New York Real Estate Journal: The Scaffold Law’s hidden role in N.Y.’s housing affordability crisis

By: Jonathan Isaacson

New York’s housing affordability crisis is typically framed around zoning battles, high interest rates, and rising labor and material costs. For developers and owners, however, a quieter force is reshaping project economics: the cost of liability insurance on New York construction sites. Those premiums are driven in significant part by New York Labor Law § 240(1) — known as the Scaffold Law — which creates an unusually demanding liability environment for elevation-related accidents and certain other safety violations.

The Impact of Scaffold Law Liability

Labor Law § 240(1) imposes a non-delegable duty on certain owners and contractors to provide proper protection against gravity-related risks on construction, renovation, and demolition projects. Once a statutory violation and a causal link to an elevation-related injury are established, liability is effectively absolute. In other words, owners and general contractors can be held liable for injury caused by such height-related accidents even if they are free from fault for the accident. While the statute was initially enacted more than one hundred years ago in an effort to make worksites safer, many argue that over the years, the protections afforded under Labor Law 240(1) have expanded to the point where the costs associated with it outweigh the protections in provides. 

For developers and builders, this legal framework translates directly into higher retained risk and higher insurance premiums. A report by the Partnership for New York City highlights how litigation costs and claims tied to statutes such as the Scaffold Law inflate construction costs and exacerbate the housing affordability squeeze. One estimate cited in the report suggests that litigation risks associated with costly, lengthy Scaffold Law claims can add up to roughly 7% in additional insurance costs for new construction. On large residential projects already constrained by high financing costs, that incremental burden can be onerous.

New York is an outlier in retaining this level of strict liability for gravity-related construction accidents. Other states that once had comparable statutes have shifted toward comparative-negligence regimes that balance worker protection with more predictable risk allocation. In New York, a covered owner or contractor can face full responsibility even where robust safety programs exist and the owner or contractor are free from fault. 

For real estate principals and lenders, this outlier posture manifests in reduced appetite from national insurers to provide coverage for New York construction projects, tighter underwriting criteria, and higher premiums and deductibles than those seen in peer markets. 

Proposed Federal Legislation

With state-level reform efforts repeatedly stalling in Albany, some lawmakers have looked to federal legislation as a potential workaround. A bill introduced by Representative Nicholas Langworthy — the Infrastructure Expansion Act — would carve out certain projects with a federal nexus from New York’s absolute-liability regime. Claims arising from gravity-related accidents on qualifying federally funded infrastructure or transportation projects would be governed by a comparative-negligence standard rather than strict liability.

Industry groups, including the General Contractors Association of New York (GCA), have suggested such a change could materially reduce liability insurance premiums for contractors working on covered projects. 

From a real estate perspective, however, the Langworthy bill—if enacted—would provide only partial relief. Most private residential and mixed-use developments, including many affordable housing projects financed through state and city programs, would remain subject to the existing Scaffold Law regime. Their risk profiles would continue to reflect absolute liability exposure for elevation-related accidents under §240(1), with corresponding impacts on insurance pricing and availability.

Moreover, maintaining different liability standards—comparative negligence for federally supported projects and strict liability for purely state or private work—would introduce additional complexity. Counsel may need to analyze which funding streams trigger the federal carve-out, while insurers would likely distinguish sharply between federal and non-federal construction risks in underwriting and pricing.

For New York’s housing pipeline, meaningful and durable cost relief will ultimately require statewide reform of the Scaffold Law. Substituting a more traditional negligence, including comparative-negligence standard for strict liability, could materially reduce loss severity while preserving strong incentives for jobsite safety. Until broader reform arrives, the Scaffold Law will remain an embedded cost of doing business in New York real estate and construction —and a meaningful, if often overlooked, contributor to the state’s housing affordability challenge.

Jonathan Isaacson is partner at Kaufman Dolowich LLP, Woodbury, N.Y.