How much will compliance cost? And now you wear your scarlet letter

David Goldsmith

All Powerful Moderator
Staff member

"The Climate Mobilization Act, which passed last spring, makes sustainability a major priority for New York’s built environment, targeting buildings that are among the biggest contributors to the city’s carbon emissions. One component of that legislation, Local Law 97, requires owners of the city’s largest buildings to meet new emission standards beginning in 2024. But the first major milestone won’t arrive for another decade: By 2030, emissions from large buildings must be slashed by 40 percent from 2005 levels; by 2050, that number must be 80 percent. If owners don’t comply they’ll face substantial fines of as much as $1 million (or more) per year for the largest buildings."

Will buildings be able to afford the upgrades or fines? And where will they get theoney?
 

David Goldsmith

All Powerful Moderator
Staff member

Bill would cap emissions at many rent-regulated buildings
Measure seeks to expand climate measure, which has broad exemption


Last May the city enacted sweeping legislation that required buildings to cap carbon emissions — but it spared properties with even one rent-regulated unit. Now that may change.
A new City Council bill would broaden the law to require certain rent-regulated apartment buildings to also meet those standards.

The measure, sponsored by Queens Democrat Costa Constantinides, would amend the landmark Local Law 97 to include buildings where up to 35 percent of units are rent-regulated.

Local Law 97 mandates 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 — or pay huge fines. The Durst Organization, for example, would be penalized millions of dollars annually for its LEED-Platinum tower 1 Bryant Park unless it somehow slashes emissions from what is marketed as a sustainable skyscraper.

The blanket exemption of rent-regulated apartments largely sprung from concern that landlords would pass the costs of green retrofits onto rent-stabilized tenants through the state’s Major Capital Improvements program. The state legislature overhauled the program last year, limiting such rent increases to 2 percent and making them temporary. MCI increases can now only be applied to properties where more than 35 percent of the apartments are rent-regulated.

Real estate groups have called for the law to be changed, but not in the way Constantinides proposes. The industry wants higher emissions allowed for densely occupied buildings and more flexibility to meet the law’s standards.
 

David Goldsmith

All Powerful Moderator
Staff member
Council advances bill to cap emissions at some rent-regulated buildings
Measure would subject more multifamily properties to Local Law 97

UPDATED, Sept. 22,2020, 1:41 p.m.: When the city approved strict carbon emission caps last year, officials exempted properties with any rent-stabilized apartments.
But the City Council is moving forward with a bill that would require certain rent-regulated apartment buildings to meet the standards laid out in Local Law 97, which calls for a 40 percent reduction in citywide emissions by 2030 and 80 percent by 2050. Under the law, most properties larger than 25,000 square feet must limit emissions based on building type and size.

A new bill, introduced in May and sponsored by Queens Democrat Costa Constantinides, would revise Local Law 97 to include buildings where up to 35 percent of units are rent-regulated. The Committee on Environmental Protection held a hearing on the measure Tuesday morning — an important step if it is to become law.

Following the passage of Local Law 97, the Real Estate Board of New York criticized the measure for — among other reasons — excluding “more than 50 percent of New York’s built environment from its carbon emission limits.” REBNY pointed to the exemption of buildings with at least one rent-regulated unit, as well as public housing, houses of worship and city-owned properties.

Essentially, the trade group saw the measure as shouldering some property owners with a burden that others were allowed to ignore.
Separately, owners have warned that the pandemic could make Local Law 97 compliance much more difficult, as they grapple with drops in rent revenue.

Michael Rothschild, vice president at property management firm AJ Clarke Real Estate, said Constantinides’ bill unfairly targets buildings with high percentages of market-rate apartments.
“It is an odd metric to use,” he said. “They are not evaluating the age or size, but rather the type of lease.”

REBNY estimates that more than 1,600 buildings would be affected by the measure. In prepared testimony, the group called on the City Council to “undertake a rigorous analysis of this proposed legislation as any expansion of local carbon reduction mandates must be reflective of buildings’ physical and financial realities, particularly now in a moment of economic downturn.”

The Community Housing Improvement Program said that because the cost of retrofits can’t be passed along to renters, the City Council doesn’t care about the financial toll of Constantinides’ bill. “There are thousands of small- and medium-sized housing providers who are struggling under the current financial climate and cannot fathom how to begin to budget for such a project,” the group testified Tuesday.

But Constantinides said the bill should not come as a surprise to anyone in the industry. When the state legislature changed the Major Capital Improvements program last year, it limited rent increases through the program to 2 percent and made it so that such increases could only be applied to properties where more than 35 percent of the apartments are rent-regulated.

That change paved the way for the city to subject some rent-regulated properties to Local Law 97, as the new 35 percent threshold could be used to prevent landlords from passing the costs of meeting emission caps onto renters through MCIs.
“Big Real Estate complained when we passed Local Law 97 that rent-regulated buildings weren’t included,” Council member Costa Constantinides said in a statement. “Now, as many landlords continue to collect rent from struggling New Yorkers through the pandemic, they say it cannot be done. Which is it?”
 

David Goldsmith

All Powerful Moderator
Staff member
NYC buildings are getting energy efficiency grades
Owners of properties larger than 25K sf must post letter grades — similar to those on restaurant windows

At the end of this month, the owners of tens of thousands of buildings in New York City will be required to post a letter grade based on their properties’ energy efficiency.
All buildings larger than 25,000 square feet must post a letter grade based on a federal rating system by Oct. 31. The grades — similar to those posted on restaurant windows — are based on an Environmental Protection Agency’s Energy Star tool, which provides buildings with a score of one to 100 based on energy consumption.
Owners were able to start printing out and displaying their letter grades on Thursday.
In a statement, DOB Commissioner Melanie La Rocca said the system “will provide a new level of transparency for building energy emissions.”
“The public has a right to know which large buildings are taking their commitment to sustainability seriously,” she said.

The requirement was part of a package of bills known as the Climate Mobilization Act, which was approved in April 2019. Another measure, Local Law 97, calls for a 40 percent reduction in citywide greenhouse-gas emissions by 2030 and 80 percent by 2050.
Various aspects of the CMA, including the grading system, have been criticized by real estate professionals for failing to take into account the number of people working in a building.
“It’s not a helpful indicator and it is actually quite confusing for people,” said Durst Organization’s Jordan Barowitz. “It is not an adequate reflection of the energy efficiency of the building.”

According to the DOB, the Durst Organization’s One Bryant Park, which attained LEED Platinum certification, scored a 41, which is a “D.”
 

David Goldsmith

All Powerful Moderator
Staff member
City Council caps emissions at many rent-stabilized buildings
Bill subjects properties with 35% or fewer regulated units to Local Law 97

The exemption for rent-regulated buildings from the city’s emission caps is about to end for some of them.
The City Council on Thursday voted in favor of a bill that subjects certain rent-regulated buildings to the requirements of Local Law 97, which imposes heavy fines on buildings that contribute too much to global warming.
The year-old law aims to cut citywide greenhouse-gas emissions 40 percent by 2030 and 80 percent by 2050. The new measure, sponsored by Queens Democrat Costa Constantinides, would tweak the law to include buildings where up to 35 percent of units are rent-regulated. But it would give them two more years to comply than buildings already covered by the law have.
The original law carved out buildings with at least one rent-regulated apartment, instead subjecting them to less stringent energy conservation reporting requirements. The blanket exemption of rent-regulated apartments largely sprung from concern that landlords would hike regulated rents to pay for green retrofits through the state’s Major Capital Improvements program.
But last year, as part of a major overhaul of rent regulation, the state limited such rent hikes to properties where more than 35 percent of the apartments are rent-regulated. That freed the City Council to extend emission caps to under-35-percent buildings without triggering rent increases for their regulated units.

The latest version of Constantinides’ bill, released this week, gives those buildings until January 1, 2026, to meet their emissions cap and then until May 1, 2027, to submit an initial report documenting their compliance.
“Our work today will help New Yorkers get back to work in good jobs that make our air cleaner, kick-start the renewable energy revolution, and chart a course to a brighter, greener, safer future,” Constantinides said in a statement.
The measure does not address the real estate industry’s primary complaint about Local Law 97: that it penalizes owners with densely occupied buildings. The Real Estate Board of New York said this week that though it backs “practical measures to limit carbon emissions and stop climate change,” it isn’t clear that Constantinides measure will meaningfully reduce carbon emissions.
“The city has not done the analysis to identify how many buildings will be impacted or even where these buildings are located. It has no solutions as to how these critical goals will be accomplished,” the trade group’s president, James Whelan, said in a statement. “The city is setting owners up for failure, forcing them to pay fines instead of helping these cash-strapped, rent-regulated buildings invest in making environmental upgrades.”
 

David Goldsmith

All Powerful Moderator
Staff member

The City Council’s latest idea for screwing up housing

The City Council is looking to add a pricey sprinkler mandate.

As if the record vacancies and ever-rising property taxes weren’t enough, the City Council is looking to add a pricey sprinkler mandate on all apartment buildings taller than 40 feet.

The Community Housing Improvement Program, a collection of over 4,000 housing providers, estimates that the bill would require $20,000 in work on every apartment, plus $6,000 per hallway and $30,000 for a new water supply — as well as $700 per night for every tenant forced into temporary accommodations. Indeed, CHIP fears that hundreds of thousands of tenants could be displaced.

The mandate would mainly impact older, rent-stabilized apartments whose owners can’t readily cover the added costs by raising rents — which a lot of tenants have been unable to pay anyway since the pandemic hit. Many landlords already can’t afford to pay the cleaning, water and sewage bills that have piled up these last few months.

And if the work requires drilling into concrete, lead and asbestos removal would likely displace families for months.

There’s an easy and affordable alternative: Require fire extinguishers on every floor. With the entire city trying to get back on its feet, it’s no time for lawmakers to push grand, impractical solutions.
 

David Goldsmith

All Powerful Moderator
Staff member

Controversial sprinkler bill stalls after landlord backlash​

“You might as well knock down the building,” one landlord says

Following an outcry from small building owners, the City Council is going back to the drawing board on a bill that would require fire sprinklers in thousands more apartment buildings.
Council member Barry Grodenchik, who sponsored the 2018 bill, said it became obvious after a three-hour hearing Wednesday that it “could not go forward as currently written.” Between Monday and Thursday, four of the bill’s 12 sponsors dropped their support.

The bill mandates automatic sprinklers be installed in every apartment in residential buildings 40 feet or taller. Owners would have until December 2029 to comply, or face daily fines of $250 to $10,000, depending on the size of the building.

Real estate groups and building owners argued that the bill would not only overburden landlords with steep renovation costs but would require uprooting tenants and gut-renovating century-old buildings.
Landlord Chris Athineos said installing sprinklers in his building, which was constructed in 1850, would require taking apart landmarked plaster molding in its apartments.

“The cost is astronomical. Even if you gave me the money to do it, I still would not be able to do it,” he said. “You might as well knock down the building and build a new one.”
Grodenchik said the impetus for the measure was a series of fatal fires, including one that killed 12 people in the Bronx in 2017. He indicated Wednesday that the Council had considered proposing another bill to provide financial support to help landlords meet its terms.

During Tuesday’s hearing, Council member Margaret Chin, who subsequently withdrew her support for the bill, expressed concern for her elderly constituents, saying she could not imagine forcing them to relocate as sprinklers were installed in their apartments.
“The fires that inspired this legislation were fresh in our minds when I signed on as a co-sponsor, and we had hopes that Introduction 1146 could be the solution to preventing future tragedies,” Chin said in a statement.

Council member Robert Cornegy, who chairs the committee on housing and buildings, said at the end of the hearing that he was alarmed by the projected costs of the retrofits, which landlords pegged at tens of thousands of dollars for even small buildings. He said he would work with Grodenchik on amending the bill.

Some owners, however, were frustrated that it took a three-hour hearing two years after the bill was introduced for members to understand their concerns.
“I completely blame the City Council for even wasting our time yesterday,” Jan Lee, whose family owns multifamily buildings in Chinatown. “This bill never should have seen the light of day.”
 

David Goldsmith

All Powerful Moderator
Staff member
NYC Now Requires Energy Efficiency Grades For Big Buildings, And Most Are Getting D’s and F’s
Just as restaurants are required by the city Health Department to post letter grades announcing the results of their most recent cleanliness inspection, many NYC building owners must now post letter grades regarding their energy efficiency. The new policy is intended to compel building owners to take a closer look at their properties’ energy use, and although there are currently no fines attached to the grades, some property owners with low grades are already worried about their reputations.
That may be exactly what the City wants.
In October, New York City buildings 25,000 square feet and larger were required to prominently post the letter grade, showcasing their degree of energy efficiency.
The letter grades range from A to F and are based on the U.S. Energy Star Score. The building owner provides energy and water consumption data, and details on how the building is used and occupied. The buildings are then rated based on the energy consumption of buildings across the country of similar size, use, occupancy, and climate.

Some well-known landmarks, such as the Flatiron Building (grade A) and the Empire State Building (grade B) did well on their scores, while others, like the New York Stock Exchange and Trump Tower, performed poorly (grade D).
Roughly half of the approximately 40,000 buildings that had to post the grades received a D or lower (F scores were only given to buildings that failed to comply).
Gina Bocra, chief sustainability officer for the Department of Buildings, said that although building owners have been required to disclose their property’s energy and water consumption for years, not many people saw it because it was in a database on a city website.
“The letter grade was a way for that information to become very visible, not just for the owners, but for the tenants,” Bocra said.
The city wants to achieve an emissions reduction of at least 80% by 2050, according to the Mayor’s office. Buildings are responsible for nearly 70% of the city’s carbon emissions, due to their extensive heating, cooling and lighting needs, as well as the energy inefficiency of older structures.
Alex Zafran, Senior Consultant at Aurora Energy, who helps buildings manage their energy costs, said many building owners were surprised to find out their grades were so low. He said after the grades were published on October 1st, he received a lot of correspondence from building owners who were “everything from furious and irate, to shocked and confused.”
The public prominence of the scores means they are visible to people passing by on the street.
“It is in many senses, a true real estate energy efficiency scarlet letter. And the buildings with the low scores are suffering immensely,” Zafran said.
Matt Cebula, director of Energy Services at Akam Associates, which manages more than 200 buildings across the city, said he thinks this is the reaction the city wanted from building owners.
“It was sort of a call to action,” he said.
Bocra said she is aware that the city is facing an economic crisis that’s especially difficult for building owners. Helping buildings to perform better in terms of energy efficiency can also be a strategy for recovering from the current crisis in the real estate market, she said. Buildings won’t be fined for receiving low grades (they only receive fines if they fail to post them). But that will all change in 2024 when local law 97 goes into effect. Those fees could be tens or hundreds of thousands of dollars for the lowest performing buildings.
“Buildings are now clamoring and struggling and rushing in an all hands on deck manner to figure out how they can start correcting systems or efficiencies that they’re building now so that they aren’t subjected to the fees,” Zafran said.

Zafran said that even though there currently aren’t any fines for low grades, owners are worried low grades will drive away new residents to competitors. “It’s still very unsightly and off-putting for any potential buyer or renter to come in and to see this grade… they don’t want to be in a position where people walk past their building and see a ‘D’ and say, ‘This building isn’t for me.”’
The grading system may also give the impression that a building is unsafe, rather than conveying its energy performance, Zafran said.
And unlike with restaurants, where grades can change rapidly after further inspections from the Health Department, building grades remain in place for a whole year. Every year, the data is resubmitted and buildings have the chance to improve their scores.
“We want to get that information out there so that everybody understands how buildings are performing and starts to think about how they impact the city’s greenhouse gas emissions,” said Borka.
The Buildings Department encourages New Yorkers to complain if their buildings aren't posting letter grades. "Enforcement of this sign letter grade requirement in NYC is complaint based," DOB spokesperson Andrew Rudansky said. "If a member of the public believes that a building is not properly hanging their letter grade sign in a conspicuous location, as required by law, we encourage them to file an official complaint through 311."

 

David Goldsmith

All Powerful Moderator
Staff member

Real estate industry calls sewage-overflow bill “extreme”​

Legislation would limit impermeable surfaces at building sites​


The City Council is pushing a bill to limit how much asphalt can cover a development site, but real estate professionals say it ignores the realities of building in the city.
The measure, sponsored by Queens Council member Costa Constantinides, would cap the percentage of material that doesn’t absorb rainwater, such as asphalt or concrete, covering building sites.

For future projects, no more than half of a lot could be impermeable, according to the bill. Existing development above the 50 percent threshold would be grandfathered but could not be made any more impermeable. Gas stations and certain industrial sites would be exempt.
Constantinides is trying to reduce how much raw sewage flows into the city’s waterways. Much of the city has a combined sewer system, meaning rainwater and sewage flow into the same pipes, which get overwhelmed during rainfalls. To prevent untreated waste from backing up into homes and streets, it is diverted into the Gowanus Canal, Newtown Creek, East River and numerous other waterways.

But the Real Estate Board of New York said his bill applies a one-size-fits-all approach to entirely different areas — whether they are high-density or low-scale, or prone to sewage overflows or not.
And what would happen, the trade group asked, if a below-grade room had a permeable surface above it?
There are surely other problems with the bill that no one has contemplated yet, the group added.

“This is by no means exhaustive given the complexities of designing these systems and the variety of below-grade conditions,” the group wrote in testimony submitted at a hearing on the bill this week. “Further study and outreach is necessary.”
The New York Coalition of Code Consultants, whose members help secure project approvals, called the measure “extreme” and said it would restrain development.

“New York City may be a concrete jungle, but residents also live sustainability through dense housing and take advantage of walkability, proliferating bike lanes and public transportation,” the group testified. “There are ways to encourage more sustainable development without completely stifling new construction.”
The bill, introduced in 2018, is part of an effort to make the city more resilient to climate change. Late last year, the City Planning Commission launched a public review of a proposal to address coastal flood resiliency through zoning.
 

David Goldsmith

All Powerful Moderator
Staff member
Critics say real estate got Cuomo to “circumvent” city’s climate law

Legislators plan to nix workaround sought by building owners​


Some elected officials and environmental advocates are blaming the real estate industry’s cozy relationship with Gov. Andrew Cuomo for a change he proposed to New York City’s building emissions cap.
State legislators, along with ALIGN NY and other groups, oppose a clause in the governor’s executive budget that would allow building owners to buy renewable energy credits outside the city to offset their properties’ greenhouse-gas emissions.

The Real Estate Board of New York pushed for the change as a way for building owners to abide by Local Law 97, which caps carbon emissions for most buildings larger than 25,000 square feet. The city law allows owners to meet these restrictions by purchasing renewable energy credits generated within the city, but such credits are virtually nonexistent because the city has no wind or solar farms to speak of, nor any hydroelectric plants.

Many states permit less-restricted purchases of the credits, which help to fund renewable energy projects.
State Sen. Michael Gianaris criticized real estate lobbyists for going to Albany to get around the city law, saying such a tactic won’t fly with Democrats’ veto-proof majority in the Senate.
“We’re going to fight this, and we’re not going to support the circumvention of a local law,” he said during a virtual press conference Thursday. Gianaris appeared with four of the Assembly’s 150 members: Emily Gallagher, Jessica González-Rojas, Robert Carroll and Ron Kim.

The state legislature does occasionally supersede New York City laws. In 2017 it nixed the city’s 5-cent plastic bag fee just as it was about to take effect.
The Assembly and Senate are in the process of crafting their own proposals for the budget, which is due by April 1. Negotiations will likely be particularly tense this year: The press conference was titled “We Won’t Be Bullied by Andrew Cuomo,” a reference to heavy-handed tactics that the governor has in recent days been accused of using throughout his decade-long tenure.

Cuomo’s enemies have been emboldened by mounting criticism related to the governor’s reporting of nursing home deaths caused by Covid. Kim, a Queens lawmaker who alleged this month that the governor threatened to “destroy” him, said at the conference that he was disgusted by the Local Law 97 budget proposal.
Building owners say the law will punish owners whose buildings are efficient but heavily used and thus consume much power. Properties exceeding emission caps face an annual fine of $268 per metric ton of emissions over the limit — amounting to $2.4 million for Douglas Durst’s ballyhooed green building One Bryant Park.

In a statement, REBNY President James Whelan noted that unlike renewable energy credits, the fines would “go into City Hall’s pockets, not renewable energy creation or programs that create new green jobs.”
“The state’s proposal is a common-sense solution that sustains the renewable energy we need now while still encouraging the carbon emissions reductions we need for the future,” he said. “Any suggestion otherwise is not sound policy; it’s just a press release.”

The state’s Energy Research and Development Authority underscored that the governor’s measure is intended as a “temporary compliance mechanism” while owners “transition away from fossil fuel use in their buildings.”

Queens Council member Costa Constantinides, who sponsored Local Law 97, said the budget proposal endangers the city’s legislative process.

“It is one thing to be a stakeholder and be heard, and it’s another thing to say that you want to write the bill,” he said during an interview. “My job is not to make sure everyone is happy. It is to make sure everyone is heard, to make sure that the policy works.”
Mayor Bill de Blasio also opposes the budget measure.
Other groups do as well — yet agree that the city’s law, as written, presents challenges for buildings owners.

In a Feb. 17 letter to the governor, Assembly Speaker Carl Heastie and Senate Majority Leader Andrea Stewart-Cousins, design and environmental groups said the budget proposal was “fundamentally at odds” with the intent of Local Law 97. According to the letter, which was first reported on by New York Focus, the proposal incentivizes property owners to buy credits rather than paying for energy-efficient building retrofits.

Tom Wright, president and CEO of the Regional Plan Association, one of the letter’s signatories, said Local Law 97 has significant problems, but Cuomo’s fix “misses the mark in some ways.”
Wright said his organization and some others on the letter are working on a compromise — a compliance option focused on energy efficiency and electrification in affordable housing.

RPA’s position contradicts that of its chairman, the developer and tight Cuomo ally Scott Rechler. When asked where he stands on the budget proposal, Rechler called Local Law 97 “flawed.”
“While not perfect, the proposal in the budget at least attempts to rectify those flaws,” Rechler said in an email. “Unless there is an alternative proposal that promotes sustainability while holding the industry accountable, I would support the budget proposal as I would rather not sacrifice the good for the perfect.”


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David Goldsmith

All Powerful Moderator
Staff member

These properties face credit risk under Local Law 97: Moody’s​

Report lays out how fines could affect cash flow​

In 2024, the owner of the former AT&T Long Distance Building at 32 Sixth Avenue could face $2.8 million in fines. The owner of the former Western Union Building at 60 Hudson Street could be on the hook for nearly $4.6 million in fines that same year.
The two properties have origins in telegraph services and now house major telecommunications and data service companies. They also back large loans that could become a bit riskier due to New York City’s new building emission caps.
A report by Moody’s found that 80 percent of commercial properties underlying commercial mortgage-backed securities in New York City would face fines under Local Law 97 that would “impair property cash flows” without retrofits or other forms of remediation.

Under the 2019 measure, buildings larger than 25,000 square feet must meet new greenhouse gas emission caps starting in 2024 and even stricter limits by 2030. According to the credit rating business, the law’s first deadline will “spur little material credit risk” that would rise “moderately” through 2030.
John Gilbert, COO at Rudin Management, which owns 32 Avenue of the Americas, said 93 percent of energy use in the building can be attributed to tenants, the majority of which are telecommunications companies.

“I control elevators and lobby lighting and that is basically it,” he said. “I can’t tell a major telecommunications company that they can shut down their servers for several hours.”
He said Local Law 97 unfairly penalizes property owners over something they can’t control.
The report lists Rudin’s building and 60 Hudson, owned by the Stahl Organization, among the top six greenhouse gas contributors that back $1 billion in outstanding loans. Those properties’ loans are valued at $450 million and $280 million, respectively. The other properties are Related Companies and Vornado Realty Trust’s 85 10th Avenue, Leser Group’s 111 Livingston Street, Brookfield’s Two MetroTech Center and RFR Holding’s 380 Lafayette Street.

The six loans pose “potential heightened risk to CMBS deals,” according to the report, and would account for 36 percent of total fines in 2024 attributed to CMBS properties in the city. According to the report, these properties could face fines representing between 4.6 and 13 percent of their 2019 net operating income if they do not take action to comply with LL97.

The broader landscape of city properties is a bit less grim. Of the 767 city properties backed by CMBS loans with available carbon emissions data, only 64 would face potential fines greater than 2 percent of their 2019 net operating income. That number jumps to 335 in 2030.
Gilbert said properties with critical infrastructure should not be treated the same as office buildings under the law.

“The modern economy runs on broadband, and these buildings should be exempt from these regulations based on their use and critical infrastructure,” he said.
A spokesperson for Brookfield said Two MetroTech Center would be “unreasonably penalized starting in 2030 for housing two significant and important data centers.”
“We are completing a number of capital projects to limit the building’s energy usage to the extent possible, and we are working with tenants to explore other ways to do the same,” the spokesperson said in a statement.

Owners of buildings with data centers, 24-hour operations, facilities critical to human health and with high-density occupancy can apply for adjustments to their emission caps. To do so, the owners must show that meeting 2024 limits is impossible because emissions in 2018 exceeded the caps set for 2024 by more than 40 percent. If approved, the building’s limits will temporarily be adjusted to 70 percent of its 2018 level. Owners have until July to apply for this adjustment.

Property owners had fought for the inclusion of another workaround to the law in the state budget. The measure, which would have allowed owners to buy renewable energy credits generated outside the city to offset their emissions, was ultimately left out.C
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David Goldsmith

All Powerful Moderator
Staff member

NYC landlords could find a lifeline in carbon trading​

A potential workaround to Local Law 97 brings a complex set of challenges​

The year is 2030. New York City landlords, struggling to comply with city-mandated greenhouse gas emission caps, are on the hook for millions of dollars in fines — penalties that will only multiply in the coming years. This is the daunting reality that building owners face under Local Law 97.
But there is a possible workaround.
The city is considering a program that will allow building owners to trade carbon emissions. If implemented, landlords who own buildings with high greenhouse gas emissions will be able to buy credits from lower-emitting building owners to reduce overall emissions. It could also give rise to a market for Wall Street to tap into.

The initiative, however, has not gained much steam. For starters, the city’s study on carbon trading is still being conducted. Environmental justice groups loathe the idea, and the city’s real estate industry has yet to vocally support it.
“My clients are not talking about [carbon trading] at all,” said YuhTyng Patka, co-chair of law firm Duval & Stachenfeld’s Climate Mobilization Act practice group. “The real estate industry is finally waking up to Local Law 97. Carbon trading is way too far off.”

But Patka expects that Local Law 97 will soon become a bigger deal to landlords. So far, the city has not caved to the real estate industry’s efforts to circumvent emissions standards.
“Building owners are going to have an ‘oh shit’ moment,” said Patka.

Passing gas​

Financial giants that have mastered the art of monetizing people’s physical assets, like homes and cars, are increasingly reaching for the intangible.

Wall Street is investing in virtual currencies. Investors are bidding on “non-fungible tokens,” or digital creations bought and sold as unique assets, in categories from collectible cards to digital real estate.
Financial firms are also increasingly looking at carbon as the next big tradeable commodity.
More generally, carbon trading programs — where companies can buy and sell credits, or allowances for emissions — are already in place in Europe as well as California. China is working on its own plan.

The initiative is an alternative to a carbon tax — or a direct tax applied on carbon emissions. Over the years, the idea has become more sophisticated. In late 2020, Goldman Sachs started an index that gave oil investors the opportunity to offset emissions by buying carbon permits in the European Union.
New York City would become only the second city, after Tokyo, to implement a municipal carbon trading program. The effectiveness of Tokyo’s program has been hotly debated. But a recent study suggests that it helped reduce the city’s average annual emissions by 6.9 percent.

The trading program could help spur a new $20 billion building retrofit market as a result of Local Law 97, according to the Urban Green Council, a New York-based nonprofit that advocates for improving buildings’ energy efficiency.
But there’s a major hurdle when it comes to implementing carbon trading: It’s complicated.
“This is not using beans; we are trading an invisible gas,” said John Mandyck, CEO of the Urban Green Council.

The city commissioned a study on carbon trading as part of Local Law 97. The law mandates that commercial buildings over 25,000 square feet are required to reduce their emissions by 40 percent by 2030 and 80 percent by 2050.
Initially, that study was to be released in January. It is now supposed to be released this summer.

There are a number of kinks that still need to be worked out. One is whether credits can be “banked,” which would allow landlords to hold credits in reserve for use at a later date, instead of being traded immediately.
It’s a proposal that the Real Estate Board of New York’s vice president of policy, Zach Steinberg, said he would like to see. More broadly, Steinberg said, REBNY is advocating for more ways to help building owners comply with Local Law 97.

“The city needs to be much more aggressive in getting the details of the law worked out,” he said.

Green bean counters​

Rudin Management’s John Gilbert is a data evangelist.
The longtime COO of the dynastic New York City real estate firm is using data, including from its smart buildings subsidiary Prescriptive Data, to help lower the firm’s energy usage across its 10.5 million square feet of commercial space. Since 2005, Rudin has reduced electrical usage by 43 percent and steam usage by 46 percent.

Gilbert is now applying this approach to carbon. When digging into other carbon markets that failed, he noticed a common theme.
“There isn’t enough granulated, authenticated data to create a market,” said Gilbert.
The solution to some of these problems could be blockchain technology, a virtual ledger most commonly associated with the speculative world of cryptocurrency.

Gilbert worked with Brookfield Renewable Partners, a subsidiary of Brookfield Asset Management, along with JPMorgan Chase, KPMG and the carbon accounting tech startup ClearTrace to design a system to swap carbon credits using the blockchain.
In October, Brookfield and JPMorgan reached an agreement to use the technology to track the flow of hydropower from Brookfield to JPMorgan facilities in hundreds of buildings across New York state.

The technology is being developed, but tracking carbon is much more difficult than tracking other commodities. It relies on a sophisticated set of calculations with no universal benchmarks.
“What is desperately needed in the carbon accounting world is a clear standard,” said ClearTrace CEO Lincoln Payton.

The carousel​

Carbon trading is not just tricky because of the logistics. It is also largely hated by environmental justice groups.

To opponents, the program amounts to a “get out of jail free” card for polluters — a loophole around emissions caps for some of the city’s biggest sources of carbon.
They have some precedent to rely on. Some of the world’s largest carbon emission trading programs have become victims of fraud. Over a decade ago, fraudsters set up fake shell companies in Europe to trade carbon credits with each other. The scheme, known as a “carousel,” resulted in billions of dollars being siphoned out of European governments. French media dubbed it the “fraud of the century.”

More recently, carbon trading in California has come under scrutiny. A state-implemented program allowed polluters to “offset” their carbon emissions by purchasing credits from owners of forested land, thus incentivizing their preservation.
But a recent investigation by ProPublica and MIT Technology Review, citing findings from CarbonData, reported that the state’s program generated between 20 million and 39 million credits that did not “achieve real climate benefit.”

The Urban Green Council recognized these concerns in an initial report on carbon trading.
One solution is to tilt investment to environmental justice areas to make them a priority. Another is to use carbon trading to fund energy upgrades and retrofits in these areas.
“However we enact [carbon trading] in New York, it will be one that advantages environmental justice communities,” said Mandyck, whose organization is working on the city’s study.

The ‘oh shit’ moment​

Despite the looming consequences of noncompliance, Local Law 97 has thus far remained a relatively low priority among landlords and developers. It was passed in 2019, the same year the state passed its controversial rent regulation laws. Then there was the broker free ban that was supposed to go into effect. Not to mention a global pandemic that kept people hunkered down at home.

That could change as lenders start to press landlords on their compliance with city law. A May report by Moody’s predicted that 80 percent of New York City commercial properties underlying mortgage-backed securities are on track to face fines under Local Law 97.
“Lenders are starting to ask questions,” said Daniel Spitzer, an environmental law attorney with Hodgson Russ.

Some landlords will face a difficult time answering those compliance questions. For landlords with energy-intensive tenants, such as data centers or trading floors, the emission mandates under Local Law 97 could become impossible to meet even with solar panel installations or energy efficiency upgrades.
“What’s left is carbon trading, or else these buildings are just going to pay fines,” said Mandyck. “We don’t get carbon reduction.”
 

David Goldsmith

All Powerful Moderator
Staff member

Real estate clashes with climate advocates over proposed fossil fuel ban​

Bill would bar natural gas in new buildings, gut renovations​

In January, Mayor Bill de Blasio vowed to ban fossil fuel hookups in new buildings by 2030. Now, the City Council is trying to bump up that deadline.
The council on Thursday introduced a bill that would effectively bar the use of natural gas in any new building or property that undergoes a major renovation. The measure, sponsored by Brooklyn Council member Alicka Ampry-Samuel, would kick in two years after it passes, several years ahead of de Blasio’s goal.

The proposal is already facing pushback from the real estate industry, which has argued that the costs of forced upgrades would likely be passed along to tenants.
Real Estate Board of New York President James Whelan said the goal of phasing out the use of fossil fuels in buildings is “laudable,” but should follow recommendations being contemplated by state and city advisory groups. For example, the state’s Climate Action Council has floated a five-year phase-out of gas and oil space and water heating in single-family homes, and a 10-year timeframe for multifamily and commercial buildings.

“This legislation ignores these ongoing substantive discussions and instead puts forward a fundamentally flawed proposal that would upend the lives of millions of residents across New York City and significantly increase costs for homeowners and renters,” Whelan said in a statement.
He pointed to the fact that most of the city’s electricity is sourced from fossil fuels, so rushing to electrify new and some existing buildings before more renewable energy is available will not “effectively reduce carbon emissions.”

According to the Urban Green Council, 40 percent of the city’s carbon emissions stem from burning fossil fuels for heat and hot water in buildings.
New York Communities for Change is pushing for the bill to go further, calling on the City Council to make the measure effective within one year rather than two. Peter Sikora, who leads the group’s climate and inequality campaign, said even though the city still relies on fossil fuel sources for electricity, electric heat pumps will improve energy efficiency in buildings.

“Every single gas installation is another blow to the fight against climate change,” he said.
If the bill passes, New York would join other cities in restricting fossil fuel use. In 2019, Berkeley, California, became the first municipality in the country to ban natural gas hookups. Others have followed, including Seattle, which approved a measure in February that prohibits natural gas use for space heating in new commercial and apartment buildings taller than four stories, as well as in older buildings that are replacing heating systems. Last week, the International Energy Agency released a report recommending that sales of fossil fuel boilers should be phased out by 2025.

Details of the City Council bill — including what kind of renovations would trigger restrictions on fossil fuels — are still being hashed out. The measure would bar the combustion of any substance that emits 50 kilograms or more of carbon dioxide per million British thermal units of energy. According to the U.S. Energy Information Administration, natural gas clocks in at more than 53 kilograms, and heating oil at more than 70.

The City Council bill is the latest clash between the real estate industry and climate advocates as deadlines to comply with the city’s sweeping climate change legislation loom. Under Local Law 97, buildings larger than 25,000 square feet must meet new greenhouse gas emission caps starting in 2024 and even stricter limits by 2030.

Jared Della Valle, CEO of Alloy Development, which is building an all-electric residential building at 100 Flatbush Avenue, said the City Council bill is welcome news. He acknowledged that electrifying older buildings may prove more of a challenge and may not ultimately make sense without a larger overhaul of the building’s envelope. But he thinks there is a strong business case for eliminating fossil fuels.

“Our future generations of renters really care about this issue,” he said. “There is a dire need to address these things now, and there’s no excuse for new construction.”
 

David Goldsmith

All Powerful Moderator
Staff member

Why passive house could become NYC’s next design standard​

More developers and architects are being drawn to the German-inspired, low-energy building concept​

Despite the advantages of passive house design, it has yet to appeal to the American masses. Upfront costs can be more expensive. Moreover, it’s just not on the radar for landlords and developers who generally prefer to collect rent checks with minimal expenses.

But the concept is gaining steam.

Cornell Tech designed its 26-story residential building on Roosevelt Island to passive house standards. In Boston, a 690-foot-tall condo and office tower is set to be the largest passive house in the United States upon its targeted completion next year.

 

David Goldsmith

All Powerful Moderator
Staff member
43 percent of buildings received Ds.

Energy efficiency grades: motivation or nuisance?

'D' is by far the most common grade, but without fines, shaming landlords only goes so far​

Most people don’t like talking about bad grades. Including landlords.
Last year, New York City began requiring letter grades based on energy efficiency and water usage to be posted on buildings over 25,000 square feet.

According to Department of Buildings data reviewed by The Real Deal, 43 percent of buildings received Ds, 15 percent received As and Cs and 16 percent received Bs. About 10 percent received an F, given to building owners who either did not publicly display their scorecard before Oct. 31, 2020, or failed to submit energy efficiency benchmarking.
Some landlords complained that the grades were an unfair characterization of their properties.
“It’s not giving an accurate picture of the efficiency of our buildings,” said Jordan Barowitz, vice president of public affairs at the Durst Organization.
The grades are calculated based on an Energy Star metric that compares the energy consumption of buildings across the country with similar density and use.
The buildings in Durst’s portfolio, which spans over 10 million square feet in New York, received a mix of grades. One of those that received a D is a prewar building that Barowitz said had recently been retrofitted with a brand new HVAC system and energy-saving windows.
“It runs extremely efficiently for the vintage building that it is,” said Barowitz. “Some older buildings are very lightly used and score fine, but that doesn’t mean they’re efficient buildings.”
Under the letter-grade statute, Local Law 95 of 2018, low scorers are not punished, as long as they participate. Building owners who receive an F are subject to a $1,250 fine, but buildings with Ds or better pay nothing. Starting in 2024, however, Local Law 97 — a different statute — will subject owners to a fine of $268 per ton of greenhouse gas emissions above a certain limit.

The energy-efficiency letter grades do not measure those emissions, which are Local Law 97’s domain. It is possible to receive a D grade and still be in compliance with Local Law 97 or receive an A grade and not be in compliance.
“I would be surprised if there are very many buildings that have gotten an A grade on their building and they would be subject to fines in 2024,” said Gina Bocra, chief sustainability officer at the Department of Buildings. “If you have a D, you may be facing fines in 2024, you may not.”
A building’s energy efficiency is only one component of its sustainability. Even the LEED Gold-certified Empire State Building received a mediocre energy-efficiency grade — a B.

The LEED program, a private initiative, proved popular because building owners use it to market their spaces and burnish their image. But if the idea of the letter-grade law was to shame building owners into making upgrades, it is hard to say if it is succeeding.
“Some people just aren’t affected by a bad grade,” said Tony Liu, a principal engineer at sustainability consultant Partner Energy Group. Liu said his clients are more concerned about Local Law 97 because non-compliance comes with heavy fines.
“LEED looks at a lot of different items,” he said. “Energy efficiency is one category out of many.”
The Real Estate Board of New York said its members are already investing in energy efficiency measures to achieve their own sustainability goals, improve their assets, retain and attract tenants and comply with the law.

“Local Law 95 and 97 present new precepts to their ongoing environmental efforts, which can be challenging given that LL95 is predicated on energy efficiency and LL97 is predicated on raw carbon emissions,” Alexander Shapanka, REBNY’s assistant vice president of policy, said in a statement. “Though energy efficiency is essential to limiting carbon emissions, the considerations for achieving Local Law 97 compliance go much further.”

Liu said many variables are associated with raising a building’s energy efficiency score but installing LED lights in common areas will not bring a D building up to an A.
“If you’re really going from a D to A, B or C, you’ll probably need to do some capital upgrades,” said Liu. Typically, that includes more costly upgrades like installing an energy-efficient HVAC system, reducing plug loads and purchasing efficient appliances.
Olayan Group’s 550 Madison Avenue, formerly known as the Sony Building, received an A grade last fall, but the 37-year old building had just undergone a $300 million gut renovation. “It’s really a brand-new building on the inside,” said Erik Horvat, head of real estate at Olayan America.

The Institute for Market Transformation (IMT), a nonprofit focused on energy efficiency for buildings, found that at the height of the pandemic, when office building occupancy dropped as much as 95 percent, only 5 percent of buildings experienced energy use reductions above 30 percent.
“Unfortunately there are a lot of buildings that are running their systems even when they’re empty and wasting a lot of energy,” said Cliff Majersik, a policy advisor at IMT.
The goal of Local Law 95 is to create public pressure to improve a building’s grade, similar to the food-safety grades posted on the front of restaurants.

Although that endeavor was successful, it is much more difficult for commercial buildings because restaurant consumers have more options.
“If they observe a D on the door of a restaurant, they probably want to go to the next restaurant where the grade is an A,” said Ginger Zhe Jin, a behavioral economist at the University of Maryland. “Maybe as an individual employee you just don’t have a choice of walking in or not walking in to that building.”
Peter Sabesan, a broker at Cresa, said that a building’s energy grade does not factor into a tenant’s decision to rent office space. Not one of his clients has ever walked away from a building because of its grade, he said.

“At the end of the day, it’s always about the rent,” said Sabesan. “If it’s an equal deal it’s definitely a plus, but if it’s not an equal deal, the tenants care about the rental package and the concession package more than the energy efficiency.”
 

David Goldsmith

All Powerful Moderator
Staff member
Will office owners even try to comply?

Office building emissions soar as owners crank up ventilation systems​

Updated industry guidelines being ignored​

In the name of safety, office landlords are cranking their ventilation systems to keep Covid at bay. An unintended but predictable consequence, however, is a rise in carbon emissions from office buildings.

A new report from Hatch Data analyzed carbon emissions from commercial buildings across the country. The software company predicts commercial buildings will use around 44 billion kilowatt hours of additional energy per year when pre-Covid occupancy returns, according to the Commercial Observer.
 
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