Property and liability insurance is a major factor driving up expenses in New York’s multifamily housing, and a new report from nonprofit lender Enterprise Community Partners highlights the issue. The report notes that one affordable housing operator, who declined to be named, has average insurance claims of $20,600 in other states, but $105,000 in New York.

Enterprise points to data that suggests third-party litigation financing is part of the problem. 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 type of financing seems to spur more claims and lawsuits, as well as remove the incentive for plaintiffs to settle quickly. National claims administrator Sedgwick says New York was home to more than 70 percent of the third-party financed cases it analyzed.

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Third-party litigation financing is likely a symptom of the same factors causing claims in New York to be so high, according to Patrick Boyle, senior director of policy and communications at Enterprise. Boyle noted that the Scaffold Law, which holds owners absolutely liable for certain gravity-related incidents, is one of the factors contributing to high claims in New York. “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,” he 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. 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.