Lawmakers Must Solve the Insurance Crisis Driving New York’s Affordable Housing Crunch

Gov. Kathy Hochul recently announced new guidance to prevent insurance discrimination against affordable housing development statewide. This is a good step forward. But more needs to be done to rein in out-of-control insurance premiums if New York is to have any hope of successfully building its way out of the affordable housing crisis.

Insurers are increasingly more reluctant to cover affordable housing because of the perceived risks of the financial liabilities that are presented when building in high-density, low-income neighborhoods. To be clear, this is an unfounded and offensive judgment to render on individuals living in affordable housing. Creating financial roadblocks to affordable development is a disappointing and deceptive tactic used to raise revenue. But it is happening, as a new report from the New York State Department of Financial Services (DFS) and the Division of Housing and Community Renewal (DHCR) revealed a staggering 43 percent average increase in insurance costs from 2019 to 2021.

Unlike market-rate housing, where landlords have the flexibility to adjust rents to cover rising operating costs, affordable housing developers are bound by strict rent limits. Their choices are either to seek additional public subsidies or withdraw from the sector entirely, which only serves to exacerbate the already scarce supply of available units.

The rising cost of insurance makes building affordable housing units untenable for developers and investors across the state. New York doesn’t have the luxury of waiting to address this problem, given the existing shortage of over 666,000 rental homes affordable and available for renters with extremely low incomes.

With every increase in premiums, insurers are destroying the stability of existing affordable housing and undermining the financial viability of new housing projects. This hidden threat is putting affordable housing at risk of financial insolvency, jeopardizing the entire affordable housing ecosystem, and the housing accessibility for countless vulnerable New Yorkers. 

From skyrocketing premiums, insurance underwriting risk and rating factors, stringent federal, state and local rules and regulations mandating insurance coverage, insurance discrimination in affordable housing, and a lack of insurers in the New York marketplace, the urgent need for state-level intervention is clear. The industry is clearly not in a position to self-regulate and overcome this problem on its own. 

New York state can be a national leader in solving this crisis. The DFS and DHCR report sets the framework for evolvement. We applaud Gov. Hochul and state legislators for taking the first measurable step to address one of the report’s key findings by prohibiting insurance discrimination in affordable housing.   

But there is much more work to do. Every idea should be on the table: Regulatory and policy changes, the creation of new programs to offset costs, incentives for insurance companies, risk mitigation strategies, and strict anti-discrimination enforcement measures could all play a role.

The work done by the New York State Association for Affordable Housing to highlight the insurance crisis has set the stage for progress, and the increasing attention being paid to this issue is an encouraging sign. We must continue this upward trajectory. While new initiatives from stakeholders of the New York housing industry emerge, the state has an opportunity to address the insurance cost crisis head-on. 

It is time for Albany to make lasting changes that will alleviate the burden of rising insurance costs and create more measures that provide financial relief to safe and affordable housing throughout the state. We look forward to working with the governor, legislative leaders, and industry partners to ensure progress is made in the coming session.

Jolie Milstein is president and CEO of The New York State Association for Affordable Housing.