State Provides $2M Loan to Milford Street to Help With Rising Insurance Costs

A new collective of affordable housing landlords trying to ease the burden of rising insurance costs scored a state loan to help fund their own liability insurance coverage.

Empire State Development (ESD), New York State’s economic development arm, has provided a $2 million loan to Milford Street Association Captive Insurance Company, the group announced.

Milford Street — which is owned and operated by New York’s affordable housing industry — will use the loan to “create stability in the market” amid the city’s “affordable housing insurance crisis” through a “captive” insurance company that owners can use to cover damages or lawsuit costs, according to the Tuesday announcement.

In the case of Milford Street, the captive insurer’s customers are affordable housing operators in New York state, who will collectively underwrite insurance costs and pool losses. The shared underwriting within a specific housing sector “combats rising liability insurance premiums,” per the announcement.

“Housing stability — for markets and for individuals — plays a foundational role in New York’s positive long-term economic development outlook,” ESD CEO Hope Knight said in a statement. “Bold ideas and innovative thinking are required to overcome the current affordability crisis, and our partnership with Milford Street reflects ESD’s commitment to working with the broader housing community on solution-oriented strategies that advance Gov. Kathy Hochul’s ambitious, aggressive housing agenda.”

Affordable housing liability insurance premiums in New York City have increased at an annual rate of 21 percent over the last five years, according to a March 2024 report from the New York Housing Conference, the announcement said.

Those rising insurance costs, which are a “critical indicator” for the New York City Rent Guidelines Board when calculating operating expenses for rent-stabilized apartments, “discourage the development of new affordable housing and force current operators to defer necessary maintenance,” the announcement said.

Milford Street will also use ESD’s $2 million loan to cover its initial membership costs, which will help boost its headcount as costs become more affordable to its participants, according to the announcement.

“ESD’s support is critical to not only the success of Milford Street, but to the continued health and existence of New York’s affordable housing market,” John Crotty, a founding member of Milford Street, said in a statement. “Rising insurance premiums are putting intense pressure on the thin margins of affordable housing operators, resulting in fewer projects being underwritten, defraying necessary maintenance and eventually forcing some buildings into bankruptcy.”

Insurance collective Milford was founded in July by a group of landlords that own a combined 80,000 apartments to help combat the increasing cost of liability insurance, the Gothamist reported.

Isabelle Durso can be reached at idurso@commercialobserver.com.