Spike in Heating Oil Costs Pinches Affordable Harlem Co-op

If it’s not one thing it’s another, as Reinhard Humburg sees it. This German-born attorney has served on the board of his Housing Development Fund Corp. (HDFC) affordable co-op in Harlem for the past three decades, and he says the usual financial pressures have become particularly acute during the past few years — thanks to the departure of the building’s three commercial tenants, shareholder job losses from the COVID-19 pandemic, a roof replacement, city-mandated facade repairs and rising taxes. This year brought a new blow: a spike in the cost of the early-20th-century building’s heat source, #2 oil.

“It’s staggering,” Humburg says of the co-op’s oil bill, which rose from $6,034 for a tank fill-up in January to $10,653 in March — a truly staggering 77% increase. “This was not part of our budget, which is already tight. The oil bill is just one of many headaches.”

To make this headache even worse, the co-op board has limited options for dealing with it. There are income caps for purchasers, which means shareholders don’t have bottomless pockets. On the plus side, when the board refinanced its mortgage for $1.8 million with the Community Preservation Corp. 2016, it set aside money for capital projects, and a 5% flip tax on the sale price of apartments serves to replenish the reserve fund. But the board strives to keep maintenance increases low, and it has never imposed an assessment. There is no money tree to shake.

Nor is there a magic bullet. The cost of converting the boiler to a dual-fuel burner could be as high as $100,000, while switching to electric heat pumps would cost a prohibitive $250,000, according to Aaron Weber of Weber Realty Management, the co-op's property manager. While switching from #2 oil to natural gas would reduce the building’s carbon emissions — a requirement under looming Local Law 11 — the benefits would be reduced by the fact that the price of natural gas is also rising. So how does the board plan to pay for an oil bill it can’t afford?

“The solution is to stretch out the payments as long as possible,” Weber says. “We’re requesting an extension from our vendor, Sprague Energy.”

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Joe Brady, the co-op’s account executive at Sprague, notes that the high costs of heating oil, natural gas and gasoline are all linked. “We’re the middle man,” Brady says. “We’re dealing with the same political issues that affect other prices — problems with the supply chain, the Ukraine war, inflation. It’s all one big pot.” Another factor is that oil and gas supplies declined during the pandemic and have not yet caught up with rising demand.

One solution to rising heating oil costs is rigorous maintenance of existing systems. “To save money on future heating expenses,” Weber says, “it’s important to have a boiler maintenance company do a full cleaning of the tubes and combustion chamber inside the boiler. Soot accumulations of as little as 1/32 of an inch will raise a fuel bill by about 2%. Another way to save money is to install a heat timer panel on the boiler which is connected to computerized sensors that help better regulate heating cycles. This monitoring system can save buildings anywhere from 15% to 30% on heating costs.”

This 40-unit HDFC co-op, like so many in New York City, is struggling to survive — and somehow managing to pull it off. “We were down to the bare bones during the worst of the pandemic,” Humburg says. “We had frequent board meetings, and we asked vendors if we could stretch out payments. Our reserve fund got us through the worst, and a Paycheck Protection Program loan helped us pay our super and weekend fill-in.”

The board has recently acquired two new tenants for its commercial spaces and is in negotiations with a third. Despite its money woes, the building boasts an A letter grade for energy efficiency, based on its water and energy usage. An apartment is on the market, which could provide a welcome infusion for the reserve fund. 

“In the end, it was the little things that got us through — negotiating worked well,” Humburg says. “We’re trying to keep it affordable, and so far we’ve always managed to make it.”

PRINCIPAL PLAYERS — PROPERTY MANAGER: Weber Realty Management. LENDER: Community Preservation Corp. VENDOR: Sprague Energy.