Condo common charges — covering operating expenses like staff, repairs, amenities, property management and insurance — are high partly because the cost of doing business in New York City is high. But that’s only part of the story, Brick Underground reports, and even higher fees are on the way. Why? Let us count the reasons:
Energy costs. “If you poll most condo groups or property managers right now, they will tell you the same thing—heating oil costs are through the roof,” says Orest Tomaselli, the president of project review at Condo Tek, a technology and information company that facilitates condo loans. “For an average 100-unit building in New York that uses No. 4 fuel oil, the average cost was around $72,000 last year. This year it’s doubling to $150,000.” The costs of natural gas and electricity are also up.
Tomaselli adds that these costs, coupled with those below, are pushing some common charges into double-digit increases. “Most condos we work with in New York City are seeing common charges increase by a minimum of 4 to 6% this year,” Tomaselli says. “Some condos are experiencing a 20 to 30% increase in common charges.”
Repair costs. “When a roof or HVAC unit needs repair or replacement, we are seeing in some cases a 100 to 150% increase in the cost of the component and more so in the cost of labor,” Tomaselli says, noting that inflation is fueling these increases.
Lending compliance guidelines. New lending rules, driven by the Florida condo collapse last year, went into effect at the beginning of 2022. Among other things, the guidelines require condos to establish a reserve fund for future repairs equal to 10% of the operating budget in order for Fannie Mae and Freddie Mac to continue to buy mortgages issued by lenders. “Most buildings are adding this 10% line item in for the first time,” Tomaselli says.
Environmental regulations. As condo boards begin to make retrofits to cut their building's carbon emissions to satisfy Local Law 97, costs are predictably rising, which is leading to rising common charges, assessments and sometimes a combination of the two. "Some of the costs of electrifying the building or replacing the boiler are starting to go into place,” Tomaselli says. “Some condo buildings are seeing massive 100% increases in monthly fees if you include special assessments.”
Staff costs. “We are seeing many condo buildings in Manhattan that have staffing needs that are much larger than in Brooklyn,” Tomaselli says. That’s not just because lots of newer buildings in neighborhoods like Williamsburg rely on virtual doorman systems instead of doormen, he says, but also because many condos constructed in Manhattan in the past decade took advantage of tax abatements from the city. One of the strings attached is a requirement to employ a certain number of unionized staff members.
“What ends up happening is that instead of cutting jobs, these buildings cut repairs and corners,” Tomaselli says. Staff costs keep rising, and the buildings must eventually ante up for the inevitably higher cost of deferred maintenance — a vicious cycle.
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