Squeezed by rising insurance costs, a group of NYC landlords have a plan to take control

Facing soaring insurance rates and fewer and fewer coverage options, a group of affordable housing owners are starting their own insurance collective in an attempt to save tens of millions of dollars across roughly 80,000 New York City apartments.

Major insurers have fled the city’s housing market in recent years, with the firms that remain raising costs by significant amounts. Landlords say the higher premiums are eating a bigger chunk of their budgets and forcing them to forgo building maintenance or repairs, leading to worsening conditions for tenants. A report published last year by the state Department of Financial Services, or DFS, and New York’s Division of Homes and Community Renewal showed that insurance premiums for rent-regulated housing rose by an average of 43% from 2019 and 2021.

The firms starting the collective include Wavecrest Management — which controls more than 30,000 apartments throughout the five boroughs, most of them rent-stabilized — and Workforce Housing Group, an affordable housing developer with about 2,000 units, mostly in the Bronx. The companies say they will reinvest the insurance savings back into their buildings.

The years-long effort was led by the late Richard Ravitch, a former lieutenant governor and real estate developer who helped organize the various property owners involved in the new association, known as a “captive” in the insurance world

In an interview in May, a month before his death, Ravitch told Gothamist he wanted to create a new model for insurance since carriers were hiking rates and rejecting coverage for low-income renters or properties located in specific areas of the city, like the Bronx.

“It’s a form of redlining,” Ravitch said. “We’re trying to fix it by creating a whole structure to provide insurance so the owner will have the same protections they had before and won’t pay these crazy premiums they’ve been forced to pay.”

The creation of the collective follows a Gothamist investigation in July that found insurers are routinely asking landlords about their tenants’ source of income and then rejecting coverage for properties that house low-income renters with housing subsidies, such as the federal Section 8 voucher program. The report spurred two pieces of legislation meant to ban that kind of discrimination in New York.

In addition to rising insurance costs, some property owners contend they cannot keep up with inflation-related hikes on utilities, fuel and supplies because laws limit their ability to significantly raise rents. Groups representing rent-stabilized apartment owners are urging the Supreme Court to take up their case and dismantle the state’s rent stabilization system — a decision that could expose hundreds of thousands of renters to dramatic rent increases .

Ravitch said reining in soaring costs through the collective is a way to free up money to invest in buildings where rents are capped, without the risk of rent increases for tenants.

Workforce Housing Group founder John Crotty, a former Bloomberg administration official, is serving as a spokesperson for the collective and said the model will provide stability, without spiking rates.

“Market forces have significantly weakened affordable housing and the ‘captive’ is a way to work against the market forces and push back,” Crotty said.

He said landlords are often forced to forgo routine maintenance when other costs surge.

“You have to pay utilities, you have to pay the mortgage, you have to pay the people working in your building. If one of your variable expenses escalates, like insurance, the things that become most vulnerable are repairs, or proactive fixes,” he said. “No one wants it, but that’s the cascade that goes on.”

The state Department of Financial Services attributed the rise to a number of factors, including climate-related disasters and national trends, along with extensive regulations unique to New York. But the agency also described how insurers make determinations based on the characteristics of tenants — including questions about whether they pay their rent with subsidies — rather than the condition of the building, in potential violation of fair housing rules that outlaw discrimination.

Other board members include Ravitch’s former business partner Peter Davis, who ran the housing complex Waterside Plaza; Wavecrest Management Chief Financial Officer Susan Camerata; and former Bronx Borough President Ruben Diaz Jr.

The group is circulating financial documents that put the estimated insurance rate at $500 per unit — less than half of what some affordable housing owners are now paying insurers to cover their personal liability claims, like slip-and-fall lawsuit settlements. Each member will pay based on the number of units they need to cover, Crotty said.

The group is working with attorney Elliott Kroll, an industry veteran who has represented major insurers. Kroll said every member must comply with strict safety requirements assessed by a risk manager.

“Light bulbs better be replaced. Skid strips better be on the stairs. If a railing is missing, where’s the railing?” Kroll said. “Are you giving your workers adequate training in certain areas? Are fire extinguishers where they need to be?”

The collective also plans to register with the Department of Financial Services, which regulates insurers in New York.

DFS declined to discuss the effort or the group’s application for state certification, but a spokesperson said the agency would provide technical support.