Odd Lots

How Insurance Costs Make NYC Construction So Expensive

February 26, 2026

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  • The exorbitant cost of construction in New York City is significantly driven by insurance costs, which are reported to be 10-12% of total project costs, compared to about 2% in other states, largely due to New York's unique 'Scaffold Law' imposing absolute liability. 
  • The New York 'Scaffold Law,' which holds contractors 100% liable for height-related injuries regardless of worker fault, is an antiquated policy that drives up insurance premiums, discourages insurers, and has not demonstrably improved worker safety compared to states with comparative negligence. 
  • Project delays, often stemming from lengthy regulatory processes like environmental reviews (sometimes taking years) or design errors requiring contract changes, significantly inflate construction costs by incurring ongoing indirect overhead expenses for project staff. 

Segments

Construction Cost Factors Overview
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(00:01:30)
  • Key Takeaway: NYC construction costs are driven by a confluence of factors including materials, labor, insurance, financing, and regulatory hurdles.
  • Summary: High construction costs in New York City hinder overall affordability across housing and infrastructure. Key cost drivers include pandemic-era increases in material and labor costs, rising insurance expenses, and the impact of high interest rates on financing. The industry also suffers from a noted lack of productivity growth compared to other sectors.
Introducing Guests and Roles
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(00:03:53)
  • Key Takeaway: Guests represent major NYC construction employers and heavy civil engineering firms.
  • Summary: Elizabeth Crowley leads the Building Trades Employers’ Association (BTEA), representing over 1,200 contractors involved in $65 billion of annual work. Michael Capasso leads CAC Industries, a public works heavy highway contractor working for major NYC agencies like the MTA and Port Authority.
Labor Costs vs. Hidden Costs
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(00:05:11)
  • Key Takeaway: Labor typically accounts for only 30-35% of total construction costs, suggesting non-labor factors like insurance are major areas for cost reform.
  • Summary: Union wages are generally in line with city and state prevailing wage laws, meaning they are not the primary driver of excessive costs compared to non-union contractors who cut corners. The industry advocates for reforming controllable, hidden costs, specifically citing construction insurance as a major target.
Impact of Project Delays
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(00:09:03)
  • Key Takeaway: Project delays, especially from regulatory processes, cause significant expense through contractor indirect overhead costs.
  • Summary: Delays force contractors to keep project managers and supervision staff on payroll without productive work, leading to unrecoverable indirect overhead costs. The land use process, involving community boards and borough president offices, can add years to a project timeline, which the new mayor aims to reduce to under six months.
Scaffold Law and Insurance Crisis
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(00:17:10)
  • Key Takeaway: New York’s Scaffold Law, imposing absolute liability, causes insurance costs to be 500% higher than in other states, leading insurers to exit the market.
  • Summary: The Scaffold Law holds contractors 100% liable for height-related injuries, unlike the comparative negligence standard in 49 other states. This law is cited as the primary driver for insurance costs reaching 10% of total construction costs in NYC, with subcontractors facing premiums of 15-20% of their volume. Reform efforts are focused on Washington and Albany to replace this antiquated, broken policy.
Insurance Market Dynamics Shift
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(00:27:17)
  • Key Takeaway: The insurance market has drastically worsened over the last decade, shifting from simple annual renewals with small increases to high deductibles and limited carrier options.
  • Summary: Thirty years ago, contractors received multiple quotes with incremental rate adjustments, but now deductibles have soared from $25,000 to $500,000 or $750,000 per occurrence. This scarcity of carriers willing to write insurance in New York has eliminated contractor purchasing power and forces contractors to absorb higher deductible costs in their bids.
Productivity, Technology, and Consultants
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(00:40:11)
  • Key Takeaway: The construction industry faces an aging workforce, but technology like AI monitoring is being adopted to improve safety and planning, while outsourced consultants can create incentive problems.
  • Summary: There is concern over an aging workforce as younger generations are less inclined toward trade schools, though technology like AI monitoring is being used to reduce risk and train workers. Some contractors are adopting AI for quicker data analysis in planning phases, and there is concern that reliance on third-party ‘owners’ reps’ can incentivize project delays.