Mamdani Announces City-Backed Insurance Option

Mayor Zohran Mamdani is offering struggling landlords an olive branch.

The city will be standing up a publicly-backed insurance option aimed at rent-stabilized and affordable housing, City Hall announced Thursday. The insurance program will be capitalized with an unclear amount of city funds, but not directly managed by the city. The program will offer property and liability insurance premiums 20 to 30 percent lower than the existing market, city officials estimate.

The initiative seems to be an attempt by Mamdani to make peace with landlords as his promised rent freeze for stabilized apartments is likely just weeks away. The rent freeze, a marquee part of the mayor’s platform, drew ire from landlords who said it would push their buildings to the brink. Late in the campaign, Mamdani said he would try to address the expense side of landlords’ balance sheets.

The proposal received statements of support from the Real Estate Board of New York, the New York State Association for Affordable Housing, the New York Housing Conference and others.

“This is absolutely part of our efforts to bring the cost of operating housing in New York City — especially the costs of operating affordable and rent-stabilized housing — down,” said Leila Bozorg, deputy mayor for housing and planning, said in a Q&A session with reporters.

The announcement, made just outside the mayor’s first 100 days, came earlier than many perhaps expected. But it’s unclear if the option, which will take months to get up and running, will satisfy landlords, especially as the specifics of the plan, including the mechanism to provide insurance and the expected premiums, are so far undetermined.

Bozorg said the program would lower premiums for landlords by taking advantage of the city’s lower cost of capital, lower overhead and lower profit expectation. This would in turn save money for the city, according to Bozorg, citing a statistic that the city’s affordable housing arm spends $1,200 underwriting new transactions for every $100 increase in insurance costs a landlord faces. The city expects savings to eventually reach $500 million, Bozorg said.

The administration aims to get the insurance option up and running by 2027. That will involve first hiring an actuary or risk consultant to help design the program, which City Hall has said it will start moving on this week. Over the summer, the city’s Economic Development Corporation will solicit proposals from providers to structure, manage and operate the program.

The Mamdani administration hopes to cover 20,000 units with the program in 2027, moving up to 100,000 by 2030. There are about 1 million rent-stabilized units in the five boroughs.

The program will be open to portfolios that meet its to-be-determined underwriting standard, Bozorg said, and designed around the risk profile of affordable housing in New York.

Insurance has been the fastest rising price category for rent-stabilized landlords over the last five years, according to the city’s Rent Guidelines Board. Insurance prices basically doubled in that time, according to the board’s data.

“The market is failing the affordable housing industry,” Bozorg said. “Our goal is to actually create a more healthy ecosystem of insurers.”

Affordable and rent-stabilized buildings in New York are more likely to draw personal injury lawsuits than market-rate buildings. 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 Association and LegalClaims.ai. That makes affordable buildings three times more likely than market-rate buildings to get sued.

“You have more claims than the buildings can afford,” John Crotty, a founding member at Workforce Housing Group, told The Real Deal when that data was released. “Someone’s got to make a decision about what’s more important.”

Mamdani repeatedly referenced the Milford Street Insurance Captive, of which Crotty is a founder, on the campaign trail as he talked about reforming insurance. The captive is made up of several affordable housing operators and provides coverage at “wholesale” prices.

“The captive stands alone in its ability to deliver value back for that entity,” Crotty said at an affordable housing forum last month. “That’s why Mamdani was talking about it on the campaign. And I think they’re going to take a very hard look at making this a reality.”

A city board is slated to tentatively vote on the mayor’s proposed rent freeze May 7. The mayor made a different entreaty to rent-stabilized landlords earlier this week when he met with Kenny Burgos, CEO of the New York Apartment Association.

Burgos, who represents rent-stabilized landlords, said the meeting was productive. The two have their disagreements, he told TRD, “but let’s spend time on where we have alignment.”