NYC Homeowner Costs Rising at 3x Inflation

https://www.bloomberg.com/news/articles/2023-10-19/nyc-real-estate-condo-co-op-expenses-rise-more-than-inflation

I'm trying to figure out how buying in NYC is attractive with all of these liabilities on the horizon.

yes -
NYC regulation
increased costs of building labor - wages and benefits
increased costs of energy
other ordinary inflation
increased borrowing costs when applicable
sunset of many tax abatements in the past few years

The article is a little inconsistent as to whether the comparison includes taxes, but property taxes alone contribute substantially to this difference. The cumulative overall inflation increase since 2000 is about 70% in total. NYC property tax revenues have increased from about $8 billion to $30 billion annually over the same period. That is not the result of new development or gentrification; the taxes on my apartment have quadrupled in the same period. NYC's total annual spend likewise has increased nearly four-fold since 2000, nearly all of which came in a period of historic low interest rates on its ever-ballooning debt. Of course, if the article is excluding property taxes, the situation is far worse.

As Rinette notes and the article points out, NYC regulation adds significantly to the cost of living here. NYC governs without any notion of the practicality or expense of to those that actually live in Manhattan. E.g., whatever one's view of the benefit of the various congestion on purpose initiatives, and the elimination of street parking with ramshackle restaurant tents and bike lanes/racks, those policies have real world impacts on the expense and practicality of operating a building, and getting trade persons to service jobs in Manhattan. A plumber charged me a $200 appearance fee a few weeks ago (my long-time plumber won't do service calls in Manhattan (from Brooklyn) any more). When one of our neighbors moved over the summer, the movers charged $750 to hire some guys overnight to stake out the only spot for the moving truck on our block due to a bike lane and bike rack. Rules like the one adopted a few months ago requiring the building's garbage to be put out at 8pm perhaps seemed like a simple headline grab, but it paid no mind to the fact that many Manhattan building's supers have returned to their homes in the outer boroughs long before then. We hired a second, garbage-only super just to take out the trash. The Bloomberg article focuses on Local law 11, which is basically government-sponsored extortion. I suspect each unit in my building has contributed $100,000 toward Local Law 11 expenses in the past 20 years or so.

The suggestions in that article as to the probable costs of complying with various existing and proposed energy efficiency, emissions and fossil fuel regulations are pipe dreams. I paid well over $100,000 to put central air/heat pump in my apartment with the place gutted to the walls in a full renovation. And, shortly thereafter our building was without gas for a period mid-winter and, as any HVAC professional will tell you, even the highest end heat pump cannot provide adequate heat in the dead of winter. We had space heaters in every room (and electric bills so sigh ConEd called with a fraud alert thinking someone had tampered with our electric service). But, this is not to debate the underlying goals, but with those goals come practical realities and increased costs. At some point, instead of debating what value is left to a building or its units after land lease rents, folks here may be debating when escalating tax and maintenance expenses begin to overwhelm the value of some properties. Even today, rental values of many apartments are not much higher than the monthly tax and common charge bill.

Do you know how much extra time your building staff spends sorting garbage?

nyc_sport,
If the search function worked better I'd try to find the post I made here years ago warning about that.

Add to Rinette list

Increased cost of transportation of goods and services

The TA (transportation alternatives) mafia has been successful in their war on cars , with their mandate to remove at least 25% vehicle lanes. They are doing so by addition of bike lanes, bus only lanes, random barricaded closed streets (they call this open streets, in keeping with their Orwellian doublespeak brigade) etc.
With the further addition of the reduced speed limit combined with wandering uber drives at 8mph, creates the illusion of "traffic."
There are blue collar workers who cannot rely on public transportation, whether its workers in retail, grocery, building maintenance, or companies servicing buildings, repairing building systems, or delivering goods to buildings who either absorb this inflation, or pass it on to the city residents if able.

And this is before Congestion Pricing.
We've already destroyed the local tourist. That is, people who live in NJ, CT, Long Island who would drive in for the day and spend their money in the city.

Manhattan is becoming a luxury open air prison. And once enough people who monetarily support it leave, it will just be a dumpster.

I'm not as bearish on Manhattan as some poaster here, but..
I think it ultimately solidifies Manhattan as a playground for the young henry renters on the make, and global 0.1% owners. With gentrified Brooklyn following close on the heals. As is Queens.

Was talking to a friend who owns/rents in LIC who had the same observation as me - they just are not building reasonable size 2BR units anymore there. And it's where a huge proportion of new development is happening. Forget 1200 sq ft, we are talking 950 sq ft 2 bed/2 bath units for investors to buy & rent out to the 20-something roommate split rental market.

So I think as 2010-2020 developments age into the market, it will be even harder for a couple working stiffs to raise a family in the city.

Personally I look to the monthlies escalation through the lens of "how does someone ever retire here?". If you can now reasonable expect your monthlies to double every decade, base case.. how do you even budget for this?

All these rosy statements assume city budget necessities driven by economic cycle, interest rates, migrant crisis, etc doesn't drive increased escalation of costs..

Not a huge fan of the "open streets" and other program implementations as it just generally seems to be a cheapskate "solution" that if they make owning a car harder, then somehow transit will magically get better. No one is actually solving the problems that make transit hard to upgrade, extend and maintain here. Nor is anyone doing simple things like real dedicated, enforced rapid bus lanes.. which are cheaper than tunneling but operationally require MTA-DOT coordination (good luck).

It would be awesome if they got cars out of traffic lanes and actually used it to move people quicker via some form of transit. Bikes ain't it for the majority of people on the majority of trips.

They have actually been removing bus routes in the outer boroughs cheered on by "transit activists" Transportation Alternatives.

They have actually been removing bus routes in the outer boroughs cheered on by "transit activists" Transportation Alternatives.

As I've said before wait until unmaintained 150 year old infrastructure elements like water mains start failing at accelerating rates.

They recently put in a bike lane on 10th Ave in Hells Kitchen and it’s one of those bike lanes that is right against the sidewalk with parking on the other side. I’ve already seen one collision with a car making a left turn, not expecting the the cyclist so close to the curb, going the wrong way, I might add (but cyclists and e-bikes and scooters ignoring traffic laws is another discussion entirely…). And it’s only a matter of time until a car parks, and the driver opens his/her door, and smacks a cyclist since most drivers DONT anticipate/expect a bike lane on their right side. Traveling by bike is great but it’s just not feasible for many people for a variety of reasons so I don’t like this massive proliferation of bike lanes everywhere, not just in NYC but in many cities. Before installing more bike lanes, how about ticketing the cyclists and e-bikes and scooters that ignore the traffic laws

Correction: most drivers don’t expect a bike lane on their LEFT side, not right

911 Turbo

Same thing on 5th ave, its parking lane, then bike lane, then sidewalk.
Its a matter of time before a bicyclist is killed by a vehicle making a left onto 20th st. eastbound.

They also will continue to completely ignore 2 wheelers that thwart every law because they want more and more people moving to it as transportation. Once they've removed the individually owned and driven cars, all the 2 wheelers will be forced to register, insure and follow most laws.

In the meantime, the powers that be allowing 2 wheelers going down one way streets the wrong way negates the claimed purpose of lowering the speed limit to 25 mph to save lives.
The 25 mph limited is offset when a 2 wheeler is coming the opposite direction 10/15 mph, making it the same as getting hit at 35/40 mph. Once your 30mph and higher, death rate is exponentially higher.

As a Manhattan resident, I'm a fan of TA and their work. Eliminating free storage for private cars (many of whom have real or fake placards) is a great idea, as are protected bus and bike lanes, as is congestion pricing, as is daylighting intersections. TA is not your enemy unless you think you have the God-given right to park your car free on 7th Avenue. While it's true that the MTA remains totally dysfunctional, TA isn't your enemy. Indeed, congestion pricing may well help that plumber get to and from his job faster, all for $20. Feels like a bargain to me.

There is a knee jerk reaction whenever anyone makes some comment about bike lanes to resort to some pocket press statement about free parking. I doubt anyone here that has a car parks on the street, and I would be happy to eliminate 100% of free street parking, as your friends at TA have advocated for. But school teachers and municipal workers are the worst offenders of using free street parking, so that will never happen. Metered street parking in Manhattan is $5.50 for the first hour, and $9/hr thereafter. Hardly free. In fact, about $300MM/yr revenues. TA has contended it could be "billions" if 25% of free spots were metered. What is the revenue profile of a bike lane?

If congestion pricing did what George says, it would indeed be a boon to Manhattanites. But the city is too incompetent and beholden to special interests to accomplish that. All that needed to happen, given the high price of existing tolls, was to put equivalent tolls on the free east river passages and the north-south avenues at 96th street. Apparently, there are no traffic issues north of 60th street, so there apparently ends the congestion pricing zone. But I am confident that, if ever put in place, the very worst offenders of driving to work in Manhattan -- city workers -- will be exempt, the city has already suggested exempting low income people that aren't too low income to own and insure a car, and the free parking around schools, civil servant buildings, municipal buildings, and the projects all will be preserved. But, if anyone was pursuing this legislation for the benefit of Manhattanites the one group that would be exempt are those that live here. Nada. Instead, that UES resident that was spared the congestion pricing zone is going to pay a $25 surcharge to take a taxi for dinner at Mr. Chow.

"We hired a second, garbage-only super just to take out the trash. "

Our co-op had to add a porter shift.

Steve>> Personally I look to the monthlies escalation through the lens of "how does someone ever retire here?"

I have a much more sanguine view on this, the answer being “The same way everyone else retires elsewhere.”

My second NYC apt recently came on the market for rent at 50% more 19 years ago. 50% seems like a lot, but then again inflation has been 60% over the same interval. And most of the increase to rent came in the past couple of years, meaning it was even more “cheap” relative to inflation for most of this years.

Like anywhere, if you work for 40 years, sock away 20% of your after-tax income, and invest your net worth at a rate that grows at inflation + 5%/yr, you retire with full ability to spend as much as ever (including future inflationary increases). If you work for less years, then you either have to save more, invest better, or downgrade your lifestyle in retirement. Same as elsewhere.

@nada - I know we have had this discussion before and you have a different view on retirement for sure..

But generally speaking, my point here is that in many places of this country, your housing expenses on a home you own will go up less than the cost of inflation, rather than 2-3x faster than inflation, as it does in NYC.

Paying for above-inflation growth cost escalation (100% in 10 years, backwards looking in ZIRP era) is one thing when you are making money & getting raises (it just cuts into what % you can sock away annually) vs when you are expecting to live off your retirement savings.. now your runway is shrinking each year, and you have to reduce your spend, move to FL, or go back to work.

NYC exceptionalism is what I see here. Others with non-NYC RE can chime in, but taxes&maintenance growing 10%/year isn't typical outside the 5 boros, in my experience.

My parents, in-laws & my nowhere home property taxes only go up something like 0.5% , 1%/year & 1% respectively. It is even flat or slightly down some years, believe it or not. All in different towns in northeast blue states no less.

Renting in NYC is likely different, as we've both experienced being renters in condos with lower cost escalations. Units I previously rented appear to have gone up closer to 4-5%/year in rent.

So maybe the answer is what you are doing - rent. Let others deal with capital outlays, and move sideways every few years when a landlord demands too much increase. Aging in place in a rental may be hard, but then again.. I bet theres tons of tenant protections in that scenario.

My experience in Queens is very different.

My first co-op apartment increased the maintenance only once (about 4% at the 8th year of the close to 10 years over there).

I stayed in my second coop apartment between 2 and three years. It had only one maintenance increase of about 4% this year.

This is only about the past, I’m hoping about the future maintenance increase stays the same, but no one knows about the future.

Is there a place to obtain the citywide or borough wide for maintenance increase?

Not everyone can follow the model of working for 40 years and socking away 20 percent of their after-tax income (employment not consistently available for everyone; high-income work not available for everyone, and costs at lower incomes absorbing the entirety of after-tax income; the addition of kids causing resource deficits for a decade or more) but even so, many people do manage to retire. I would add "working for more than 40 years" (as one example, think of a senior who babysits or nannies) as one more possible adjustment.

>> 100% in 10 years, backwards looking in ZIRP era

I'm with Woodsidenyc on this one. Your place(s) or area(s) must have experienced something quite different than mine in Manhattan.

The place I rented ~10 years ago has had increases of ~2%/yr on common charges plus (unabated) taxes. A bit less than 2%/yr on common charges, a bit more on (unabated) taxes. Of course if you count it via abated taxes, it becomes something unreasonable, but that doesn't make much sense as a baseline to me.

The place from ~20 years ago is in the same ballpark of ~2-3%/yr. 100% per decade is a lot -- I'm not sure I've seen anyplace that where (unabated) monthlies run 4x what they were 20 years ago. Sure, developers could have stamped taxes of zero and subsidized common charges on offering documents, but I have personally never run across listings where there has been 4x increases on what one should have "truly" expected.

FP>> I would add "working for more than 40 years" (as one example, think of a senior who babysits or nannies) as one more possible adjustment.

Certainly. No matter the specific means of the participants here, there is always a boatload of people who make do with less. The notion that people should work for 20 years, sucking off the collective teet of society for the other 60 years or whatever, all the while enjoying economic parity just doesn’t add up to me personally. If you can make it work, great. But it seems much as a baseline for society.

These are the world’s most expensive cities
https://www.economist.com/graphic-detail/2023/11/29/these-are-the-worlds-most-expensive-cities
from TheEconomist

NY is tied at #3 with Geneva behind Singapore and Zurich. And the lion's share of that cost has to be housing/commercial RE

These lists are always funny to me due to how much NYC stands out from other "worlds most expensive cities" in terms of public safety, infrastructure, and what you get for your tax dollars in terms of health care / functional social housing / etc.

The flip side of course is that in NYC you get access to employment in a variety of growing industries and to live with American rights & freedoms, versus a lot more stodgy, over-regulated economies with more limits on civil liberties.

Classic US trade-off I suppose.. you have all sorts of rights but need to put up with everyone else having those rights as well :-) .

As much as the Europe likes to look down their noses on us as being less enlightened, good luck entering their borders permanently. By & large US has the most open immigration / high immigration rates in the world (legal & otherwise). So they always have the option to move here more than we have the option to move there.

The EU had a melt down & started electing the far right over Syrian refugee numbers that don't hold a candle to our steady state Central/South American flow.. and the EU has 50% higher population to start with. There's a reason Europe remains a set of ethnostates while the saying goes that America is the only country founded on an idea.

How much does it cost to have a slice of pizza in NY vs in Zurich or Singapore?

I was in Zurich last year, didn't see any places selling slices of pizza. However, you can buy a very quality personal pizza made by Italians, for 20 to 25 euros.

Also, regarding immigration to Europe, there are plenty of opportunities if you can bring something to the table. Or you have some relatively recent ancestral connection you can apply for citizenship. Certainly Northern European countries are more difficult than Southern...

I'd imagine from my travel experience that cheap dining / "street food" is cheaper in NY than Zurich, but not as cheap as Singapore.

NYC if you are not living in prime areas is just not that expensive. Think Bayridge. Inwood. Pizza example is a good one. You can go to Chinatown and still get yourself a quick no frills for $15mm.

no frills meal for $15. So used to typing real esate.

To Keith's point, in my neighborhood a personal pizza made by Italians is $14. But I think that it's harder for people without work to get by here than in Europe.

I should have been more clear and said Swiss franc, but the exchange rate is about the same and euros are readily accepted.

Both of my grandmothers are from Italy, so as we make future plans to live/retire in Europe, trying to understand the best path to secondary citizenship. Also have roots and relatives living in switzerland, however, it is a bit more difficult to get that Swiss passport!

If you move to Europe to retire just make sure you buy insurance (or acquire citizenship to access national plans). Huge generalization here but in my experience is there's a big difference between Europe and the US where plain friendliness is concerned. Move to Europe and odds are all or most of your friends are going to be other immigrants. RE can be a lot more affordable there and there's nothing like the maintenance you pay in NY coops, even in Paris and London. RE taxes are generally a fraction of what they are in NYC. European consumption taxes take a big bite out of your discretionary dollar (or euro). In return you get great social services, efficient public transportation, decent roads and schools, wonderful subsidized culture. Labor markets are indeed rigid as @steve123 points out so good luck finding a job or, if you start a business and hire people, firing them if it doesn't work out. Europe definitely has its charms (the art and architecture, the food) but it also feels very sedate. Maybe partly to do with median age.

I'm sure a lot of this is just because I'm an old fart now, as well as being a cheap bastard in general, but I'm still shocked on a frequent basis at how expensive NYC has become. For example, I'm not surprised at all at real higher end dining prices. Back in the 1990s the wife and I would go to the original Bouley at ?$125? PP price fix reasonably often. Now price fix at Momofuko Ko is ?$280?.

But for a lower end weekday meal we would go to any number of places in Greenwich Village, Chelsea, etc which were unpretentious, small, but had decent food and were still full service "white tablecloth" establishments, and dinner for 2 could be had for $30. Now it seems hard to find actual "white tablecloth" (not actually talking about tablecloths, but the industry term of art) restaurants which aren't nearing $200 for dinner for 2.

$200? Have you tried eating at Newark Airport?

I'd always eat at diners as a way to economize when staying at the Y - a hearty breakfast could be had for $10. Not any more. I imagine it's mostly overhead (rent). And maybe labor. Are they still employing undocumented workers and paying under the table? It used to be running a restaurant was a precarious, labor intensive enterprise with daily headaches. I doubt that has changed.

Some of this can be blamed on the NYC council who raised the minimum wage, tying condo and coop abatements to paying "prevailing wage" and local law 97.

Based on my limited understanding the costs due to local law 97 have not had much of an effect yet, have they? Since it's phased in the big changes won't happen for a while.

https://www.urbangreencouncil.org/what-we-do/driving-innovative-policy/ll97/#:~:text=Local%20Law%2097%20phases%20in,to%20meet%20zero%20emissions%20requirements.

I think it's hysterical restaurants can pay $40,000 a month rent and then blame paying minimum wage as the reason for high prices

MTH,
https://youtu.be/4cia_v4vxfE?feature=shared

local law 97 costs are get reflected as buildings take mitigation measures and invest in measures that reduced carbon footprints. the costs are showing up today, unless the building has opted to kick the can down the road

https://archive.is/TiLTo

My coop just announced a double digit maintenance increase driven by insurance and tax increases. Ouch!

@30 Ha! I needed that. Such sartorial exhuberance - matched only by 1974 inflation.

@riversider - Many probably have. I doubt many buildings are remotely near the eventual goal net zero emissions?