By TERI KARUSH ROGERS
Published: February 24, 2008
NEW YORK CITY apartment owners can hardly be blamed for feeling nostalgic, and a little depressed, as they receive their increases in condominium common charges and co-op maintenance fees this year, for many, the fifth or sixth in a row.
In the old days, the fees rarely rose, and then usually by very little. Owners and prospective buyers, rationally or not, expected common charges and maintenance to remain about as constant as their mortgage payments. But six years ago, rising operating costs and property taxes put an end to that.
Average co-op maintenance fees in Manhattan last year were 30 percent higher than in 2002, compared with a 9 percent difference in the previous five-year interval, according to an analysis of residential sales data by Miller Samuel Inc., the Manhattan appraisal company. (Data for other boroughs was not available.) Condos had a 38 percent increase in combined common charges and real estate taxes in the most recent five-year comparison, versus 27 percent in the previous five-year period.
The old yardstick of $1 in maintenance for each square foot in the apartment has gone the way of the nickel candy bar. Doorman buildings in Manhattan now average $1.37 per square foot in maintenance fees or in the case of condos, real estate taxes and common charges, according to Miller Samuel. Buildings without a doorman average $1.22 per square foot.
Many brokers selling in Manhattan’s prime residential areas put the range higher — at $1.40 to $1.60 for a doorman building to more than $3 a square foot for ultraluxury buildings.
Surprisingly, the increases have not been met with the loud and bitter complaining that one would expect. “New York is just so strange right now — anytime you go out to dinner or to the dry cleaner, everything costs so much money that nobody flinches anymore,” said Dennis Mangone, a senior vice president at the Corcoran Group.
Mr. Mangone recently sold a $13 million co-op at 15 Gramercy Park North with maintenance charges of $13,000 a month. Even he struggled to comprehend the monthly sum: “I’m a simple guy from the Bronx, and nothing makes sense. But if they want to have room service at 2 in the morning, they can have it.”
This year, according to several large property managers, many ordinary buildings ended up with another round of 5 to 7 percent increases. As usual, the reasons were largely outside the control of the buildings or their managers.
“Co-ops control a very small percentage of their actual costs,” said John R. Janangelo, the president of Bellmarc Property Management. “About 85 percent you really have very little or no control over. Real estate taxes, insurance, payroll, fuel, water and sewer costs make up the vast majority of the budget. The leftover 10 or 15 percent you have some control over, like repair and maintenance costs, your service contracts, your building supplies, the administrative costs.”
Unfortunately, prices for nearly every item in the 85 percent category have surged in recent years.
Shortly after Sept. 11, property insurance rates shot up, even tripling in certain high-profile buildings. (Rates have begun drifting downward again, but not to previous levels.)
More significantly for many, an 18.5 percent increase in property tax rates in 2002 dealt an enormous blow to co-op budgets. Soaring property tax assessments, the byproduct of a roaring real estate market, magnified the impact.
“We saw increases of 25, 50, 75 percent in assessed values,” said Gary Ziprin, chief financial officer at Midboro Management. “Sometimes they even doubled.”
A modest reprieve arrived in the form of a 7 percent reduction in tax rates in 2007, but it was good for only one year. Assessed values continue to rise, albeit at a slower pace this year.
(It could be worse. Although assessments are way up, they still trail property values. To help shield owners from unaffordable tax increases in a rising market, the law requires that co-op and condo buildings be assessed as if they were rental buildings, resulting in far lower tax bills.)
As water and sewer costs have ratcheted upward, fuel costs have spiked. “The price is three and a half times higher than it was six years ago,” Mr. Ziprin said. Recent upticks have been especially brutal.
“Fuel has been a big, big issue,” said Lynn Whiting, the director of management for the Argo Corporation, a property manager based in Manhattan.
Consider the impact on a 35-unit Manhattan co-op managed by Argo. This year the building budgeted $2.50 for a gallon of fuel oil, compared with $1.50 for 2007.
Average co-op maintenance fees in Manhattan last year were 30 percent higher than in 2002, compared with a 9 percent difference in the previous five-year interval, according to an analysis of residential sales data by Miller Samuel Inc., the Manhattan appraisal company. (Data for other boroughs was not available.) Condos had a 38 percent increase in combined common charges and real estate taxes in the most recent five-year comparison, versus 27 percent in the previous five-year period.
The old yardstick of $1 in maintenance for each square foot in the apartment has gone the way of the nickel candy bar. Doorman buildings in Manhattan now average $1.37 per square foot in maintenance fees or in the case of condos, real estate taxes and common charges, according to Miller Samuel. Buildings without a doorman average $1.22 per square foot.
Many brokers selling in Manhattan’s prime residential areas put the range higher — at $1.40 to $1.60 for a doorman building to more than $3 a square foot for ultraluxury buildings.
Surprisingly, the increases have not been met with the loud and bitter complaining that one would expect. “New York is just so strange right now — anytime you go out to dinner or to the dry cleaner, everything costs so much money that nobody flinches anymore,” said Dennis Mangone, a senior vice president at the Corcoran Group.
Mr. Mangone recently sold a $13 million co-op at 15 Gramercy Park North with maintenance charges of $13,000 a month. Even he struggled to comprehend the monthly sum: “I’m a simple guy from the Bronx, and nothing makes sense. But if they want to have room service at 2 in the morning, they can have it.”
This year, according to several large property managers, many ordinary buildings ended up with another round of 5 to 7 percent increases. As usual, the reasons were largely outside the control of the buildings or their managers.
“Co-ops control a very small percentage of their actual costs,” said John R. Janangelo, the president of Bellmarc Property Management. “About 85 percent you really have very little or no control over. Real estate taxes, insurance, payroll, fuel, water and sewer costs make up the vast majority of the budget. The leftover 10 or 15 percent you have some control over, like repair and maintenance costs, your service contracts, your building supplies, the administrative costs.”
Unfortunately, prices for nearly every item in the 85 percent category have surged in recent years.
Shortly after Sept. 11, property insurance rates shot up, even tripling in certain high-profile buildings. (Rates have begun drifting downward again, but not to previous levels.)
More significantly for many, an 18.5 percent increase in property tax rates in 2002 dealt an enormous blow to co-op budgets. Soaring property tax assessments, the byproduct of a roaring real estate market, magnified the impact.
“We saw increases of 25, 50, 75 percent in assessed values,” said Gary Ziprin, chief financial officer at Midboro Management. “Sometimes they even doubled.”
A modest reprieve arrived in the form of a 7 percent reduction in tax rates in 2007, but it was good for only one year. Assessed values continue to rise, albeit at a slower pace this year.
(It could be worse. Although assessments are way up, they still trail property values. To help shield owners from unaffordable tax increases in a rising market, the law requires that co-op and condo buildings be assessed as if they were rental buildings, resulting in far lower tax bills.)
As water and sewer costs have ratcheted upward, fuel costs have spiked. “The price is three and a half times higher than it was six years ago,” Mr. Ziprin said. Recent upticks have been especially brutal.
“Fuel has been a big, big issue,” said Lynn Whiting, the director of management for the Argo Corporation, a property manager based in Manhattan.
Consider the impact on a 35-unit Manhattan co-op managed by Argo. This year the building budgeted $2.50 for a gallon of fuel oil, compared with $1.50 for 2007.
FULL ARTICLE: http://www.nytimes.com/2008/02/24/realestate/24cov.html
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