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New York City Pressured to Prove Clean Building Laws Can Work

Aug. 10, 2020, 10:01 AM

New York City officials say they have to nail the rollout of their landmark law limiting greenhouse gases from buildings to show that municipalities in the U.S. and abroad can play a significant role in fighting climate change.

But they’re facing real estate agents and developers already reeling from the coronavirus pandemic, who claim the law—among the most ambitious in the world—could cost a midsized apartment complex nearly $1 million a year.

“We are the largest city in the country. We have over a million buildings in New York City,” said Mark Chambers, director of Mayor Bill de Blasio’s (D) Office of Sustainability. “So we have an obligation to de-risk this work for other cities.”

A failed introduction, marred by unenforceable mandates or open defiance from building owners, could signal to other cities that clean building laws aren’t worth the effort, New York officials said.

And some building owners are already balking: “Local Law 97 is a bear trap,” said Frank Massa, a real estate agent with DJK Residential. “Many property owners will suffer when it hits.”

Biggest Buildings

Under the law, buildings larger than 25,000 square feet will have to reduce their carbon emissions by varying amounts, depending on their occupancy type and size, or face fines. Only 4% of New York’s buildings are that size, according to the Department of Buildings.

The city has set a goal of cutting building greenhouse gas emissions by 40% by 2030 from 2005 levels, and 80% by 2050.

The retrofit requirements of Local Law 97 don’t kick in until 2024, but the city is busy hashing out details of how it will be implemented, addressing finer points such as how to calculate penalties, how to create incentives for reducing peak energy demand, and how to achieve even bigger reductions from city-owned buildings.

Buildings play a role in releasing greenhouse gases by using fossil fuel energy for electricity, and by consuming natural gas and heating oil for their boilers and furnaces.

Residential and commercial buildings are responsible for nearly 40% of carbon dioxide emissions in the U.S., according to the Environmental and Energy Study Institute. In New York City, the figure is closer to 70%, according to city officials.

Eyes on the Big Apple

Boston, for one, is closely monitoring the New York experiment, according to officials from the city’s Environment Department.

“During these unprecedented times, it is even more crucial that cities learn from each other,” said Chris Cook, Boston’s chief of environment, energy, and open space.

New York officials say they’re confident they’ll adjust the settings just right, striking a balance that cuts greenhouse gas emissions without imposing heavy financial burdens on building owners.

“Our team is taking every step necessary to make sure implementation of this groundbreaking law is successful, and that our rollout can serve as a model for any city that wants to implement smart and necessary climate solutions,” said Melanie La Rocca, commissioner of the Department of Buildings.

‘Just a Money Grab’

But property owners and real estate companies aren’t convinced Local Law 97 will have a light touch on their business, and they’re trying to shape the process through the city’s 15-member advisory board.

The board must deliver a report to the mayor’s office and City Council by Jan. 1, 2023, with recommendations for improving energy and emissions requirements for covered buildings.

The rules will impose heavy costs that could be even more onerous now that the coronavirus has battered the economy, driving out commercial and residential tenants across the city, said Massa, the real estate agent; he worries building owners could be hit with six-figure fines.

It will also impose a double burden on building owners who recently spent large sums upgrading their mechanical systems to reduce carbon emissions, but still aren’t fully in compliance with Local Law 97, he said.

Massa pointed to the building he lives in, a relatively new, 14-year-old structure that includes photovoltaic materials, fresh air delivery systems, and “every advanced system you could imagine,” he said. “Yet the way the law is written, we are subject to huge fines if we can’t reduce our electricity usage by 40%. It’s just a money grab.”

‘It Can’t Be Done’

Stuart Saft, a real estate attorney with Holland & Knight LLP, said the law’s targets are technologically unreachable. “So there’s no way we’re not going to be fined,” he said. “Because it can’t be done.”

Saft calculated the fines for a non-complying 160,000-square foot building—a typical size for an 80- to 100-unit apartment building—at $960,000 a year.

He also said the law unfairly targets big buildings while excluding one- and two-family homes “that probably produce far more pollutants than apartment buildings.”

Some 40,000 buildings will be affected by Local Law 97, according to the city.

John Gilbert, the chief operating officer at Rudin Management Co., said some of his company’s buildings won’t be able to meet the law’s mandates because they can’t control their tenants’ energy consumption. Tenants’ energy use generally comprises 60% of an office building’s total, he said.

‘Things They Do Not Control’

One of Rudin’s buildings, the historic AT&T Building in Lower Manhattan, uses large amounts of energy 24 hours a day because at least 60% of it houses the switches, routers, and hubs that power the Internet, Gilbert said.

“Those machines don’t care whether it’s night or day—they need AC and electricity,” Gilbert said. “And how do I knock on AT&T and Verizon’s door and say, ‘Hey, guys, you have to shut down your portion of the Internet tonight or I have to pay fines’? It’s not going to happen. Owners are being held responsible for things they do not control.”

The advisory board has already started tackling the issue of tenant energy usage, and will include recommendations to the mayor and city council in its report, according to Gina Bocra, chief sustainability officer at the city’s Department of Buildings.

St. Louis, Washington, D.C., and Washington state are the only other jurisdictions in the U.S. with similar laws requiring performance improvements to existing buildings. But several parts of the country are considering their own building rules, including Boston, Colorado, and Montgomery County, Md.

‘I Don’t Want People’s Money’

New York City Councilman Costa Constantinides (D), who sponsored Local Law 97, said the industry’s complaints ignore that the city is providing different ways for buildings to comply.

Property owners will be able to get technical assistance, property-assessed clean energy financing loans, and retrofit assistance, said Constantinides, who chairs the city’s Committee on Environmental Protection.

“It’s aggressive, but it’s also very achievable,” he said of the law. “There are lots of buildings out there making this work. We’ve provided lots of avenues for these things to be addressed.”

The city is also studying a carbon trading mechanism, and a companion measure, Local Law 96, lets building owners finance energy retrofits through an assessment on their property tax bill, said Donna De Costanzo, former counsel to the Committee on Environmental Protection.

The law will also cut building owners’ utility bills and create good local jobs, said De Costanzo, now director of the Natural Resources Defense Council’s climate and clean energy program in the Eastern region.

“The way in which they’ve asked for flexibility, it means they want leniency,” said Chambers, of the Office of Sustainability, referring to the real estate community. “But that’s not feasible, given the fact that we have a significant amount of carbon we need to reduce from the building stock.”

Constantinides also brushed aside claims that Local Law 97 is a bid to raise revenues.

“I don’t do revenue bills,” he said. “That’s not my bag. I’m an environmentalist. There are plenty of ways to raise revenue in the city of New York; this is not one of them. ...

“I don’t want people’s money. I want people’s carbon.”

To contact the reporter on this story: Stephen Lee in Washington at stephenlee@bloombergindustry.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergindustry.com; Anna Yukhananov at ayukhananov@bloombergindustry.com

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