Unfunded Mandates: Why Other People's Problems Add to Co-op & Condo Costs

"We're all for safety, but one or two highly visible incidents happen, then everybody gets stroked with the same paint brush," argues Greg Carlson, property manager at the Fairview, a 425-unit co-op in Forest Hills, Queens, and also the head of Carlson Realty and the executive director of the Federation of New York Housing Cooperatives & Condominiums.

"I understand why they changed the elevator inspection rules," Carlson says. "They did it [following a series of] elevator accidents in 2006. What they failed to note was that the problems were in public housing, not in co-ops and condos. And the problem with the construction cranes was that the crane companies were paying off city officials, and the city wasn't inspecting the cranes."

The difficulty, as Carlson sees it, is not that existing rules are inadequate; but that they aren't being adequately enforced. "If the city would enforce existing laws instead of making new [unfunded mandates], things would get done at no more expense. Don't change the rules," he pleads. "Just make sure people do their jobs."

Public Housing Apples, Co-op/Condo Oranges

At the Fairview, where Carlson has lived since 1991 and has served as property manager since 1994, mandated elevator inspections were conducted every two years by a service company. City inspectors would then randomly check to make sure that the work was done properly. Now, thanks to several accidents in public housing complexes, caused by poor maintenance, new regulations require co-ops and condos to hire a third party to conduct what's known as a "witness test" of the elevator company's work once a year. The cost: almost $30,000.

Seward Park is another property suffering from unfunded mandates. With 1,728 apartments in four 20-story buildings on the border of the Lower East Side and Chinatown, it is the largest free-market co-op in Manhattan. "Back in the mid-1980s, the co-op did an elevator renovation," says Frank Durant, who has managed the property for Charles Greenthal Management since summer 2008. "New elevator regulations went into effect in December of 2009, and we got a violation in March of this year."

Because of those elevator accidents in public housing complexes, the Seward Park board had to follow a new mandate and install sight-safety guards, which prevent small children from getting trapped between an elevator's inner and outer doors. Installing the guards on 240 elevator doors will cost the co-op $30,000.

Site-Safety Salary

The co-op is also tackling an extensive, four-year schedule of Local Law 11 work to the buildings' exteriors. Once again, a new unfunded mandate is adding to the cost.

"Over the next four years, the site safety inspector is an added expense of $1,500 per week during the spring-to-fall outdoor work season," Durant says. "Since we're playing catch-up on deferred maintenance, we had to make a small assessment of $8 per room until the work is done." To ease the sting, the board is generating income by adding 112 storage bins and 120 bike spaces.

Durant is getting ready for the added costs of the city's proposed green initiatives, signed into law in December. "Right now, we're interviewing companies that will come in and properly recycle used electronic equipment," he says. "One company is going through the complex and telling us what to do to become more energy efficient. Another is looking into ways we can use alternative energy — solar, wind, geothermal."

How to Deal

For Durant, two keys to dealing with unfunded mandates are keeping abreast of changing regulations and persuading the board to do the work right. "There are a lot of sources of information," he says. "You have to take the time to sit down and read through it, and you have to have a board that cares about the safety of the residents and is willing to spend the money."

Seward Park, according to Durant, has such a board. Board president Michael Tumminia says, "The board," he says, "understands the value of having a team of professionals that's involved from the beginning in assessing work that needs to be done, hiring the contractors, and overseeing the work. You have to have quality, strong professionals…."

"With all the unfunded mandates that the city has placed on co-op and condominium unit-owners," observes attorney Stuart Saft, a partner at Dewey & LeBouef, "costs are increasing tremendously on co-op and condominium owners. And then when you add to that the way water and sewer bills have escalated and the increases in the real estate taxes themselves, it's quickly becoming unaffordable. A city that is regularly concerned about the loss of affordable housing, by adding on these unfunded mandates, is primarily responsible for the loss of affordable housing."

Adapted from Habitat June 2010. Join our Archive >>