New York’s housing crisis is often framed as a question of supply, and there is no doubt we need more housing at every income level.

However, as lawmakers negotiate the FY 2027 State Budget, there is another emergency unfolding in plain sight: the rising operational costs threatening the stability of the affordable housing stock we’ve already built.

If we fail to address this fundamental weakness, we risk losing thousands of preexisting affordable homes, stifling any progress made toward increasing the housing stock with new development.

A recent analysis by LISC NY, National Equity Fund, and Enterprise found that since 2017, total operating expenses for affordable housing in New York have increased by roughly 40%. Specifically, insurance costs have risen by a stark 110%. This is in tandem with administrative costs, increasing 51% and repairs and maintenance expenses climbing 35%.

At the same time, rent collection has declined. Economic occupancy across affordable housing portfolios has fallen from about 95% historically to closer to 90% in recent years. For many nonprofit owners, that gap represents the slim margin between stability and distress.

The financial picture in 2024 was especially worrying. More than half of properties analyzed – 57% – ended the year in negative cash flow.

That level of strain jeopardizes routine maintenance, long-term affordability, and the organizational stability of nonprofit providers, which account for 64% of the portfolio reviewed. When the majority of mission-driven owners are operating in the red, the risk posed to tenants and communities becomes systemic.

Governor Kathy Hochul has put forward ambitious proposals to expand housing supply, including continued investment in mixed-income development, starter homes, and downpayment assistance. Her commitment to a graduated affordable housing continuum, one that allows families to move from deeply affordable rental housing toward homeownership, is especially important.
But expansion alone will not solve the operating crisis.

The Governor’s FY 2027 Executive Budget proposes important steps to address one of the most volatile cost drivers: insurance. Requiring commercial property insurers to publicly report data on claims, premiums, and rates would bring much-needed transparency to a market that affordable housing providers experience as opaque and unpredictable. Expanding automatic discounts for risk-reduction measures, such as sprinkler systems in multifamily housing, is another sensible way to align safety improvements with cost containment.

The proposal to modernize the J-51 tax abatement program is also a promising step. By updating it to better support capital repairs in rent-stabilized housing, the State can help owners finance critical building upgrades while ensuring that tenants remain protected through continued affordability requirements and oversight. Strengthening J-51 so it reflects current construction costs and ties benefits to meaningful tenant protections will help preserve aging buildings, improve living conditions, and maintain long-term affordability.

Yet the scale of financial distress demands additional action.

First, New York should establish targeted stabilization funding for affordable housing properties in distress. This would be flexible capital that can be deployed quickly to address operating deficits, refinance troubled loans, or fund energy efficiency upgrades to prevent deeper deterioration and reduce long-term costs.

Second, the State should explore structural insurance solutions beyond transparency and discounts. Reinsurance backstops or pooled risk mechanisms for affordable housing providers could help stabilize premiums in a market that has become both shallow and volatile.

Third, policymakers must develop a coordinated strategy to address nonprofit housing distress, including the roughly 150 nonprofit-owned affordable housing projects currently in or near loan default. Without intervention, some of these properties could convert to market rate over time, eroding affordability in communities that need it most.

At the same time, we shouldn’t lose sight of opportunities to responsibly expand supply. Advancing the Faith-Based Affordable Housing Act would unlock underutilized land owned by faith-based and mission-driven organizations. Paired with technical assistance and capital tools, this approach can bring new housing online while keeping development rooted in community leadership. It should be viewed as one part of a broader strategy that strengthens both production and preservation.

We must pair bold efforts to build new housing with equally bold efforts to stabilize what already exists. If we focus only on new construction while ignoring operating distress, we risk running up the down escalator. Preservation is not an afterthought. It is the bedrock of affordability for millions of New Yorkers.

This budget is an opportunity to recognize that reality and act accordingly.

Valerie White is senior executive director at LISC NY; Christine R. O’Connell is LISC NY senior director of capital investments and expanded markets.