What if the Rent Guidelines Board Approved a 38% increase?
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…That’s what California just did for its price-controlled home insurance industry.
In California, the homeowner’s insurance market is spiraling toward collapse. In New York City, the rent-stabilized multifamily housing market is dangerously fraying. At first glance, these seem like disconnected stories, but they share a common thread of state-imposed price controls. Designed to help people, these price control regimes have created structural imbalances that are threatening the long-term viability of property insurance and apartment housing.
This piece is not an indictment of tenant protections or affordable property insurance. History has shown us that both are essential. However, as we examine more closely what's happening in both California and New York, we begin to see how policies that limit pricing, when not paired with sustainable reforms, can have unintended consequences. When it comes to New York City housing and California property insurance, policymakers are caught in a political bind. Most voters benefit from price controls, while smaller business groups, like insurers in California and landlords in New York, are left to shoulder the burden of shrinking margins on their businesses.
Eventually, some walk away. And when they do, entire systems falter.
Prices Held Far Below Market
In both California and New York, prices have been artificially kept low, and they no longer accurately reflect the real risks or costs of providing the service.
In California, homeowners insurance premiums were among the lowest in the country for years. According to Reuters, the average California premium was $1,300 in 2023, well below the national average of $2,200¹. This is doubly stunning because median California home prices are significantly higher than those in other states, which means that insurance premiums as a percentage of home values were relatively low. California executives Josh Hoffman and Kevin Katari argue that premiums should be up to ten times higher in high-risk zones².
In New York City, the gap is just as glaring. Median rents in Manhattan reached a record $4,500 per month in February 2025³. Yet, over a third of all New York City’s 2.3 million rental apartments rent for under $2,400 due to rent regulations. In the Bronx, three-quarters of apartments rent for less than $1,650. These numbers are not just below market, they are sometimes below the operating cost of the unit. The Community Preservation Corporation (CPC) estimates that it costs $1,250 per month to operate a typical rent-stabilized apartment, even in a well-run building⁴.
The Strikers Leave The Market
Price controls only work as long as the providers are willing to play along. When margins disappear, so do market participants.
In California, insurers have been retreating. Allstate and State Farm stopped writing new policies in the state in 2023¹. In 2024, State Farm boldly announced that it would not renew approximately 70,000 existing policies, covering both multifamily buildings and personal homes⁵.
In New York, major players like Related Companies have started to unload their rent-stabilized holdings. Over the past year, global real estate investment firm Related has sold nearly $200 million worth of rent-regulated multifamily property at steep discounts. For some landlords, regulated buildings now cost more to maintain after expenses and debt service than they produce in rent⁴.
Downward Spiral
Both price control systems are showing signs of failure. In California, as insurers pull back, homeowners are struggling to find coverage. Without insurance, they risk defaulting on their mortgages since lenders require proof of coverage. The state's insurer of last resort, Fair Access to Insurance Requirements (FAIR) is strained. If more private insurers leave, FAIR's funding base shrinks and the whole system could seize up⁶.
In New York, the consequences are creeping but no less serious. As owners defer maintenance or “abandon properties” by selling them for steep discounts, building conditions begin to deteriorate. Government agencies like HPD and HCR can fine bad actors or step in during emergencies, but they are not equipped to manage a system-wide crisis at scale. The CPC is stepping in where it can, but it is a non-profit lender, not a landlord⁴.
Regulatory Apparatus
Both New York City and California use formal regulatory bodies to approve price increases. In New York, the Rent Guidelines Board (RGB) controls annual increases for rent-stabilized units. In California, the California Department of Insurance must approve any rate hike requests from insurers².
These bodies are supposed to weigh data and decide what is fair. But in practice, they are under enormous political pressure. Delays, freezes, or denials of increases are common, especially when elections loom (the RGB vote was initially scheduled for the day after the NYC Democratic mayoral primary, now the vote happens just three days later) or when public outcry is loud. The result is a cycle of standoffs and half-measures that leaves both markets fragile.
Politics of the Majority
In California, the majority of households own homes and buy insurance. That means insurers are the minority. In New York, nearly 70 percent of residents rent, and many of them are in stabilized apartments. That makes landlords the minority⁴. When a majority benefits from holding down prices, it becomes very difficult for elected officials to argue for the interests of providers—even if the long-term consequences affect everyone and slowly begin to chip away at the system. And when things do begin to crack, there is little political will to act until the damage is severe and visible, like in response to the Los Angeles County fire of January 2025.
A Moment of Action in California
What happened next in California is stunning. After refusing to approve insurer rate hikes for over a year, the state reversed course. In early 2025, following one of the most destructive wildfires on record—over 23,000 acres burned and nearly 7,000 structures destroyed—California granted State Farm approval for an emergency rate hike⁵. Premiums will rise 17 percent for homeowners and 38 percent for multifamily owners beginning next week.
This was a dramatic move. The magnitude of the rate hike and the speed with which it was approved were both unprecedented. But it was also necessary. It paved the way for State Farm to stay in California. If others follow, the market may stabilize. The lesson here is that profitability is crucial for businesses to be able to continue offering their services. This was an example of an uncomfortable but necessary action for the benefit of all those connected to California's housing market.
New York’s Problem Isn’t Special and Its Solution Won’t Be Either
Just as California was forced to reckon with its pricing distortions in the insurance market, New York should review its regulatory framework for housing to identify areas of concession that can spur continued investment as this is the bedrock of business activity. This does not mean eliminating tenant protections. It means pairing them with financial structures that are sustainable for all parties. Owners need to generate sufficient revenue to operate buildings responsibly. Tenants need predictability and protection from bad actors. Both can coexist.
Price controls can have deleterious effects on free market business activities, regardless of industry or state. It sometimes feels like what’s going on in NYC is special or unique to the city's nature, but that's not the case. Elected officials in California have rallied against the property insurers in parallel ways that the NYC pols have responded to landlord profit-making in NYC. It’s not clear exactly what the way forward will look like for NYC, but California’s approval of State Farm’s price hike provides a helpful precedent that building owners in NYC should take solace in.
Elected officials will listen. Eventually.
California’s move to allow insurers back in with more realistic pricing was a recognition of reality. It was not popular, but it was necessary. New York City may need to consider similar concessions. The city may need to take a bold and perhaps unprecedented step, one that breaks the political impasse and acknowledges the economic reality behind the crisis. Otherwise, the slow bleeding will continue. And if that happens, tenants, owners, and the city itself will pay the price.
I am bullish on NYC multifamily
Best Regards,
Romain Sinclair
646 326 2220
Sources
Terhune, C. (2025, January 9). Pacific Palisades fire may spell an end to cheap homeowners insurance in California. Reuters. https://www.reuters.com/world/us/pacific-palisades-fire-may-spell-an-end-cheap-homeowners-insurance-california-2025-01-09
Hoffman, J., & Katari, K. (2023, September). California’s Insurance Market: Another Victim in the War on Prices. Cato Institute. https://www.cato.org/blog/california-insurance-market-another-victim-war-prices
Miller Samuel. (2025, February). Elliman Report: Manhattan, Brooklyn, & Queens Rental Market February 2025. https://millersamuel.com/files/2024/01/Manhattan-10YR-2023.pdf
Citizens Budget Commission. (2025, May 22). How NYC Can Better Track the Condition of Rent Stabilized Housing. https://cbcny.org/advocacy/how-nyc-can-better-track-condition-rent-stabilized-housing
Fortune Editors. (2025, March 10). California’s homeowner's insurance crisis: What’s behind the exodus—and the surprising reversal. Fortune. https://fortune.com/2025/03/10/california-homeowners-insurance-crisis
Oh, S. (2023). Pricing of Climate Risk Insurance: Regulation and Cross-Subsidies. Columbia University; cited in Law & Economics Center paper on Prop 103. https://laweconcenter.org/wp-content/uploads/2023/09/Prop-103-paper-final.pdf