Co-ops and Condos in Manhattan Face Revenue Loss as Congestion Pricing Takes Effect

New York City’s controversial congestion pricing plan to charge drivers a $15 toll to enter Manhattan below 60th St. — which is slated to kick off in mid-June — could be bad news for co-ops and condos that lease their garages to garage operators. Anticipating a drop in business, a growing number of operators are already seeking to renegotiate their leases and reduce their rent, which many boards count on for revenue.

Indeed, the numbers are sobering. Among the 1,022 garages in Manhattan, 572 are in the congestion zone, and 157 of those garages are in co-op and condos, according to Will Kwan, a managing partner at EZ Election Solutions, who did a cross-check of data from NYC Open Data (PLUTO and Active DCA-Licensed Garages and Parking Lots). “As commercial tenants, these garages provide income to buildings,” he says. Kwan, who is also a board director at his Murray Hill co-op and whose company helps boards with their annual meeting and election needs, says that “they are almost certainly going to be impacted.”

Rafael Llopiz, the president of the Metropolitan Parking Association, a trade group of operators with 900 garages in New York City, agrees that co-ops and condos are going to feel the sting. “This is a low-margin business,” he explains. “The rent we pay accounts for about 65% of our total income, and another 30% goes to labor, leaving us a 5% profit, or 10% at most. Garage operators are going to want relief.”

Anticipating a drop in business, some operators are already taking steps to protect their bottom line. “For the last year or two, we’ve been incorporating congestion pricing language in all of our lease agreements,” says Justin Melhado, the business development manager at LAZ Parking, which operates more than a dozen garages in co-ops and condos below 60th St. “We now have specific thresholds baked in. For example, let’s say you’re paying $250,000 in rent a year and your net operating income is $350,000. If your net income drops to, say, $250,000, your rent drops by roughly the same percentage.”

Congestion pricing arrives at a time when co-op and condo owners are already dealing with the costs of Local Law 126, which went into effect in January 2022 and requires garage owners to have their garages inspected every six years and make repairs as needed. “That’s a one-two punch that is going to knock the wind out of co-ops and condos,” says Kwan, adding that his building, which has 125 vehicle spaces, has been looking for ways to deal with the double burden.

“Co-ops and condos will have to get creative about ancillary revenue opportunities,” Melhado says. “That could be renting out newly unoccupied space in their garages for electric-scooter charging stations or Amazon lockers, or to other companies that need lockers for last-mile distribution. They need to position themselves to make up for any loss.”