New York State is backing a captive insurer as it looks for ways to cut insurance costs for affordable housing operators. The state issued a $2 mn loan to Milford Street Association, an affordable housing group with a member-owned insurance captive.
The loan comes from Empire State Development and goes to Milford Street Association Insurance Co. Milford Street plans to use the $2 mn to cover part of the initial capital contribution required for membership.
The goal is to bring more affordable housing operators into the captive. A larger membership base should spread risk across more properties and reduce costs for participants, according to Beinsure analysts.
Gov. Kathy Hochul said the investment supports New York’s housing agenda and should help produce more affordable units for tenants. She said the state needs to build more housing and support partnerships aimed at insurance costs.
New York has also advanced $5 mn for a pilot program aimed at helping nonprofit housing providers reduce expenses through captives.
The Urban Homesteading Assistance Board and Housing Partnership Network will work with nonprofit affordable housing providers across the state.
Those groups will assess property risk profiles and help providers evaluate captive insurance options. For operators already squeezed by higher financing, labor, and maintenance expenses, insurance has become one more nasty cost line.
John A. Crotty, Milford Street’s president and founding member, said state support matters for both the captive and New York’s affordable housing sector. He said rising insurance premiums have put pressure on thin operator margins.
Higher premiums have reduced the number of projects getting underwritten. They have also delayed maintenance and pushed some buildings closer to bankruptcy.
Milford Street is owned by its participants. It reinsures policies bought by New York affordable rental buildings with regulatory agreements limiting rents and public financing behind them.
The captive currently insures about 3,000 apartments. Milford Street says it has lowered liability insurance premiums for affordable housing by shifting from profit goals to stability, reducing overhead, and adding risk controls built for the sector.
The company is domiciled in Vermont and regulated by the Vermont Department of Financial Regulation. It received its license in December 2023.
The state loan follows New York City Mayor Zohran Kwame Mamdani’s recent plan for a city-backed insurance program serving affordable housing. The proposal seeks to lower property and liability insurance costs for the sector.
Mamdani wants the city to reduce insurance costs for 20,000 homes by 2027. By 2030, the target rises to as many as 100,000 homes.
The mayor said New York City would hire actuaries to design the program with private-sector partners. He has not committed to one structure, though Crotty has said Mamdani previously described Milford Street as the type of insurance idea New York needs.
Liability insurance premiums for New York City affordable housing rose at an annual rate of 21% between 2019 and 2023, according to a March 2024 report by the New York Housing Conference.
That pace has made insurance one of the most painful operating costs in the sector.
The NYHC report said rising premiums discourage new affordable housing development. They also strain affordable rents and carrying charges, then force existing operators to defer repairs, which hurts housing quality.
In testimony before a state legislative insurance hearing last November, Crotty said Milford Street was created to address what he called the largest operational threat to affordable housing. He tied the problem to insurance costs driven by a more aggressive liability environment.
Crotty said insurance for an affordable building cost less than $500 per unit a few years ago. Today, he said, it often exceeds $1,500 per unit.
He told lawmakers premiums have climbed by an average of 21% a year for five years. That path isn’t sustainable for owners already working with narrow budgets.
Crotty blamed New York’s extended litigation system for drawing capital away from repairs and improvements. He said many marginal claims settle because defense costs run too high, which then pushes premiums higher again.
Without intervention, he warned, buildings will keep failing because litigation costs overwhelm operating budgets.
According to Beinsure, the captive model does not erase legal risk, but it gives affordable housing operators a more direct way to control risk selection, claims behavior, and long-term insurance spending.
