Runaway Costs: A Case Study on Utilities

Utility costs keep rising, which does one of two things: Drives up rents, or in rent-regulated apartment buildings, defunds buildings. Here is a recap of some of the biggest cost drivers that have made housing less affordable.

Gas Price Gouging.

Rep. Ritchie Torres released a report in August showing Con Edison charged twice as much for natural gas transfer fees as National Grid. Although the two energy giants provide national gas to different parts of the city and are not in direct competition, their clientele is similar and they are delivering the same product. This disparity in price is unprecedented.

In 2024, National Grid charged an average delivery charge of $0.60 per Therm, the standard unit of energy measurement, compared to a $1.45 per Therm delivery charge from ConEd during the same time. This difference in delivery charge is estimated to have cost an additional $17,213 for a rent-stabilized building of 30 units, based on the average per apartment usage of 675 Therms.

Owners are not able to choose their energy provider. National Grid services Staten Island, Brooklyn and parts of Queens. Con Edison territory includes Manhattan, Bronx and parts of Queens. The ConEd delivery charge accounts for 16.9% of net operating income at the average pre-1974 rent-stabilized building in the Bronx.

Rep. Torres called on the state’s Public Service Commission, which allows the prices to be set, to investigate the disparity, even as both energy giants had major price increases approved. Reasons for the increases included infrastructure upgrades, federal and state safety mandates, and increased property taxes.

In 2024, National Grid increased its rates by 19.4 percent in Queens, Brooklyn and Staten Island. Con Ed is hiking rates 12 percent for electricity and 19 percent for natural gas over three years.

And that’s just the gas bill. 

Water Increases.

This past summer, the NYC Water Board approved a rate hike of 8.5 percent, the largest in 15 years and double last year’s hike. This is to cover a huge “rental payment” the city is charging the Water Board to use its infrastructure. This is only the third time since 2017 the Water Board has been charged a rental fee for infrastructure.

The city tried to claim this fee ended a subsidy for “wealthy homeowners” but in reality, is having devastating effects on affordable rental housing and rent-stabilized buildings. Water rates typically cover the operating costs of the system, but with the rental fee tacked on, some of the hike goes directly back to the city instead of going to the water board.

Since July 1, the average customer has seen their monthly water bill rise by $93 annually. The city is charging its own Water Board more than $1.4 billion in rent over four years to lease its water and sewer systems from the city, which means water rates could continue to jump significantly.

The New York City Independent Budget Office (IBO) analyzed the New York City Water and Sewer system and provided insight into the rate setting process, the rental payment to the City, and assessed water bills by charge, type, borough, property type, and council district. They found residents were paying rent to the city for using the water and sewer infrastructure, even after Water Board bonds issued for capital projects had been satisfied in 2005. 

While technically legal, this “financial fiction” is used by the city to pad the city’s General Fund, which can then be used for expenses unrelated to any water or sewer infrastructure issues or needs. The result is higher rate increases on water and sewer bills that go to pay for other city services.

The IBO study also found that multi-family residential buildings generate the highest total bills by property type, ranging from $663 million to $926 million per year.

Distressed Buildings and Third-Party Transfers.

The buildings most affected by these increases are rent-regulated buildings, which are unable to raise rents to match cost increases and which have had rent adjustments well under inflation, much less costs, for years.

Instead of finding ways to lower the costs or subsidize these buildings, the city council is considering a bill that would bring back a third-party transfer program that would essentially allow the city to transfer ownership of distressed buildings with tax liens, including unpaid water and sewer bills, and high violation counts to nonprofits.

This bill has a dangerously low definition of unpaid tax liens with only one year liability, which increases the number of buildings at risk of being seized. The available repayment terms are unrealistic for these struggling properties, and with a TOPA provision, it seems like the city is more interested in transferring these buildings to non-profit or tenant ownership, even though that would do nothing to increase the building’s income for taxes, utilities, or to fix violations without additional government subsidies.

While there needs to be a mechanism to get owners to pay, that solution cannot include taking distressed property from owners after the city caused the distress in the first place.

Overall, this is a clear example of the runaway costs buildings face, with noticeable examples of ways lawmakers could reduce costs, but instead increase them, hurting renters and housing providers alike.