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City Building Owners Looking to Get Ahead of 2024 Environmental Regulations

Local Law 97 puts carbon caps on buildings bigger than 25,000 square feet — the city’s largest source of greenhouse gas emissions. With the rules still in draft form, landlords are trying to figure out what they need to do now.

SHARE City Building Owners Looking to Get Ahead of 2024 Environmental Regulations

Buildings in New York City larger than 25,000 square feet will have to pay fines if they go over carbon emissions limits.

Ben Fractenberg/THE CITY

With just over a year before New York City’s climate law targeting buildings goes into effect, property managers and co-op board members are starting to look to the future, motivated by the looming deadline — and the threat of thousands of dollars in penalties.

Local Law 97, passed by the City Council in 2019, puts carbon caps on all buildings bigger than 25,000 square feet — the city’s largest source of greenhouse gas emissions — including some grocery stores, distribution centers, offices and several kinds of apartment buildings.

The Department of Buildings’ draft rules for exactly how it works were only released in October and won’t be finalized until the end of the year. In the meantime, many owners are already trying to prepare for the changes.

“Some boards are choosing to ignore it and don’t believe it’s going to happen,” said Jessica Tusing, director of compliance at Argo Real Estate, which owns or manages about 120 buildings in four boroughs. “The majority of the boards are worried about it, and many of them are being proactive, but many of them are just waiting for the updates on Local Law 97.”

Complying with the law is far from a one-size-fits-all proposition: The pathway is unique to each building, based on its age, finances, heating and cooling systems and state of maintenance.

Some are just starting out in exploratory phases, while others have projects in the works. But confusion about how the law works and uncertainty over next steps — including how to pay for upgrades — has been the experience so far of many property owners and co-op boards.

“These regulations are coming down the road. You’re going to have to do it. It’s not going to be a choice,” said Jeffrey Weber, a property manager at Weber Realty Management, which has a portfolio of 40 buildings in Manhattan and Brooklyn.

“This is coming. We know it. [Should we] close a blind eye to it and say, ‘Wait?’” he asked. “No! What are we going to do? How are we going to do this?”

A ‘Study-Heavy Phase’

Most building owners the law applies to must comply by 2024, and citywide, about 70% of buildings are expected to be ready as they are, according to a November report from the city comptroller. But the story changes for many of those same buildings starting in 2030, when emissions limits ratchet down. At that point, only 30% of buildings will already be in compliance, according to the report.

If owners don’t make a “good faith effort” to comply, as the DOB indicated in its proposed rules for the law, they could face fines of $268 for every ton of carbon dioxide emissions above the limit. The DOB has not yet defined what constitutes a good faith effort.

“Any building owner right now who thinks that they’re going to get away with a good faith effort claim but is not, right now in 2022, doing a lot of work is going to be, I think, sorely disappointed,” city Department of Environmental Protection Commissioner Rohit Aggarwala said at a November event hosted by the nonprofit Citizens Budget Commission.

The city has been offering free guidance and resources on how to comply with the law through the NYC Accelerator program, which hosts educational events, as well.

The first step for compliance is to figure out whether a building’s emissions would meet the imposed caps — and to get a sense of what it would take in labor and dollars to shrink those emissions.

“For our clients right now, the vast majority are in a planning or study-heavy phase,” said Cathal Gleeson, building system director at Steven Winter Associates, an engineering consulting firm. “At a minimum, I think buildings need to do a study to kind of inform things like, what are they really spending on the system right now versus how much would it cost to go over to a new system?”

Environmental advocates rallied outside City Hall in favor of a law forcing large buildings to meet energy efficiency standards, Nov. 3, 2022.

Ben Fractenberg/THE CITY

SWA made compliance roadmaps for its clients and put together retrofit packages mostly focused on getting off fossil fuels through electrification, such as through replacing gas boilers.

While converting a gas heating system to heat pumps can be expensive, the project becomes more cost effective compared to the longer-term cost of maintaining and replacing an existing system to the end of its useful life, Gleeson said.

One of his clients — the two-story, 198-unit Independence Gardens co-op in Bath Beach, Brooklyn — is embarking on a process of installing electric heat pumps, starting with two test apartments.

Lee Lui, the co-op board treasurer, said he wants the whole complex outfitted by August so they can be well ahead of the 2024 compliance deadline. When the co-op refinanced last June, it borrowed a total of $5.5 million to cover its mortgage and estimated $3 million in upgrade costs, plus possible other expenses, he said.

“Unfortunately, we live in a time where these things have to be paid for, and I’m sorry, there is no heating fairy that will give free heat to all the good boys and girls in the world,” Lui said. “Look, your heating system is 40 years old, right? How much longer do you think that this will continue to work?... The thing you thought was the cheapest is actually the most expensive because of these disincentives,” including the fines associated with Local Law 97.

Weber, the property manager, is also starting to factor in potential costs when it comes to the pre-war Morningside Heights co-op he oversees (and in which he owns four of the over 50 units). He anticipates the building won’t be in compliance with stricter 2030 emissions limits.

“We’re putting off certain cosmetic repairs that we would like to do today,” Weber said. “This particular building is not upper-class, where [they say], ‘Here’s a check, we can pay for it.’…I’d rather now slowly but surely do 3% maintenance increases, build up a reserve fund, so that when we hear about it, it’s not a shock.”

The money will be there, Weber hopes, in case the building needs to replace its boiler with electric heat pump systems or install solar on the roof.

Doing the Easy Stuff First

Argo’s Tusing said she’s seeing building owners tackle “low-hanging fruit” before they get to the more costly or disruptive changes. She’s seen co-ops and condo boards mandate low-flow fixtures and high-efficiency appliances in their alteration agreements, or install dimmers or motion-sensor lights in areas that don’t need 24/7 illumination.

One of the co-ops in a coalition suing the city to challenge Local Law 97 is at the same time making moves to comply with the law, starting with one of those types of projects.

Warren Schreiber, president of Bay Terrace Cooperative Section One in Queens, said all the exterior lighting at the complex is now from energy-efficient LED bulbs. The property completed the swap in October, and it cost about a quarter of a million dollars before a roughly $140,000 rebate through Con Ed, Schreiber said.

Schreiber, who is also co-president of the Presidents Co-op and Condo Council, is working with a consultant to figure out whether his 16-buildings will be facing fines in 2024 or 2030. He’s worried about how to pay for further possible upgrades.

An energy efficiency rating sign on an office building at 50th Street in Manhattan. Nov. 5, 2021.

Hiram Alejandro Durán/ THE CITY

“We want to see where we’re going with the lawsuit and then we’re going to start talking to other people. We’re going to start looking into the solar panels,” he said. “Our next step would be looking into upgrading the operating systems and seeing if there’s a way that we can go electric.”

Building owners may also be able to purchase credits associated with electricity transmission lines that will bring clean energy to the city to offset some emissions over the caps. Environmental advocates and a majority of City Council members are pushing for strict limits on those potential credits.

Gov. Kathy Hochul on Wednesday announced the construction of one of the transmission lines, the Champlain Hudson Power Express, which will bring juice via Canadian dams to the city. That project is expected to be operational by spring of 2026. 

“As construction begins on this project to help deliver clean energy to New York City, our state is setting yet another example of what climate action looks like,” Hochul said.

The state grid operator on Wednesday meanwhile warned in a new report that New York could face reliability risks if the project faces delays.

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