Exit interview: New York’s climate chief on reshaping the city

Whether it’s a creative deal financing structure or a nine-figure apartment sale, if it happens in New York City real estate, the world’s markets pay attention — and take inspiration. The city’s climate czar believes the same could be true of sustainability.

“If New York City’s buildings can be a model for climate-friendly real estate development, that’s a model that people are hungry for,” said Ben Furnas, the director of the Mayor’s Office of Climate and Sustainability and an architect of landmark green-building policies such as Local Law 97, which sets aggressive targets for slashing carbon emissions in larger buildings, and a ban on gas in new buildings.

Furnas joined the de Blasio administration as a policy analyst in 2014, and this is his final week at City Hall: He will not be joining Eric Adams’ administration.

Furnas sat down with The Real Deal for a conversation about how New York’s built environment will be transformed by policies put in place by Bill de Blasio — he described his boss as the “most ambitious climate mayor in America” — and why he thinks the Adams administration will continue the march toward a greener real estate landscape.

How does the ban on gas in new construction move the needle on sustainability?

As we think about deep decarbonization, one really important piece is shifting away from fossil fuels, and one important place where we do that is in buildings. When we’re generating heat in our boilers or hot water heaters, it’s important that we’re shifting away from fossil fuels that are contributing to climate change. And that the source of that electricity is increasingly clean and renewable and zero-carbon. What this law really says is that in the real estate capital of America, the richest country in the history of the human species, the next generation of buildings is going to be electric. That puts a marker down for the world that this is the direction the built environment is headed in. We’ve got a really broad and diverse real estate industry and we think we can get it right here. And the lessons that we learn as we take this leap can be applied around the world.

What was the pushback like from the real estate industry? There’s been some concern that going electric will make development more expensive and that electric heating may not be as reliable for tenants.

The technology that we’re looking toward is the heat pump, and heat pumps are used across East Asia and Scandinavia. The climate there’s not so dissimilar from New York, and they are a cost-competitive solution to build all-electric, high-efficiency buildings. As we’re trying to push an industry to spur innovation, it makes sense to set some deadlines and work toward better cost-competitiveness.

“If New York City’s buildings can be a model for climate-friendly real estate development, that’s a model that people are hungry for.”

One thing I was really heartened by through this entire process is there was broad consensus that this was ultimately the direction that the industry needed to go. A lot of the dialogue was really around the timelines. What are the exemptions or differential treatment for certain types of fossil-fuel usage? There are developers of very large, very complicated buildings of all types that are building all-electric now in the five boroughs. And it was really useful to be able to hear from them. On Flatbush Avenue, Alloy Development is building a very large all-electric building.

Hines is also building some all-electric structures. It was exciting to see the cutting edge of the industry being able to educate us and also their peers. All legislative processes come down to the wire and if it’s a little bit contentious, that’s how you know you’re doing something important.

Does the fact that so much New York real estate is owned by dynasties — families playing the long game but often with mom-and-pop operations — influence the discussions around sustainability?

One thing that’s definitely true is that the New York real estate industry is [made up of] people who think a lot about New York City and its future. At its best, that can be an opportunity to be talking in decades and generational terms in a way that few other few other industries are accustomed to thinking. But when we’re thinking about climate, this is exactly the timescale we want to be thinking about. What is New York going to look like physically in the year 2050, in 2100? Will the coastline be in a slightly different place? We need to adapt the structures that we’re building to last 100 years. They need to not just be ready for a changing climate but to minimize the dire consequences of a changing climate.

It is good for New Yorkers to have those structures be built. It is great for these developers to get in the habit of building structures that major global companies that have carbon pledges will be enthusiastic about occupying. I’d love for New York City to have an industry that knows how to build these buildings really well and can share that knowledge and expertise. If New York City’s buildings can be a model for climate-friendly real estate development, that’s a model that people are hungry for.

How has real estate’s contribution to the climate crisis escaped scrutiny for so long?

For a long time, very reasonably, when people thought about fossil fuels, they tended to think about the internal combustion engine under the hoods of their cars. And it’s true that’s a major source of greenhouse gas pollutants — about a third of our emissions here in the five boroughs. And why is it just a third? Because most people take an electric vehicle to work called the subway.

We have a built environment that means that people can live without a fossil-fuel vehicle. That sort of compact urban living pattern in itself was seen as a model. We want to keep on building buildings along subway lines. We want to keep expanding mass transit. The stat in New York City is that about two-thirds of our emissions come from the fossil fuels used to heat, cool and power our buildings. It is a little bit more invisible — we’re really talking about boilers and hot water heaters. It’s not sexy like an electric car. It’s inconvenient to renovate your home. It’s not like trading in your Camry for a Tesla.

A big lever that city governments have is oversight and regulatory authority over the buildings in their municipalities. We articulated a plan called “One City: Built to Last,” where we invested billions of dollars in our own municipal facilities and started the analysis that ultimately formed the legislative process that culminated in Local Law 97.

Local Law 97 was described to me as a “blunt instrument” that penalizes rather than incentivizes density. And in contrast with the all-electric law, it was fiercely contested by real estate interests. Could you see it evolve into something more nuanced?

To push back a bit: There are currently seven different use group categories, and there are specific targets, depending on the usage. The Department of Buildings is undergoing a process to have even more granular categorization to help make sure that the targets that we’re hoping people aspire to are reasonable for the uses in their building. We should be pushing folks. We should be holding ourselves to be the most efficient version of ourselves, but not to compare the activities of a law firm with the activities of an industrial process — they’re two very different things, both of which are important.

Decarbonization is going to be very challenging. It’s going to ask something of all of us, and this law sets out reasonable but ambitious targets to reduce our own emissions in order to achieve these really deep decarbonization targets that we know are necessary.

The law is going after what we can measure and what we know is important, which is the carbon emissions associated with building operations and building systems. A component of that is electricity drawn off the grid and [another] component is onsite, in the furnaces and hot water heaters.

“It’s inconvenient to renovate your home. It’s not like trading in your Camry for a Tesla.”

We are making investments in cleaning up the grid and working pretty closely with REBNY to catalyze new investments in transmission and making it easier than ever to build solar and storage in the five boroughs. All of these things together make it easier for us to hit these targets in Local Law 97.

We think it is an enormous job-creating opportunity. We’re seeing a whole industry grow up around the requirements associated with Local Law 97 to help building owners understand what their obligations are and identify opportunities in their own building systems. We are really not leaving people on their own. We set up new financing programs which provide an ability to get low-interest loans to invest in clean energy projects.

Sometimes people talk about this as if somebody’s doing something wrong if they’re exceeding their targets in Local Law 97. It’s really not. It’s a way of being clear-eyed about what the challenge is, what we’re all going to have to do together in order to reduce our emissions and what different building typologies and use cases are needed. As long as emissions are going down, we’re very agnostic as to how individual building owners meet their targets. In a lot of places, it is going to be some combination of energy efficiency and shifting out fossil-fuel combustion for electric options.

New York City has always been a pioneer in making markets. We have a market for air rights. Would the city support a market for carbon trading, so that as a building owner, I’m incentivized to reduce my emissions even further than the required levels?

I think it’s a very high level of complexity. The only other municipality that has ever done something even remotely like this has been in Tokyo and it was done with many, many, many fewer buildings. The level of complexity and difficulty in the vast array of buildings that are participating in Local Law 97 would make it daunting, but if it can be demonstrated that this is a way for us to achieve deeper or faster emission reductions than we otherwise would, it’s an interesting idea.

There’s a great desire in this work for folks to be able to write a check and make this go away. This is not easy work and I’m the first to acknowledge that this is challenging and inconvenient. But it is something that we’re sort of called upon to do in this generation of professionals.

This is your last week on the job. How would you rate Mayor de Blasio’s overall legacy when it comes to sustainability and the built environment?

Being in this office has made it pretty clear that contrary to what you might expect, Bill de Blasio is the most ambitious climate mayor in America right now. Between his view that we need to be shifting rapidly away from fossil fuels in everything that we do, from the pensions that we are investing to our buildings and electricity system, he’s made major moves.

And where he has really distinguished himself has been on the built environment. He made it clear that we can’t achieve these deep emission reduction goals without tackling existing buildings. He really put his political capital on the line to get [Local Law 97] done. As we see these major investments being made to improve efficiency all across the five boroughs, we’ll think back and say, “Wow, that was really a pivot point in New York city’s emission reductions.”

The electric buildings law makes it clear that that’s the direction we’re going in the future as the next generation of structures gets built. And Local Law 97 will be working to shift the existing built environment away from fossil fuels.

Another major accomplishment that we just finalized was this set of contracts to power New York City government with 100 percent clean, renewable electricity. This purchase is the mayor saying that we are putting our money where are our mouth is. It does two really important things. It makes it clear that our city government operations, which is about a tenth of all electricity usage in the five boroughs, is going to be 100 percent clean and renewable. And it catalyzes the development of these two new transmission lines. We’re essentially serving as the anchor tenant on these transmission lines, meaning that they can get financing.

You’re making the market.

We’re making the market. And we’re creating a new physical reality, which is that these two new transmission lines will be built, one in upstate New York, the other to tap into Canadian hydropower and wind power. That helps not just air quality in the five boroughs but also means that building owners who are facing Local Law 97 obligations will have a much cleaner grid than they otherwise would. Even as we were holding all of ourselves accountable by putting in place these Local Law 97 targets, we weren’t just relying on building owners to do everything. The city is also stepping up and supporting them.

rnrn“There’s been a total sea change at the height of American capitalism and business in the way they think about climate change.”rnrn

We tend to think about each of these things in silos, but if you step back, our goal was to reduce carbon emissions. We recognized that a lot of the responsibility could be at the building level, but also that a lot of the responsibility has to be at the grid and systems level.

Do you think the mayor’s shenanigans with the SUV convoy to the gym in Park Slope dent that legacy at all?

I’d like to think that with a little bit of time and space, folks will look back and see the material changes, and the individual activities will fade into the background. I will note that for quite some years now, [the mayor’s vehicle] has been an all-electric Pacifica. So it’s not a fossil-fuel SUV. [laughs]

Do you have a dialogue with the trade unions when it comes to these policies? There’s opportunity, but also some level of fear and anxiety about obsolescence.

Absolutely. We’re really talking about shifting the way in which we build and the current structure of the trades is set up to reflect the way that we currently build. At a very high level, we want to continue to have all this work be high-quality jobs done by a unionized workforce, the same workers having lots of opportunities and creating new opportunities for folks to come in. And how that work is going to get thoughtfully allocated, where it’s not a total zero-sum dynamic where you’re taking away work from one trade and shifting it to another. The leadership of the [Building and Construction Trades Council] has been very engaged on this.

A lot of what we’ve talked about is deploying existing technologies and crafting legislation to make sure that we are judicious about our emissions. But we’re going to need serious investment in new tech as well. What role has the city played in encouraging innovation?

I’d put this in two categories. One, I think there is a level of enthusiasm and interest in blue-sky ideas, helping companies with lab space or a series of programs for entrepreneurs thinking about new solutions to these problems.

But people often put these in contrast with each other, like, “Are you deploying or are you doing R&D?” I see these things as deeply interconnected. The best type of R&D comes via deployment, where you’re taking the technology, you’re starting to install it, you’re seeing what challenges arise, what opportunities there might be to iterate on that product.

There’s really a positive feedback mechanism. So if we have these targets where we’re looking to deploy certain types of building technologies but a new technology comes knowing that there’s a pre-existing market, knowing that there’s going to be major demand for electrified building technologies, for example, it helps entrepreneurs and research scientists see a market that’s out there. So we see the legislative role of setting targets and holding people to meet pretty high standards as really part and parcel of creating that ecosystem dynamic.

Many of the initiatives you’ve been working on for years are only just coming to fruition. Why not stay on and see how they play out in the Adams administration?

It has been eight amazing years. It’s been the experience of my life. I’ve had some really lovely conversations with the Adams team. I think a lot of this work is in really good hands. There are passionate people coming into the City Council who care deeply about climate change.

Eric Adams has made it clear that he is going to be an unabashedly pro-business mayor.  Are you concerned that attitude could lead to some initiatives that work against what your office has achieved?

As we think about the great companies and the great new firms of the 21st century, a lot of them will be in the business of transforming energy systems, electrifying buildings and dramatically reducing our contributions to climate change. There’s been a total sea change at the height of American capitalism and business in the way they think about climate change. You have some of the most ambitious entrepreneurs associated with finding climate solutions. And if New York City is going to be a city of global capitalism and big business, it needs to be at the forefront of climate solutions. All of the things that we were talking about — about the next generation of structures, the next generation of urban living, thinking about how to have a vibrant, livable city that attracts talent and ambitious people from all over the world, like New York City always has been — I think that is totally consistent. And in fact, you probably need to be a place where ambitious climate action is happening.

This interview has been condensed and edited for clarity.

(Write to Hiten at hs@therealdeal.com or @hitsamty on Twitter. To check out more of The REInterview, a series of his in-depth conversations with real estate leaders and newsmakers, click here.)