No one ever said living in New York City is cheap. But surging expenses in recent years are threatening to squeeze homeowners even more.Fees paid to co-op and condo boards have soared almost three times faster than the rate of inflation. Ever-tougher rules on inspections, escalating insurance premiums and preparations for a strict new climate law are adding hundreds or even thousands of dollars to monthly bills for residents already paying some of the world’s highest housing costs.
While the charges may be little more than an annoyance to the wealthy owner of a Park Avenue penthouse, they could force New Yorkers of more modest means — from families to seniors on fixed incomes to young first-time buyers — to give up on their hard-won foothold in the city.
“When you put it all together, we’re going to end up being a city of the very rich and the very poor,” said Mary Ann Rothman, executive director of the Council of New York Cooperatives and Condominiums. The people in the middle who “want to make a commitment to the city by buying into co-ops and condos are going to be pushed out.”
At one co-op on Riverside Drive, the bill for two recent inspections was $28,000, followed by fixes that tallied $1.4 million. A building on West 80th Street spent $900,000.
The cycle of near-constant repairs and construction across the city is pushing up insurance expenses, which have jumped more than 300% for some properties. Upgrades to outdated heating and cooling systems could amount to $25,000 for each homeowner at certain buildings, according to an estimate from a supporter of the new carbon-emissions limits.
After years of steep inflation in the US, New Yorkers aren’t alone in paying higher prices for everything from taxes to water, gas and electricity. As routine expenses have surged, so have the fees the city’s condo and co-op boards charge unit owners. Those bills — meant to cover utilities, labor and basic building maintenance — jumped roughly 54% from the first quarter of 2020 to the third quarter of this year, according to appraiser Miller Samuel Inc. Across the economy, US consumer prices were up 19% in the same period.
Piled on top of that are costs for complying with the city’s stricter building standards. Some homeowners and real estate professionals vent that the rules are excessive, and speculate whether special interests that stand to profit might be behind them. Advocates argue the mandates — strengthened after a falling piece of terra cotta struck and killed a pedestrian in 2019 — are needed to keep New Yorkers safe in their homes and on the city’s streets as properties age.
“All these regulations are really putting a severe financial strain on these buildings where the shareholders really don’t have the resources to pay for everything,” said Gustavo Rusconi, vice president and director of management at Argo Real Estate. “I understand they’re in place for safety reasons, but they really are squeezing everyone.”
‘Everything’s a Cost’
The exterior walls of every property of more than six stories must be examined every five years under the Facade Inspection and Safety Program. With each cycle, the city has added more requirements, which in turn have raised the costs of compliance.
Inspecting a 100-unit building in Brooklyn with 200 feet (61 meters) of perimeter walls would cost roughly $30,000, said Peter Varsalona, principal and vice president of RAND Engineering and Architecture. It would’ve been cheaper five years ago, before the city mandated that scaffold drops be installed every 60 feet — at a cost of roughly $7,500 each. If it’s a postwar building with cavity walls that need to be probed, add another $20,000 to the price.
In Varsalona’s example, each unit would be responsible for a proportional share of the cost. While an additional $500 or so for an inspection may not be a huge burden, the repair bill often can be.
In the wake of the pedestrian’s death, the city now bans repairs to damaged terra cotta elements and instead requires that they be fully replaced. The tab could reach $2.5 million as pieces are recast and other repairs are made, pipe scaffolding is rented, the project is insured and a consultant advises on the process, Varsalona said. That would translate to $25,000 on average that each owner in a 100-unit building would have to pay on top of existing maintenance or common charges.
“Everything’s a cost. How much can you put on co-op shareholders? There are limits,” said Varsalona, who is also president of the Council of New York Cooperatives and Condominiums. “Many owners are going to have to figure out if it is affordable to live in the city or not.”
Insurers Are ‘Bleeding’
When it comes to insurance, boards are paying more and getting less.
Longtime carriers are leaving the market, forcing buildings to stitch together multiple policies to get anywhere near the coverage they had just a few years ago. One affordable co-op in the Bronx, for example, is paying 45% more for just 15% of the coverage it had previously.
While natural disasters have sent the industry reeling nationwide, much of the pressure in New York is coming from multimillion-dollar “nuclear verdicts,” payouts of sometimes more than plaintiffs sought in accidents involving construction work.
Insurers are raising prices to make up for their losses, said Sean Kent, senior vice president at FirstService Financial, which works with 600 co-op and condo buildings in the city. Annual premiums at those properties rose as much as 300% this year, though the average increase was about 25%, Kent said.
Traditionally, buildings would pool together to buy so-called umbrella policies, with better coverage at lower rates than they could secure on their own. But now that carriers are “bleeding,” those plans are disappearing, said Chip Stuart, North American real estate practice leader at insurance brokerage Hub International.
The Amalgamated Housing Cooperative, a complex of 11 buildings near Van Cortlandt Park in the Bronx, paid $2.4 million last year for $650 million of coverage, the level required by its mortgage lender. Now its bill is $3.5 million for just $100 million of coverage, cobbled from 10 different carriers.
The board is still working to make up the difference, according to its treasurer, Ed Yaker, who said skyrocketing insurance costs are a surprise to residents.
“The average guy who just lives in the building, who doesn’t think about it and doesn’t serve on the board, doesn’t understand why it’s happening,” Yaker said.
Climate Costs
For all but the most energy-efficient buildings, the largest expense on the horizon is Local Law 97. The measure requires properties of at least 25,000 square feet (2,300 square meters) to begin reducing their greenhouse gas emissions by January 2024, though proposed changes could give two more years of leeway to building owners that show a “good faith effort” to comply.
A study commissioned earlier this year by the Real Estate Board of New York estimated that nearly 15% of co-ops would be out of compliance with the emissions limits, facing average annual penalties of about $57,000. Without updates, 72% of co-ops will face similar fines beginning in 2030, when the city’s rules become more stringent.
Overhauling a residential building’s heating and cooling systems comes with “a significant cost,” generally amounting to $20,000 to $25,000 for each unit, which can be spread out over several years, said Pete Sikora, a campaigns director at New York Communities for Change, a group that advocated for the law’s passage.
Buildings will be able to apply for grants to make projects less onerous, and heating with electricity instead of gas or oil would ultimately save money, Sikora said — two reasons he and others are optimistic about compliance.
“There is no serious threat to affordability in any large-scale way,” he said.
But critics have been vocal in arguing it would put a heavy burden on homeowners. Warren Schreiber, co-president of the Presidents Co-Op and Condo Council, and his allies are suing to stop the law’s implementation while supporting city council bills to water it down.
“Yes, we should do something about the climate,” Schreiber said, “but the burden should not be put on the shoulders of co-op and condo owners.”
He estimated the tab for modernizing his building, the Bay Terrace Cooperative in northeast Queens, at as much as $5 million. That would leave each of the complex’s 200 units with a $25,000 bill, which he said is unrealistic to expect his fellow shareholders to pay.
“We have young families that are just starting out and struggling to make ends meet, we have civil servants, we have teachers, firemen, police,” he said. “We don’t have a lot of those millionaires — as a matter of fact, we don’t have any, as far as I know.”