Stories that start with owners of tens of thousands of apartments colluding together usually end badly for tenants, but in the case of the Milford Street Association Captive Insurance Company — a Vermont-registered captive insurance provider created by the owners of a combined 80,000 affordable apartments in NYC — both landlords and tenants will benefit.
The firms got together in response to skyrocketing insurance rates, which shot from an average of $869 to $1,770 in annual per-unit costs from 2019 to 2023, according to a recent analysis.
We rarely get what seems to be unalloyed good news on NYC affordable housing, but this, at least initially, seems like all upside. The units will still all have the requisite insurance, only now with more manageable premiums that will keep more money going to the more crucial daily aspects of keeping affordable housing in good repair and, well, affordable.
Shared risk pooling together is just what insurance is, and if these owners can find a way to do it better, then all the power to them. This is the exact type of competition we like to see in stultified and often monopolistic industries like housing insurance.
These underwriters would surely push back on that characterization, but it seems unlikely they could begin to substantiate why premiums have doubled over four years when costs and payouts for NYC affordable housing — not in frequent disaster zones or otherwise under any particularly dire threat — have not risen commensurately.
In fact, we’d challenge them to actually try to lay out any rationale for viewing affordable properties in the city with suspicion other than base discrimination. If there are issues of disrepair that could drive risk up, at least one big reason is the exorbitant insurance costs in something of a chicken and egg problem. They should not count themselves surprised that landlords are seeking alternative arrangements, but rather be thankful that the gravy train has chugged on as long as it has.
Insurance pools, of course, work best when the risk pool is larger, and we hope more affordable housing operators think about joining this and potentially other such groups. One idea could be for the city and state to invest some government funds with these enterprises at competitive interest rates. But what’s needed most is new housing across all income bands, with an emphasis on the affordable end that can fill overwhelming demand.
One clear way to do that is for the City Council to approve the mayor’s City of Yes plan for housing affordability in September. In addition to various general housing-forward policies, the plan has a direct incentive for affordable housing construction in allowing builders to make residential projects up to 20% larger if the additional units are designated affordable.
To keep all this affordable housing actually accessible to those who need it most, the city should redouble its efforts to enforce against source of income discrimination — a frankly baffling type of discrimination given there’s hardly a more reliable tenant than one whose guarantor is the government. For those landlords who won’t join the captive insurance company, the state must continue efforts to prevent established insurance companies from building this discrimination into their policies.
