Local Law 97 Updates: Building Energy Grades & Emissions Compliance

New York City’s Climate Mobilization Act is the most ambitious legislation in the country aimed at reducing carbon emissions in existing buildings. The centerpiece of the law, which was enacted in 2019, is Local Law 97, which establishes carbon emissions caps, fines and compliance deadlines for buildings comprising 25,000 square feet or more. Emissions caps are based on your building type, size and occupancy classification. In practice, the law impacts roughly 50,000 buildings across the city, a majority of which are multifamily residential properties.
 
There is no out-of-the-box solution for multifamily properties to achieve compliance with Local Law 97. Boards and building owners will need to partner with an experienced energy consultant or mechanical engineer to identify personalized solutions for your building that will deliver the greatest value in terms of reducing emissions, energy costs and consumption, while also avoiding fines and establishing compliance. Whether this entails the replacement of existing mechanical systems or optimizing your current systems, the best solutions will improve overall energy efficiency, resident comfort and property values.
 
The best consultants should have proven experience in surveying buildings for energy consumption and emissions. Their findings should offer a personalized and holistic approach to reducing your property’s carbon emissions.
 
As New York City’s property management leader, FirstService Residential and its energy advisory affiliate, FirstService Energy, are prepared to help multifamily building owners and boards of condominium and co-op properties identify a long-term carbon reduction roadmap and capital planning that will maximize emissions reductions and cost savings and minimize disruption to residents.
 
Our in-house energy experts recently discussed the most common questions and challenges facing multifamily buildings impacted by Local Law 97. View a short clip of the webinar below or click here to watch the presentation in full.
 

How are carbon emissions, emissions caps and fines quantified for residential buildings?

A building’s carbon profile is based on the carbon dioxide equivalent that they are directly releasing into the atmosphere as a result of combustion and indirectly through the use of electricity and district steam. Common examples of direct emissions include boilers, chillers, furnaces, water heaters, generators that rely on oil or natural gas to operate. Since electricity and district steam are both created (in part) at fossil fuel generated power plants, electricity use also contributes to the building’s carbon profile.     
 
The first critical step is completion of a carbon study, which will provide a foundation for all future strategies and investments related to Local Law 97 compliance. The study will analyze the specific use-type of the building, carbon profile (i.e. natural gas, electricity, oil, etc.) and its current emissions. The study will also quantify the property’s emissions intensity limit or carbon cap. For boards and building owners, the study will help identify operational improvements, equipment to replace and potential upgrades that can reduce emissions and improve efficiency.
 
The amount of allowable carbon emissions is set to decrease over time. The first benchmark arrives in 2024 and the next in 2029. The top 20% of buildings that have the highest carbon intensity are required to reduce their carbon emissions by December 31, 2024, or face an annual fine commencing in 2025. While the average building will like already be close to or in compliance with 2024 emissions limits, energy retrofits can take years to complete. Boards and building owners should not stall their efforts to comply given the progressively restrictive emissions caps in 2029 and beyond.
 
According to the Department of Buildings (DOB), GHG emission limits for buildings and carbon coefficients of each commodity will be defined by 2024. Therefore, any calculations for anticipated fines in 2030 and beyond are estimates that use the 2024-2029 coefficient.
 
The city has imposed hefty annual penalties for buildings that do not comply with Local Law 97, including a fine of $268 per metric ton of emissions that exceed the building’s carbon cap. While this number may sound small, annual fines can quickly reach or exceed $100,000 if boards and building owners do not take action to reduce carbon emissions.


 

What incentives are available to offset the cost of Local Law 97 compliance?

The New York State Energy Research and Development Authority (NYSERDA) is currently offering incentive opportunities to offset costs related to the carbon study through its Flexible Technical Assistance (FlexTech) Program. The Low Carbon Capital Planning Support for Multifamily Buildings  will provide access to funds that cover up to 75% of project costs for completing a comprehensive, actionable energy study that provides a roadmap to guide low carbon energy-saving upgrades and put them on the path towards compliance.
 
For more information on this program and to get started contact [email protected].
 

What happens if the building exceeds allowable carbon emissions or is unable to comply given the nature of the property?

There will be some properties that cannot comply with the prescribed carbon cap given the unique nature or use-type of the building, financial hardship or special constraints. To accommodate these buildings, Local Law 97 allows for several alternative pathways to compliance:

• Purchasing renewable energy credits or certificates (RECs) generated in New York City or directly contributed to the city grid*
• Purchasing greenhouse gas or carbon offsets*
• Participating in carbon trading by purchasing carbon from buildings that are below their carbon caps*
• Exceptions may be granted by the Department of Buildings after ALL alternative options have been implemented and a study has been conducted showing all their potentials ways to reduce. 

*As of June 2021, the Department of Buildings has not specified how RECs, greenhouse gas offsets and carbon trading programs will work or if they will continue to be alternative compliance options.
 

For income-restricted and affordable housing properties with 35% or more rent-regulated apartments, alternative pathways to compliance must be completed by December 31, 2026. This includes:

• Adjusting temperature set points for heat and hot water
• Maintaining heating systems and repairing all heating system leaks
• Installing individual temperature controls or insulated radiator enclosures with temperature controls
• Insulating pipes for heating and/or hot water
• Insulating steam system condensate tank or water tank
• Installing indoor and outdoor heating system sensors and boiler controls
• Installing or upgrading steam system master venting and replacing or repairing all steam traps
• Upgrading lighting
• Weatherizing and air sealing
• Installing timers on exhaust fans
• Installing radiant barriers behind all radiators

Certain buildings have an extended period to comply with Local Law 97. These buildings include:

• Properties owned by a limited-profit housing company organized under article 2 of the private housing finance law
• Properties that contain one or more dwelling units for which occupancy or initial occupancy is restricted based upon household income

Commencing January 1, 2035, these buildings will be subject to the annual emissions limits and reporting requirements established by Local Law 97.
 

Are there advantages to starting the process sooner rather than later?

Deep energy retrofits are complex, multi-year projects that can significantly disrupt the quality of life in your building if not strategically planned and managed. Boards and building owners should retain professionals who can plan the sequence of work at various intervals to minimize disruption to residents and maximize emissions reductions and cost savings.



Boards and building owners that take a proactive approach to getting started will have major advantages – all based on time. By starting the process early:

• Decision makers will have ample time to plan, evaluate, prioritize and make informed choices and investments on the path forward that will deliver the most value.
• The sooner you implement projects, the sooner you will start to save. The cumulative savings from efficiency measures will increase your return on investment.
• Starting early will give you better access to qualifying capital, favorable financing terms and other incentives, which may not be available as the first compliance deadline nears.
• You will have time to align and phase projects with capital expenditure cycles, equipment replacement, and refinancing to maximize paybacks and make deeper retrofits more feasible and cost-effective.
• You will have better access to qualified professionals and contractors to complete the work, all of whom will be in high demand in the last years prior to the compliance deadline.

 

Why would a brand new building have a low energy grade and high carbon emissions?

A building constructed to code is not necessarily compliant with more recent local laws aimed at reducing energy consumption and carbon emissions.  
 
Building letter grades and energy scores are primarily calculated by energy consumption. New buildings and luxury properties tend to offer more services and amenity spaces than older buildings, and therefore, can consume much more energy compared to an older “simpler” property. To put this into perspective, imagine a building that relies on round-the clock central cooling of its hallways and stairwells, in addition to large common spaces and indoor recreational areas. The amount of energy required to maintain the ideal interior temperature will be significantly greater than an older building that does not contain amenity spaces.
 
Learn more about how boards and building owners can improve building letter grades and energy scores.
 

For mixed-use properties, how can boards deal with commercial tenants who are a large contributor to the building’s energy use and emissions?

Whether it’s a supermarket or a community facility, boards and building owners will need to work with the commercial tenant to make sure they are doing everything they can to reduce their energy consumption and emissions. For new commercial tenants, boards and owners should consult with the building attorney to include an addendum that states how much carbon the business is allowed to emit based on their occupancy classification and carbon limit per square foot as defined in the law.  In addition, if energy consumption is not directly metered by the utility it is important to install a submeter which makes it easier to monitor and calculate how much of the building’s total energy consumption is contributed to the commercial tenant.
 
FirstService Energy was recently joined by Goldberg, Weprin, Finkel, and Goldstein LLP, one of New York City’s leading real estate law firms, to review the hurdles associated with addressing commercial tenants’ energy usage and strategies to achieve sustained building efficiency and decreased carbon emissions. Click here to view the discussion.
 

How can building occupants reduce their energy consumption and emissions?

The energy used by building occupants makes up a sizeable portion of your building’s total electric consumption, so it’s imperative that occupants to do their part to reduce personal energy use, and as a result, the building’s overall emissions.
 
Inspiring people to change their behaviors can be a challenge. Education on energy consumption and carbon emissions is a crucial first step to help occupants understand just how much energy they are using and how that impacts a building’s energy grade and carbon emissions. When occupants are unaware of their individual energy use, they have no frame of reference for how their consumption impacts the building, which gives them little incentive to change behaviors. It’s essential for boards and building owners to communicate to occupants that any efficiencies achieved through their behavioral changes could reduce potential fines stemming from Local Law 97.
Being proactive and clearly outlining how the Climate Mobilization Act will impact owners will help you build trust and confidence in your board and its decisions on the path to compliance. To get the conversation started, consider hosting an educational event for owners and occupants to help them understand how the Climate Mobilization Act will impact your building. You can use the opportunity to:

• Educate occupants about your Building Energy Profile and Building Energy Grade.
• Explain the carbon intensity split between residential and base building systems and what this means for occupants.
• Share key findings from your energy audit and explain what measures your board is planning to take to meet Local Law 97 emissions caps.
• Share the overall benefits that energy efficiency upgrades will bring to your building and how it will improve quality of life.
• Address specific pain points in your building that will be corrected by implementing efficiency improvements.
• Educate occupants about behavioral changes they can make to help your building reduce its consumption and emissions.
• Create a green committee made of owners or shareholder to help the board with getting the word out.

 

How can a property manager help boards and building owners meet carbon emissions goals?

The best course of action is to begin with a carbon study and commit to a comprehensive roadmap to invest in systems, capital improvements and technologies that will help the building achieve long-term compliance. FirstService Residential and FirstService Energy are working with Steven Winter Associates, one of the city’s leading experts in the design and completion of energy retrofits for multifamily buildings.
 
Aligning energy efficiency retrofits with capital expenditure cycles or refinancing can make the most of long-term efficiency investments. Many buildings will require specialized financing to undertake energy retrofits, including schedules that don't align with mortgage refinancing.
 
Buildings managed by FirstService Residential also have access to our unique Energy Report Card. Provided as a no cost, the report cards benchmark a building’s historic energy use and costs against similar buildings. They also chart a building’s carbon emissions and calculate potential annual savings from prospective efficiency measures.
 
Our partnerships and breadth of experience in the New York City region empowers our team to deliver deep carbon savings to boards and building owners. In addition to Local Law 97, our experts have experience helping boards and owners navigate compliance with the following local laws:

• Local Law 84 | Requires annual energy benchmarking for buildings 25,000 square feet and above
• Local Law 87 | Requires an energy audit every ten years for buildings 50,000 square feet and above
• Local Law 33 | Establishes the requirement to post energy letter grades and scores
• Local Law 92 and 94 | Requires solar panels or green roofs to be installed as part of a large-scale roof renovation or new construction

If your property is currently managed by FirstService Residential, contact our experts today to jumpstart your journey to compliance with New York City local laws and improve overall energy efficiency.