At the end of 2021, the U.S. committed to addressing carbon emissions. President Biden signed an executive order requiring all federal operations to achieve net-zero emissions by 2050, with a 65 percent reduction by 2030. In just over a year since the order, major corporations, states, and cities have made a growing number of pledges to reach that 2050 net-zero target. Meanwhile, leaders in the country’s largest city were ahead of the game. New York City passed the nation’s most ambitious emission reduction target back in 2019 by pledging to reach net-zero emissions, also targeting 2050. Several of the city’s biggest office landlords have since made net-zero part of their own platform as well, further bolstering the city’s agenda.
Commercial building owners tend to have more resources to upgrade their properties to meet these stricter regulations. Yet there’s a growing concern for the residents of thousands of co-op and condo buildings in New York City that the city’s well-intended efforts to curb the worsening impact of climate change could end up bankrupting scores of buildings, leading many residents to leave the city altogether. Making necessary upgrades may not be as big of an issue at rental buildings owned by large commercial real estate companies. But for these co-ops and condos (some of which are over a century old), the cost to upgrade, through either assessments or huge hikes in monthly maintenance fees, will fall on individual shareholders and owners.
The New York City Council adopted Local Law 97 in 2019 as part of a larger package called the Climate Mobilization Act, which was part of then-mayor Bill de Blasio’s New York City Green New Deal. The law requires the majority of buildings over 25,000 square feet to meet strict limits around energy efficiency and greenhouse gas emissions by 2024, with even more stringent limits to meet in 2030. Buildings are responsible for two-thirds of NYC’s greenhouse gasses, and the ultimate goal of the law is to cut emissions from the largest buildings in the city by 40 percent by 2030 and a staggering 80 percent by 2050. It’s a lofty goal for the city, where the law applies to nearly 50,000 buildings across the five boroughs.
New York City hasn’t been alone in committing to significantly reducing its carbon emissions. Just months before Biden’s executive order on net-zero in late 2021, more than 100 cities, including Los Angeles and Houston, pledged to achieve net-zero emissions over the next few decades. Still, NYC is unique in not just the number of condo and co-op buildings spread throughout the five boroughs but also the age of many of the buildings, which in some cases are over a hundred years old. Co-ops, in particular, make up 75 percent of the city’s apartment buildings. The first greenhouse emissions cap deadline for residential buildings that fall under Local Law 97 is January 1, 2024. The looming deadline is heightening fears among co-op and condo boards across the city.
Last May, leaders of a group of co-op and condo buildings sued New York City over Local Law 97, claiming the mandate was unconstitutionally retroactive and that the law’s excessive penalties violated due process, among other things. One of the co-ops behind the suit is Glen Oaks in Queens, the city’s largest garden-apartment complex with over 10,000 residents living in 134 buildings. The co-op board’s president told the New York Post that the complex’s 96 boilers would need to be replaced at the cost of $24.5 million to meet the requirements of the law. If the building made no changes, it would be subject to $1.1 million in fines every year. At another co-op that is part of the group suing the city, the 200-unit Bay Terrace, installing heat pumps alone would cost $3 million, which could mean enormous assessments or a 30 percent increase in monthly maintenance costs for building shareholders. “I’ve never had an issue that actually kept me awake at night,” said Bay Terrace Resident and Board President Warren Schreiber about the law.
The biggest issue for residential buildings impacted by Local Law 97 surrounds how the property is heated. Most apartment buildings that must comply with the emissions mandate use boilers to supply apartments with heat through steam heat systems, a hallmark of pre-war NYC buildings. But the method is less energy efficient than using electricity, which is what city officials are pushing. To do that, buildings would need to switch out using boilers for heat pumps. However, heat pumps have been criticized for not supplying enough heat for temperatures dipping below 30 degrees Fahrenheit, commonly occurring in NYC winters.
The fear of failing to meet the standards is based not just on the exorbitantly high costs to properly upgrade buildings so they produce fewer emissions but also the costly fines they could accrue if their building misses the mark. The Real Estate Board of New York (REBNY), the city’s largest real estate trade organization and lobby, said recently that buildings that fail to meet the new emissions standards could face more than $200 million per year in penalties, with that figure potentially jumping to $900 million annually in 2030, when the law becomes even stricter.
As NYC’s condo and co-op buildings scramble to figure out how to finance necessary upgrades, at least one other city has a plan for getting it done. While it’s nowhere near as big as NYC, officials in the town of Ithaca in upstate New York voted to fully decarbonize the city by 2030. That includes, of course, residential buildings and homes, 40 percent of which are more than 100 years old. Estimates of how much it will cost to retrofit every building in a city with 30,000 residents and (an annual revenue of about $80 million) to meet its goal could be up to $600 million.
Ithaca’s decarbonization plan involves two investors: Brooklyn-based climate tech company BlocPower, and Alturus, a Boston-based private equity firm. Together, the companies have committed around $105 million to provide low and zero-interest loans for things like heat pumps and other electrification technology for Ithaca residents and businesses. BlocPower will serve as program administrator for the venture and perform building energy use analysis for those participating in the program. “Without a doubt, we’re going to need private equity involved in this transition,” said Building Decarbonization Coalition Executive Director Panama Bartholomy of Ithaca’s plan. ”If you look at the speed and the scale of the energy transition, there’s just no way that public capital by itself, taxpayer or ratepayer dollars, are going to be able to help us on this journey if we’re going to try to meet our targets. We need private capital.”
The growing concern and opposition to Local Law 97 requirements from condo and co-op boards have led to one City Councilmember in Queens proposing legislation calling for a seven-year delay in implementing the law. While that will likely not get enough support from fellow city council members, at least one other lawmaker admitted that specific requirements in the law were going to be difficult and expensive for buildings to meet. However, that same lawmaker implied that city officials overseeing the law would seek to work with co-op and condo boards on the issues. “The administration has the ability to take significant steps to work with these entities that are operating in very good faith to comply,” said Councilmember Jim Gennaro.
With less than a year before the law’s first deadline, there seem to be more questions than answers for the thousands of NYC co-op and condo buildings that fall under the purview of Local Law 97 requirements. Concerns from the hundreds of thousands of residents living in these buildings will likely continue to grow as the costs to upgrade become clearer and more estimates emerge on how costly penalties could end up being. Given how dire the situation is beginning to look, it’s hard to imagine that city officials won’t delay penalties for a while or allow buildings more time to make upgrades. As Ithaca’s plan goes to show, there are certainly options NYC leaders could explore that would help ease the burden that the new law is putting on condo and co-op residents. But with the 2024 deadline just nine months away, the clock is ticking.