The Meter is Running
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Costs are going up – and boards need to build better budgets.
AUTHORAndrew Lazarus, Tudor Realty
Up and up. Inflation, higher insurance, utility costs, real estate taxes, the new law requiring buildings to pay workers the prevailing wage — co-op and condo boards have been getting hit from all sides with increased operating expenses. I’m talking about everything from the cost of garbage bags to heating fuel costs. We have one building on the Upper East Side that, in May, already exceeded the amount budgeted for heating oil for all of 2022. In a typical calendar year, we would have expected only about 65% of that line item to be accounted for at this five-month mark. Another example is that a number of properties we manage are experiencing increased payroll costs related to the new union contract and/or the new prevailing-wage law. At one of our buildings, the cost for its security guard service will go up by 72%. That increase alone would represent 7.8% of total maintenance charges.
Course correction. We’ve been working with boards to help them find ways to make up for the shortfall. For example, the Upper East Side building has decided to do a special operating assessment for a period of three months to address the increase in fuel costs. Other boards are taking a wait-and-see approach and considering doing a late-year maintenance increase, if that’s what is needed. There isn’t a one-size-fits-all solution. But all boards need to be doing prudent financial planning by continuing to monitor their finances in real time.