How New York City’s Local Law 97 Effects Real Estate

Real Estate Lawyer NYC

New York City is poised to take a decisive step in environmental stewardship by introducing penalties for owners of buildings emitting excessive greenhouse gases. This move is part of a broader initiative aiming to achieve net-zero building emissions by 2050. Notably, this echoes a national trend, with four states and nine cities embracing similar “building performance standards,” suggesting a potential nationwide adoption.

The urgency of such measures is underscored by the fact that residential and commercial buildings contribute a substantial 13% to harmful carbon emissions, as reported by the EPA. This percentage is even more pronounced in densely populated cities, where these emissions are concentrated, making buildings a significant contributor to climate change.
Environmentalists view the building decarbonization movement as pivotal in mitigating cities’ contributions to global warming. However, developers and landlords are apprehensive about the impending requirements, foreseeing substantial costs associated with replacing gas-burning heaters and retrofitting older structures.

A landmark in this policy landscape is New York City’s Local Law 97, set to be effective from January 20. This law applies to a staggering 50,000 buildings exceeding 25,000 square feet and incorporates progressively stringent emissions standards over the next 16 years. The law explicitly states that buildings account for around two-thirds of greenhouse gas emissions in the city.
For owners of older buildings, compliance with Local Law 97 could prove to be financially burdensome, necessitating extensive retrofits and the replacement of gas-burning furnaces with more expensive alternatives such as heat pumps and other advanced technologies. While federal and state tax incentives are available, landlords argue that they only provide limited relief.
Local Law 97 is a driving force for investment in decarbonizing buildings and is the largest initiative of its kind in any U.S. city. Building owners nationwide are increasingly considering building performance standards as inevitable, adjusting their plans accordingly.

Decarbonizing a building involves various measures such as insulating and air-sealing, replacing gas-based heating and cooling systems, and installing energy-efficient lighting like LED bulbs. Violators of the law face annual financial penalties based on their CO2 emissions exceeding set limits.

Currently, in New York City, 91% of building owners are in compliance with the impending decarbonization rules. However, concerns are raised about the potential challenges that may arise in 2030 when a 40% reduction in greenhouse gas emissions will be mandated.

In the broader context of New York real estate, there is unease about the escalating expenses associated with Local Law 97. This concern compounds existing challenges such as high office vacancies and proposals to convert office buildings into apartment houses. Despite the financial considerations, the environmental benefits of retrofitting buildings are acknowledged, contrasting with the less eco-friendly option of demolishing and rebuilding. The intersection of economic viability and environmental responsibility poses a complex dilemma for the real estate sector in New York and beyond.

Robert Aronov & Associates, PC 88-02 136th St, Jamaica, NY 11418 (718) 206-1555

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