State and Local Governments Explore Publicly Backed Insurance Programs to Lower Costs for Affordable Housing Providers

By Julian Mura-Kröger, NLIHC Research Intern

The rising costs of insuring affordable rental properties is a growing source of alarm for advocates, housing providers, policymakers, and researchers trying to tackle the nation’s housing crisis. Between 2019 and 2024, the average monthly insurance cost per rental unit rose more than 75% nationally. A study from the University of Texas at Austin found that the average share of multifamily properties’ operating costs spent on insurance nearly doubled from 2019 to 2024, jumping from 5.7% to almost 10%. These researchers also found that tenants often paid the price for these increased insurance costs: housing providers compensated for roughly one-third to one-half of these increased costs by raising rents.  

These increases can be attributed to factors such as construction cost inflation, rising reinsurance prices, and speculative underwriting practices, all of which have implications for the profit-driven structure of the private insurance market. For insurance companies that are publicly traded or owned by private equity investors, growth is a structural requirement of their business. To maximize growth, companies must reduce costs by minimizing risk, acquiring new insurance policies to gain a larger share of the insurance market, or increasing per capita revenues by raising premiums and deductibles. 

As climate change increases overall risk and makes some communities uninsurable, increasing premium prices is left as one of few viable options for continued growth. In many cases, private insurers are choosing to stop insuring communities with the highest disaster risks, leaving housing providers in those communities with few—and frequently expensive—options. Available options may be further limited by “insurance redlining,” through which insurance providers refuse to cover properties with affordability restrictions due to faulty assumptions about low-income households’ liability risk. For affordable housing providers already operating on low margins, this often results in decisions to neglect repairs and maintenance or to push for rent increases, as seen during New York City’s recent Rent Guidelines Board hearings.  

In New York City, insurance costs have risen dramatically, with premiums for affordable rental properties rising from $617 per unit in 2018 to $1,853 in 2025. To address this, the city recently unveiled plans for a publicly backed Affordable Housing Insurance Program (AHIP) reserved for affordable and rent-stabilized housing. With a $100 million investment, the program is seeking to provide premium reductions of 20% or more for 20,000 income-restricted and rent-stabilized units at its launch in 2027 before scaling to 100,000 units by 2030. Given that every $100 increase in insurance costs is associated with an additional $1,200 in city capital for new affordable housing transactions, reducing insurance costs will hopefully allow the city to stretch its housing capital further. 

The AHIP proposal seeks to address insurance cost pressures while preventing rent hikes, building on lessons learned from other policies and programs for multifamily housing insurance seeking to slow or prevent rising costs across the country. Of these tools, insurers of last resort—often called Fair Access to Insurance Requirements (FAIR) plans or Beach/Wind programs—are some of the most prevalent, with thirty-five states having at least one program to support homeowners or rental housing providers. Insurers of last resort provide coverage in communities that the primary insurance market refuses to take on, usually due to risks perceived to be unprofitable; as a result, policies offered by FAIR programs tend to be significantly more expensive and have narrower coverage. Although initially permitted in the 1960s to address small, temporary gaps, climate change has made them increasingly more important as the private sector leaves more areas uninsured. Insurers of last resort still struggle with a wide array of structural issues, including the pooling of risky policies, extreme assessment pass-through agreements, and depopulation contracts that funnel lower risk policyholders back to the private sector. As a result, private insurers maintain their ability to hold only the most profitable, low-risk policies while dumping high liability communities into expensive coverage which will, in many cases, pass the costs of claims back to communities during the worst of disasters. 

Some states are turning to other strategies to reduce insurance costs for affordable housing providers. For example, New York State recently issued a $2 million loan to the Milford Street Association, which provides captive insurance exclusively for members who have properties with regulated rents or subsidies from city, state, or federal housing financing agencies. The program insures more than 80,000 affordable housing units in New York. Policymakers in California are seeking to emulate this model through Senate Bill 1170, which would allow nonprofit housing developers to enter into agreements with public agencies for the purpose of establishing joint insurance programs. Initiatives developed because of this bill would be able to operate at lower margins, and in theory, with lower costs for affordable housing providers. 

These examples highlight the importance of getting the details right for New York City’s $100 million investment. The NYC Economic Development Corporation (EDC) recently released a request for expressions of interest for the AHIP that provides some insight into what the program might look like once launched in late 2027. The request makes it clear that the AHIP is not intended to serve as an insurer of last resort, allowing it to combine low- and high-risk properties under a single program and commit to stricter underwriting practices. Given that city funding will be a one-time investment only, this will be vital to ensure that the program can sustain itself on premiums and other revenues rather than assessments passed to policyholders and already strained general budget funding. The request also notes that while the NYC government does not anticipate owning the program, options for transparency will be essential, such as through board representation, covenants, a trust, or consent rights. 

The NYC EDC may wish to consider additional components to the AHIP to ensure its long-term sustainability—for example, adding specific provisions on how savings can be passed onto residents to make up for shouldering portions of rising insurance costs, using surplus revenues for climate mitigation strategies, and making public the models used to determine rates and coverage. Should the EDC seek to expand the program to cover a larger portion of the more than one million rent-stabilized or income-restricted units in New York City, additional funding might be captured through specific fees, taxes, or surcharges on significant emitters of greenhouse gases, as recommended by the Climate & Community Institute in their report on FAIR plans. Ultimately, New York City’s new insurance program and its predecessors illustrate the growing need for policymakers to take actions that address the root causes of rising insurance costs for affordable rental properties so that existing units remain affordable and inhabitable for the lowest-income renters for years to come.