Landlords To Be Hit By $200M In LL97 Fines Next Year, Study Estimates
Thousands of New York City buildings will be unable to comply with the new emissions cap set to go into effect next year, with annual fines reaching $900M by 2030, according to a new study.
Property owners will have to report their emissions levels to comply with Local Law 97 starting in 2024, and more than 3,700 buildings are expected to exceed their caps, according to a study by engineering consulting firm Level Infrastructure commissioned by the Real Estate Board of New York.
Local Law 97 was passed as part of the 2019 Climate Mobilization Act. The laws set emissions-reduction targets on large and midsized buildings starting in 2024, with even lower emissions limits starting in 2030. Property owners could face fines of $268 for every ton of emissions above the limit, and the study found properties that aren’t meeting the caps will face up to $213M a year in penalties starting next year.
By 2030, the study projects 13,500 properties won't be compliant, and cumulative fines would come to $900M a year.
“While real estate industry leaders continue to work diligently to reduce emissions from their buildings, this study should be a wakeup call that Local Law 97 is not designed to secure the emissions reductions we need,” REBNY Vice President of Policy Zachary Steinberg said in a statement. “The study’s findings demonstrate that even if buildings take meaningful steps to comply and use the tools provided by the law, owners will still be unable to meet the emissions limits and will instead pay hundreds of millions of dollars in annual penalties. We hope the City will take action over the next 12 months to avoid damage to our local economy and unfair penalties to property owners in 2024.”
The city released details on the regulations late last year, with the first batch of final rules applying to 50,000 structures, and more regulations are expected to be laid out in the coming months. The Department of Buildings established formulas for working out how much greenhouse gas a building is emitting and what limit would apply.
It also established how to figure out a building’s gross floor area in order to report to stay compliant. In the draft of the rules, the department set out that owners can offset emissions from electricity by buying renewable energy credits from solar and wind projects — but not from fossil fuels.
According to the study, that distinction means 9,000 properties will have to take extra steps to bring their emissions down, beyond investing in credits. The residential sector is the most likely to be out of compliance, according to the study.
Some 60% of buildings set to exceed the caps next year are expected to be multifamily properties, whose share goes up to 66% in 2030. REBNY said if every building reduced its energy consumption by 15%, 11,400 buildings would be noncompliant in 2030.
Local Law 97 was written to force owners of New York City's buildings, its largest emitter of greenhouse gases, to help reduce citywide emissions by 40% by 2030 from a 2005 baseline and by 80% by 2050.
Many landlords have said the rules are too onerous and retrofitting many buildings to comply is too costly after a prolonged recovery. The Urban Green Council, which helped craft the Climate Mobilization Act, pegged the market for these retrofits at close to $20B.
The city's electrical grid is powered largely by fossil fuels, and options like solar panels are impractical with the city's thousands of tall, narrow buildings.
Some landlords have started to implement creative emission-reduction strategies. Brookfield and JPMorgan Chase are going off the grid to power new skyscrapers with energy directly from a Brookfield Renewables-owned hydroelectric plan in upstate New York, Bisnow previously reported. Others, like Glenwood Management, have installed carbon-capture systems to reduce buildings' overall footprints.