Price Index of Operating Costs

1 2022. new york city Rent Guidelines Board Price Index of Operating Costs April 14, 2022. Board Members Chair: David Reiss Public Members: Christina DeRose Christian Gonzalez-Rivera . Arpit Gupta Alex Schwartz Owner Members: Robert Ehrlich Christina Smyth Tenant Members: Sheila Garcia Ad n Soltren Staff Members Executive Director: Andrew McLaughlin Research Director: Brian Hoberman Deputy Research Director: Danielle Burger Office Manager: Charmaine Superville new york city Rent Guidelines Board 1 Centre Street, Suite 2210, new york , NY 10007 l 212-669-7480 l new york city Rent Guidelines Board 2022 Price Index of Operating Costs 04 Introduction What's New 04 Overview R The Price Index of Operating Costs (PIOC) for buildings that contain rent stabilized apartments increased this year. PIOC Components - 05 Apartments R Costs in natural-gas heated buildings increased , while Costs in fuel-oil heated buildings increased PIOC by Building 08 Type R The Core PIOC, which excludes the changes in fuel oil prices, natural gas and steam Costs , rose by this year.

2 08 Hotel PIOC R The Hotel PIOC decreased this year. R Real estate taxes fell by , the only decrease of 08 Loft PIOC any PIOC component, primarily due to a decline in assessments for Class Two properties. 09 The Core PIOC. R Fuel Costs and Insurance Costs rose by the greatest proportions, and , respectively. PIOC Projections 09 for 2023 R The Maintenance component increased by R The Administrative component increased by , due to Commensurate a rise in attorney Costs . 10 Rent Adjustments R The Utilities component increased by 12 Methodology R The Labor Costs component increased by , due to increases in both union and non-union labor. 15 Acknowledgments R The PIOC for buildings that contain rent stabilized apartments is projected to increase next year. 16 Appendices new york city Rent Guidelines Board April 15, 2021 Page 3. 2022 Price Index of Operating Costs Apartments Introduction Change In Costs for The Price Index of Operating Costs (PIOC) measures changes in the cost of Buildings that Contain Rent purchasing a specified set of goods and services (market basket) used in Stabilized Apartments, the operation and maintenance of buildings that contain rent stabilized April 2021 to March 2022 units in new york city .

3 The PIOC consists of seven cost components: Taxes, Labor Costs , Fuel, Utilities, Maintenance, Administrative Costs Taxes and Insurance Costs . The specific goods and services (items) within Labor Costs each component were originally selected based on a study of 1969. Fuel Utilities expenditure patterns by owners of buildings that contain rent stabilized Maintenance apartments. The specific items Administrative Costs included in each component Insurance Costs have changed over time in The Price Index of order to reflect changes in All Costs Operating Costs for Buildings that Contain owner expenditure patterns. The Rent Stabilized methodology for determining Apartments the Costs for each component is described in the final section of this report. The measured Price changes ( Price relatives) in each Index component are presented Terms and Definitions in Appendix 2. The relative importance of each Index component as a percentage of total Operating and maintenance expenditures is shown by its expenditure weight (see Appendix 2).

4 The 2021-2022 Price Price Index - the measure of Price change in a market basket changes and expenditure weights are then combined to provide the of goods and services. overall change in the PIOC for Changes in the overall PIOC result from changes in the prices Component - categories of of individual goods and services, each weighted by its relative goods and/or services, such importance as a percentage of total Operating and maintenance as Labor Costs or Taxes, that (O&M) expenditures. Because the market basket is fixed in the comprise the market basket of a sense that the quantities of goods and services of each kind remain Price Index . constant, the relative importance of the various goods and services Item - individual good or service will change when their prices change either more quickly or more within a component, such as slowly than average. Thus, the relative importance, or weight, Plumbing, Non-union Wages, attached to each good or service changes from year to year to reflect Faucet or Roof Repair.

5 The different rates of Price change among the various Index items. Price Relative - the change of current and prior year's prices. Overview This year, the PIOC for all rent stabilized apartments increased by Expenditure Weight - the relative importance of the Increases occurred in all PIOC components, except Taxes, change in Costs of different which fell by The largest proportional increase was seen in goods and services. Fuel ( ), followed by Insurance ( ), Maintenance ( ), Administrative Costs ( ), Utilities ( ), and Labor Costs ( ). Specification - defined pricing The growth in the Consumer Price Index (CPI), which measures unit with specific terms of sale, inflation in a wide range of consumer goods and services was lower such as cash, volume or trade than the PIOC, rising during this same time See the discounts. table on this page and Appendix 2 for changes in Costs and prices for buildings that contain rent stabilized apartments from 2021-2022.

6 Page 4 April 14, 2022 new york city Rent Guidelines Board 2022 Price Index of Operating Costs The Core PIOC, which excludes changes slight decline in the tax rate of However, the in fuel oil, natural gas and steam Costs used for decline in assessments and the tax rate was offset heating buildings, is useful for analyzing long-term by a fall in the total value of exemptions, which inflationary trends. The Core PIOC rose by had the effect of dampening the total decline in this year and was lower than the overall PIOC due taxes by Change in tax abatements had little to the exclusion of Costs in the Fuel component, impact on the change in Taxes for 2022. which rose The PIOC for hotels decreased by , while apartments heated by gas increased Tax Levy The total tax levy for all properties in by and those heated by oil increased by the city (commercial and residential) decreased by from FY 2021 to FY 2022. The large majority of rent stabilized apartments are contained in Price Index Components Apartments multi-family buildings that are in Tax Class The total Class 2 property levy fell at a slower pace than Taxes that of the city as a whole, at a rate of The The Taxes component of the PIOC is distribution of the levy among property classes based entirely on real estate taxes tends to shift from year to year.

7 From FY 2021 to FY. and accounts for of the overall 2022, the levy share for Class 2 properties increased Price Index . The change in tax cost is by percentage points, from to of estimated by comparing aggregate the total tax burden. This is significantly higher taxes levied on buildings that contain than the share that was established at the rent stabilized apartments in Fiscal Year (FY) 2021 inception of the four-class tax system in 1983. and FY 2022. Aggregate real estate taxes fell by The decline in taxes was primarily due to Tax Rate The average annual FY 2021 Tax Class 2. a decline in assessments. There was also a rate of decreased by , resulting in a Percent Change in Taxes due to Assessments and Exemptions/Abatements/Tax Rate 2004-2022. Both Assessments and the Overall Tax Change for Buildings with Rent Stabilized Apartments Declined in 2022. Assessments Exemptions, Abatements and Tax Rate Overall Tax Change 18%.

8 16%. 14%. 12%. 10%. 8%. 6%. 4%. 2%. 0%. -2%. -4%. -6%. -8%. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022. Source: new york city Department of Finance new york city Rent Guidelines Board April 14, 2022 Page 5. 2022 Price Index of Operating Costs new annualized rate of for FY 2022. This is labor makes up more than 57% of the Labor Costs the eighth time in the past ten years that the Class component. The entire Labor Costs component 2 tax rate decreased. For a historical perspective comprises of the overall Price Index . on changes in the tax rate, abatements, and Labor Costs rose , percentage points exemptions, see the graph on the previous page. higher than last year's rise of Wages comprise 80% of the Labor Costs component. Non-union Assessments In the wake of the pandemic, pay increased by , percentage points assessed valuations of properties containing rent higher than the increase seen in the 2021 PIOC.

9 Stabilized apartments fell by Citywide in ( ). Unionized wages also rose, rising by , FY 2022. Assessments fell in all five boroughs, percentage points lower than last year ( ). with Manhattan witnessing the greatest decline, at Health and welfare benefits, which comprises 14%. , followed by the Bronx at , Staten Island of the Labor Costs component, increased at , and Queens at Brooklyn witnessed An increase in unemployment insurance of the smallest decline in assessments, falling by had minimal impact, since it accounts for only one Buildings in Manhattan drive much of the change in percent of this component's weight. See Appendix assessed value Citywide. This was true in FY 2022, 2 for all Labor Costs item weights and Price relatives. with 58% of the total assessed value attributed to this borough. For a historical perspective on changes in tax assessments, see the graph on the Fuel previous page. The Fuel component comprises of this year's Price Index .

10 The change Abatements and Exemptions This year, the in cost measured in this component number of buildings that contain rent stabilized considers both the change in apartments receiving tax abatements decreased weather and the change in prices for by from the previous fiscal year. At the same heating multifamily buildings by fuel time, the average benefit value of the typical tax oil, natural gas and abatement increased by from FY 2021 to This year the Fuel component increased , FY 2022. The net impact of the decrease in the following a decrease in the prior year. Natural number of buildings receiving abatements and gas Costs , which account for 53% of the overall the increase in the average abatement value was a Costs in this component, increased The cost negligible increase in the overall change in Taxes of for heating buildings by fuel oil makes up 40% of just this component, and increased Steam Costs In FY 2022, fewer buildings benefited from increased , but these Costs account for only tax exemptions and the value of the average tax 7% of the Fuel component.