Real estate seeks changes to city’s green buildings bill

Facing fines in the millions, owners pin hopes on city board

Local Law 97 is part of a push for a 40 percent reduction in citywide emissions by 2030 and 80 percent by 2050 (Illustration by Kevin Rebong for The Real Deal)
Local Law 97 is part of a push for a 40 percent reduction in citywide emissions by 2030 and 80 percent by 2050 (Illustration by Kevin Rebong for The Real Deal)

In four years, tens of thousands of buildings in New York City will need to meet strict carbon emission caps. But landlords are hopeful that key changes will be made before then.

Local Law 97, enacted in May 2019, is part of a push for a 40 percent reduction in citywide emissions by 2030 and 80 percent by 2050. To achieve these goals, most properties larger than 25,000 square feet must limit emissions based on the building type and size. Owners who fail to adhere to the law’s caps will be on the hook each year for $268 per metric ton of emissions that exceed the limit.

For some buildings, annual fines would be in the millions, and even with retrofits, some might not be able to comply.

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Last month Mayor Bill de Blasio and City Council Speaker Corey Johnson announced a 15-member Climate Advisory Board to oversee the implementation of Local Law 97 and provide recommendations for its rollout. Many see the board as a means to alter how the statute is applied.

In particular, big property owners want revisions to how it treats building density. They also want to be allowed to purchase renewable energy credits to meet the law’s standards.

Even environmental groups that supported the law admit it has flaws.

“I think there was a recognition that not everything could be resolved before the bill’s passage,” said John Mandyck, CEO of the Urban Green Council, a Local Law 97 backer whose mission is to reduce New York City buildings’ carbon footprint. Mandyck called the measure’s emission cap “a blunt instrument for how a building operates.”

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For one, the law doesn’t take into consideration how many people occupy a building. As a result, according to the Durst Organization’s Jordan Barowitz, it rewards partially filled buildings, as fewer tenants means less energy use.

“It encourages sprawl, which is fundamentally at odds with sustainability,” he said. “Buildings that are densely occupied get fined; buildings that are empty do well. It establishes a paradoxical reward and punishment system.”

The law lets owners offset their emissions by purchasing renewable energy credits from power generated in the city. But such credits will be scarce as few solar or wind farms are likely to be built in the five boroughs. Landlords want to be able to buy credits generated elsewhere.

“We must prioritize greening the grid and investment in large-scale energy infrastructure to make new emissions standards for real estate and other sectors possible,” said James Whelan, president of the Real Estate Board of New York, in a statement.

It’s not clear if the city board will consider making allowances for factors such as building density, nor if it will expand the options for owners to meet the caps. The board’s only representative from the real estate industry is Anthony Malkin of Empire State Realty Trust, which owns and operates office and retail properties in the city.

Meanwhile, the state has set its own goals of reducing greenhouse-gas emissions 85 percent from 1990 levels by 2050, ensuring that 70 percent of the state’s energy is renewable by 2030 and getting all electricity from zero-carbon sources by 2040. The Climate Action Council, a 22-person panel appointed by state officials, has until Jan. 1, 2022, to lay out a plan for how the state will reach its 2050 goal. Gov. Andrew Cuomo has yet to name his two appointees, but so far, none of the council’s members represent the real estate industry.

The Urban Green Council estimates that between 2024 and 2029, owners of buildings in the city will spend between $1.75 billion and $2.7 billion to comply with Local Law 97 — and $14.8 billion to $21.6 billion in the five years after that, before standards tighten again. Mary Ann Rothman, executive director of the Council of New York Cooperatives and Condominiums, said the city’s measure will disproportionately hit small owners.

“It’s kind of a regressive thing to treat all buildings the same. So an awful lot of work has to be done,” she said. “We have to be more building-specific. We have to be more encouraging and less punitive.”

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