New York housing captive could get loan boost
The New York State Urban Development Corporation, doing business as Empire State Development (ESD), is looking into lending the Milford Street Association Captive Insurance Company up to $2 million.
The Milford Street Association Captive Insurance Company is an insurance captive that provides affordable housing operators in New York City with an alternative to the current private insurance model. The captive is made up of and owned by the Milford Street Association LLC, which is, in turn, wholly owned by its members, all of whom are affordable housing owners and managers, and both the premium payers and insureds under the Captive program.
According to an assessment on the loan created by ESD for its board, which is looking at the loan, New York City affordable housing liability insurance premiums have exponentially increased at an annual rate of 21% over the last five years, per the March 2024 New York Housing Conference report. These rising costs discourage the development of new affordable housing in the area, and often force current operators to defer necessary maintenance funding, adversely impacting housing quality. Furthermore, insurance costs are a critical indicator for the New York City Rent Guidelines Board when calculating operating expenses for over one million rent-stabilised apartments; increasing operating expenses result in continued rent increases for low-income renters.
In December 2024, Milford Street Association applied for a $2 million loan from ESD to assist with incentivising captive participation by using the loan funding to cover a portion of the initial capital contribution membership costs. Increasing membership is essential to the long-term success of the captive, and this would not be feasible without ESD’s loan.
The potential $2 million loan would be for a five-year term. In exchange, the captive has committed to securing general liability coverage for 4,000 additional New York City affordable housing residential units.
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