Insurance premiums have been a rising boogeyman for New York City’s multifamily owners across the board.
But now, a new data analysis shows that costs stack up disproportionately for affordable housing operators in the Big Apple.
Affordable and rent-stabilized apartments make up only 20 percent of the city’s multifamily buildings, but drew 56 percent of the personal injury lawsuits in the last five years, according to an analysis by the Milford Street Captive Insurance Company and LegalClaims.ai. That makes affordable buildings three times more likely than market-rate buildings to get sued.
Milford Street, an alternative insurance company for affordable housing operators, said the analysis is another data point demonstrating the challenges facing affordable housing providers.
“You have more claims than the buildings can afford,” said John Crotty, a founding member at Workforce Housing Group and a founder of the Milford Street Insurance Captive. “Someone’s got to make a decision about what’s more important.”
Payouts for liability claims vary wildly, according to the report, but the groups estimate the insurance payouts are taking more than $1 billion annually from affordable and rent-stabilized housing. In the last three months, about 600 lawsuits have been filed against affordable buildings, Crotty said. Payouts typically increase premiums.
LegalClaims.ai was used to match lawsuits to buildings, while data from New York University’s Furman Center was used to identify affordable and rent-stabilized buildings.
It’s not totally clear why affordable buildings draw disproportionately more lawsuits. But some in the industry have said they believe these buildings are targeted by fraudulent claims.
Hercules Argyriou, vice president at construction contractor Mega, said his company believes that fraudulent lawsuits are increasing the cost of insurance. He told a recent New York Housing Conference forum that 20 percent of the claims the company investigated in its portfolio were brought by workers who had been on the job a week or less.
It’s not just liability insurance. Many types of insurance are becoming more expensive in markets across the country, according to Huhnsik Chung, a lawyer at Arentfox Schiff.
“You have a lot of lawsuits being filed because the entry to the courthouse is very low in the U.S.,” Chung told the forum. “Insurance pricing is ultimately a reflection of how much it costs to offer that insurance.”
In total, per-unit insurance costs for affordable housing operators have more than doubled since 2017, according to data from Enterprise Community Partners.
The increasing cost of liability insurance is just one of the hurdles facing affordable housing operators. Affordable and subsidized housing projects have also been seeing heightened levels of rent nonpayment, squeezing the revenue side of the equation.
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