property type, but this was never completed, and little information was provided on actual claims. While both DFS and the Department of Homes and Community Renewal recognize the scale of this challenge, no comprehensive state solution has been proposed to date.

That is why I’ve introduced a legislative package to address affordability and increase transparency in the property insurance market for New Yorkers. We must confront these challenges head-on to ensure affordable housing construction can proceed, and tenants and homeowners alike across the state can sustain their homes

Annual, New Reporting: This bill requires DFS and HCR to release a yearly report on premiums, nonrenewals and other denials, excess line placements, exclusions, deductibles and claims for multifamily affordable housing, including statewide and regional data, so policymakers and the public can see how insurance costs affect housing affordability.

Statewide Task Force: This legislation creates a Statewide Housing Insurance Task Force led by DFS and HCR with insurers, reinsurers and housing stakeholders all at the table. The task force will assess market conditions, collect data, hold public sessions, publish collected data and issue reports with recommendations to improve availability, pricing and fairness in the insurance market.

Excess Liability Insurance Relief Fund: I’m also calling on Gov. Kathy Hochul to create a $50 million fund to help fill the growing gap that affordable housing developers face in covering insurance costs. This fund would provide targeted grants of up to $3,000 per unit or $2 million per project.

We currently face a cost-of-living crisis, and now would be a terrible time to shed affordability in housing. We have 800,000 new units to build. The time is now to confront New York’s insurance challenge before it becomes a crisis.