Insurance has become the second-largest operating expense for property owners after debt service, according to Michael Kovalev, owner of Kovalev Insurance Agency in Newton, Massachusetts. Kovalev, who specializes in commercial real estate coverage, said the hard insurance market and a series of compounding cost pressures have driven operating expenses significantly higher across rental properties.

Kovalev's firm works with condominium associations, apartment buildings, office buildings, warehouses and mixed-use properties. The agency has grown from a two-person operation to a 20-person team.

Among the factors raising costs are increasing maintenance expenses, recalled electrical panels, aging infrastructure, higher labor costs, COVID-era rent freezes, proposed rent control initiatives and rising tenant expectations, Kovalev said. Short-term rentals have gone from booming to being heavily restricted in many communities, while commercial vacancies remain elevated.

These factors affect insurance costs, insurance eligibility and long-term risk management strategies, he said.

Most of the landlords and investors Kovalev works with are not massive institutional owners. They are local business owners trying to maintain safe, well-run buildings while dealing with rising insurance costs, taxes, labor and maintenance expenses, he said.

In Greater Boston, conversations around housing supply, zoning restrictions, office vacancies and affordability are not going away anytime soon, Kovalev said. He said the long-term solution has to include loosening zoning restrictions, converting underutilized office space where it makes sense and creating incentives for builders to increase the housing supply.