To analyze the impact of Local Law 97 compliance efforts on shareholders and unit owners, the Council of New York Cooperatives & Condominiums (CNYC) held a series of town halls and discussion groups with co-op and condo residents over the last 18 months to establish advocacy priorities based on the firsthand concerns of homeowners and the boards representing them. According to a CNYC press release, “Across the board, the cost of compliance and diminishing affordability were at the top of every list.”

In late July of this year, the Council published a report on its findings “Utilizing data from CNYC's Annual Study for Comparable Operating Costs for 2019-2024, an analysis of the demographic and typological make up of co-ops and condos subject to LL97, a review of New York City's Open Data sets, an analysis of energy audits, information from ULI's technical advisory panel report on LL97, and the insights contributed by board members and homeowners at CNYC's member buildings.” From this, the CNYC developed recommendations to address these concerns and submitted the resulting Reasonable Recommendations to Keep Co-op and Condo Homes Affordable report to the office of Mayor Mamdani.

CooperatorNews recently spoke with Rebecca Poole, Director of Membership and Communication at CNYC, to give us the 311 on the report and why it was written.

COOPERTORNEWS: Good afternoon, Rebecca.  Thanks for joining us.

REBECCA POOLE: “Good afternoon.  Thanks for inviting me to chat about this important report.”

CN: Why was the report written?  What factors prompted CNYC to undertake the project?

RP: “The whole shared-interest community is suffering from the cumulative unintended consequences of well-meaning legislation. 

“CNYC developed its Reasonable Recommendations to Keep Co-op and Condo Homes Affordable Report to stabilize co-op and condo homeownership and assist homeowners who are overwhelmed by the escalating expense of capital projects on top of now-routinized annual increases in carrying charges. Facade work, parking structure repairs, gas piping replacement, window replacement and the other capital work required to maintain an aging building at today’s standards all require continual investment from homeowners. Unfortunately, recent legislation and regulations have added to the complexity of projects and typical costs.”

CN: Please tell us more.

RP: “Despite the toll this has taken on co-op and condo owners over the past six to seven years, new legislation and regulations are still being introduced regularly without a view to the burden the collective requirements are placing on homeowners.  

“CNYC’s concern over the erosion of the viability of co-op and condo homeownership and the potential displacement of homeowners led us to analyze the problem and host town halls throughout the city. Across different neighborhoods, individual homeowners told stories of how they had depleted their discretionary savings to cover assessments, and didn’t know how they would afford the next carrying charge increase. These issues called out for meaningful change.”

CN: How severe is the financial burden on co-ops and condos these days? 

RP: “The severity of the burden on co-ops and condos ranges, depending on building typology. However, across the board co-ops and condos are facing escalating costs and are becoming stuck in a compliance loop that is precluding buildings from undertaking proactive resiliency projects, and potentially exacerbating the problem going forward.  

“All capital preservation work in co-ops and condos is self-funded by the homeowners who live there, and most salaries are not keeping up with the operating cost increases seen in CNYC’s annual study. For young families and young professionals, middle class workers, and seniors on fixed incomes, the costs are becoming increasingly unfeasible. Those co-ops and condos that added to their underlying mortgages or borrowed to fund capital projects while rates were low will now face the added burden of potentially refinancing at a higher interest rate, further adding to carrying costs. We’ve gotten to the point where some potential purchasers are making the decision not to purchase, because they are concerned their savings will be depleted by assessments.”

CN: How has the burden of compliance increased over the past few years, and why?

RP: “Buildings have experienced extended gas shutdowns as they’ve replaced piping to comply with Local Law 152. The new Parking Structure Inspection requirements have also hit many buildings particularly hard. Those co-ops and condos subject to Local Law 97 have had to engage engineers, and many have undertaken some form of physical plant work. 

“The number of local laws requiring administrative work has also increased, alongside the liability for non-compliance. While all of the laws are intended to improve safety and quality of life, neither the cost nor complexity of compliance was considered in their development. The increased inspection requirements and other ‘soft’ costs related to the Facade Inspection Safety Program (FISP) and others have depleted reserve funds.”

CN: How can that problem be addressed?  

RP: “Our report has three recommendations to help address the existing compliance burden:  

“The first is to develop a one-stop shop where co-op and condo board members and professionals can see all of the compliance requirements for their building. This would help prevent violations, reduce liability, and expedite compliance.  

“Second, implement a system whereby the City Council is able to access a fiscal analysis of local laws when they are introduced, and engage with co-ops and condos to discuss the most efficient means of accomplishing the bill’s goals before bringing the legislation to the floor.  

“Third, review all existing bills, laws, codes, rules and regulations to learn where there is overlap, how various requirements compound the costs of compliance, and seek ways to reduce soft costs.”

CN: Do these cost increases have a disproportionate effect on say, small or mid-size buildings versus large buildings, or newer versus older buildings?  

RP: “The impact of individual local laws on individual buildings does vary based on typology.  However, compliance affects all co-ops and condos as a whole. Smaller buildings struggle with administrative filings, medium-sized buildings have fewer homeowners to fund capital projects, and large buildings generally have to comply with more of the local laws.” 

CN: Are lower- and middle-market shared-interest communities more adversely affected than say high-end luxury buildings?

RP: “Almost all co-ops and condos have been adversely affected by the increases in operating and capital costs. The hardest hit have been homeowners who are already the most burdened by housing costs based on their individual economics.”

CN: What were the three or four most important findings from your study?

RP: “Co-op and condo homeowners are a vital component of New York City’s success, and contribute substantially to the city’s budget via their property taxes. Further, in this critical moment of housing scarcity, co-op and condo homeowners self-fund preservation work, maintaining over 720,000 units of affordable housing.  In a city with among the lowest rates of homeownership in the country, co-ops and condos can provide a pathway to affordable homeownership. 

“That said, the long-term affordability of co-op and condo homeownership is under threat. Most salaries are not keeping up with increases in operating costs, and capital costs associated with compliance requirements have depleted reserve funds and required buildings to increase their debt. Compliance requirements are impacting the ability of co-ops and condos to function efficiently. 

“There are over 100 local laws pertaining to co-op and condo operations spread over multiple agencies, and some of them overlap. Violations and non-compliance increase liability and costs, as well as impacting insurance renewals and mortgage availability. It is beneficial for co-ops and condos to lead the way on energy efficiency and resiliency measures; however, Local Law 97’s decarbonization through electrification mandate and penalty structure present some obstacles to success.”

CN: What are the three or four most important recommendations resulting from the study?

RP: “Most importantly, CNYC believes there is a way to both protect the viability of co-op and condo homeownership, and to ensure the city meets its safety, quality of life and decarbonization goals. We recommend that the City partner with co-ops and condos to ensure that new and proposed legislation and regulations address implementation concerns before being passed. We also advocate the development of a one-stop-shop to ease the compliance burden on all co-ops and condos and facilitate a reduction in violations and liability. Finally, we urge the City to address the issues inherent in LL97’s electrification-based penalties, which are adding to the liability of co-ops and condos working towards decarbonization through energy efficiency measures.”

CN: How has the report been received by the  Mamdani administration?  

RP: “CNYC is looking forward to working with the Mamdani administration. Co-op and condo homeowners have invested in New York City’s future and are committed to  the city’s goals. Together we will be able to secure affordable homeownership and the stability and economic mobility it brings.”

NEXT IN THIS SERIES: WHAT CO-OP AND CONDO BOARD MEMBERS AND OWNERS ARE SAYING ABOUT THE REAL-LIFE EFFECT OF COMPLIANCE REQUIREMENTS