A spike in insurance premiums is a big reason operating costs have shot up. But why did that happen?
A prime suspect is bogus litigation, which some multifamily owners say insurers too often settle rather than fight.
They point to trip-and-fall lawsuits in which insurers caved despite video evidence proving that the accidents were fake, or that the person who fell in the stairwell was typing furiously on his cellphone rather than watching his step.
Will the government come to the rescue? Might Zohran Mamdani prod the City Council or state to offer a low-cost insurance product, allowing owners to pour the savings back into their buildings?
The government does provide flood insurance and (after 9/11) terrorism insurance. But nobody can fake a natural disaster or a terrorist attack.
For standard liability policies, the government would not be any better at handling fraudulent claims, and probably worse. It seems to me that it would have even less incentive than private insurers to litigate rather than settle.
History offers a clue. When Mike Bloomberg became mayor, he was faced with a large budget deficit and responded by raising property taxes 18 percent — which made him immediately unpopular. But then he set about cutting spending.
One way he did that was by shifting responsibility for sidewalk maintenance to property owners in 2003. It wasn’t just to save money on repairs. Rather, the city was getting hammered by trip-and-fall lawsuits. Now, property owners do.
The city did exempt one-, two- and three-family, owner-occupied homes from liability because those owners have less financial capacity (and also tend to be prime voters).
The 2003 shift wasn’t exactly an innovative solution to rising lawsuit expenses. And it suggests that the government is not likely to take any responsibility back, even by offering a reinsurance product as a backstop for carriers.
What we’re thinking about: Will multifamily owners view Mayor Zohran Mamdani’s “rental ripoff” hearings as antisemitic? New York City landlords are disproportionately Jewish, and so far only landlords have been targeted by Mamdani for public hearings. One will be held in each borough.
It is true that housing is New Yorkers’ greatest expense and that two-thirds of city residents are renters. So it’s a logical place to begin the push for affordability on which Mamdani campaigned.
However, many Jews in the industry were already on edge about Mamdani, and reacted negatively when he rescinded two executive orders by his predecessor, Eric Adams. One equated some criticism of Israel with hatred of Jews and the other banned city agencies from boycotting Israel, the New York Times reported.
Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: Of the 47,000 planned housing units that don’t have building permits, 31 percent are in filings from more than five years ago, “which means they are likely stalled or may never begin construction,” according to a Real Estate Board of New York report.
The least productive of the 51 City Council districts is represented by Julie Menin, the new speaker. Her East Side district has negative nine units in pre-development: More are slated to be lost through demolition, consolidation or use changes than created. However, in terms of units under construction, it ranks in the middle of the pack with 961.
Elsewhere…
One of the best economics podcasts has shut down, but not before leaving real estate geeks with a final nugget of wisdom.
The 118th episode of The Economics of Everyday Things looked at urban trees, which significantly benefit not only the environment and human health but also real estate.
A 2007 study in East Portland found that a single tree in front of a home raised that home’s sales price by more than $7,000 and the value of homes within a 100-foot radius by a total of $13,000.
As a result, Portland’s street trees were increasing property tax revenues by $15.3 million a year, about 5 times more than homeowners spent to maintain them.
The same researcher found that Sacramento shade trees reduced a home’s electric bill by an average of $25 during summer months.
Another survey found trees benefit retail real estate, as shoppers judge merchants on tree-lined streets to be more knowledgeable and pleasant and said they would spend 9 percent to 15 percent more in retail areas with a nice canopy.
Closing time
Residential: The top residential deal recorded Tuesday was $10 million for a 3,984-square-foot, sponsor-sale condominium unit at 85 Worth Street in Tribeca. The Eklund Gomes Team with Douglas Elliman had the listing.
Commercial: The top commercial deal recorded was $55 million for the Woodcrest Rehab & Residential Health Care Center property at 119-09 26th Avenue in College Point. An entity tied to Jacob Sod purchased it from Jack Deutsch.
New to the Market: The highest price for a residential property hitting the market was $14 million for a 4,315-square-foot condominium unit at 459 West Broadway in Soho. Kristina Paces with Serhant has the listing.
— Matthew Elo