Ask affordable and rent-stabilized property owners about expenses, and they will no doubt talk about insurance.
Property and liability insurance is a major factor driving up expenses in New York’s multifamily housing.
A new report from nonprofit lender Enterprise Community Partners underlines just how much worse this situation is in New York compared to other states. One affordable housing operator, who declined to be named in the Enterprise report but operates in 33 states, broke down its claims data: While its average insurance claim in other states is $20,600, in New York that number is five times higher, at $105,000.
Enterprise points to data that suggests third-party litigation financing is part of the issue. This is where hedge funds and institutional investors front money to personal injury or other liability plaintiffs and get a cut of the eventual payout. According to reporting from the New York Times this summer, some of these investments are even being pooled into a new class of securities. This seems like it would spur more claims and lawsuits, as well as remove the incentive for plaintiffs to settle quickly.
Some data suggests New York is seeing the bulk of this kind of financing, with national claims administrator Sedgwick saying New York was home to more than 70 percent of the third-party financed cases it analyzed.
Patrick Boyle, senior director of policy and communications at Enterprise, said the proliferation of third-party litigation financing in New York is likely a symptom of the same factors causing claims in New York to be so high. That includes the Scaffold Law, which holds owners absolutely liable for certain gravity-related incidents.
“I think there would not be this much activity of people essentially speculating in lawsuits if there wasn’t such a good bet that, by doing so, they were going to make a return on their investment,” Boyle said.
In the affordable housing space, these cost pressures join essentially flat revenue and depressed rent collection rates to make for tough math for operators.
What we’re thinking about: An article in The City Reporter published Monday says Freddie Mac has issued a pause on new loans to New York City rent-stabilized properties, attributing the information to real estate sources. (Bill Pulte, director of the Federal Housing Finance Agency, posted a response from Freddie Mac on X, saying that the firm continues to quote and lend on “those properties.”) What would be the effect of a pullback from Freddie? Send thoughts to lilah.burke@therealdeal.com.
A thing we’ve learned: The accuracy of the City Reporter’s report is also being discussed in dueling letters to the court in New York’s rent freeze lawsuit.
Elsewhere . . .
— An arm of National Grid has applied to the state’s grid operator to build three new gas units on the sites of its current, aging power plants on Long Island, New York Focus reports.
— Westchester County experienced widespread voting-machine failures today, Gothamist reported. The New York Board of Elections attributed the issue to a failure to provide “updated election programming” to the scanners.
— New Jersey Gov. Mikie Sherrill warned New Jersey port operators against accepting Russian diesel shipments authorized by the Trump administration, arguing that such imports would violate federal law, Bloomberg reports.
