2024 Spring Issue of Urban Land - 104

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CHRISTOPHER CAYTEN
Local Law 97
What it is and how it could make or
break your next deal
ConstruCtion Codes are pushing
new buildings toward net zero, but
roughly 80 percent of the expected
2050 building stock already exists
today and needs to undertake major
upgrades to meet emissions limits
in line with the Paris Agreement. To
address this issue, cities and states
across the U.S. have started to limit
emissions from existing buildings
with regulations known as Building
Performance Standards (BPS).
In 2019, New York City Council
passed the first BPS in the country-
Local Law 97 (LL97), part of a suite
of laws titled the Climate Mobilization
Act-aiming to reduce buildingbased
emissions 40 percent by 2030
and 80 percent by 2050. Local Law
97 affects more than 50,000 privately
owned buildings across New
York City that are 25,000 square
feet (2,322 sq m) and larger, regardless
of property type, age, or landmark
status. (City-owned buildings
have a separate 50 percent emissions
reduction goal by 2030.)
Emissions limits, starting in 2024,
are assigned based on the types of
spaces in a building as defined in the
Energy Star Portfolio Manager Tool
and ratchet down every five years,
converging at 1.4kg CO2e/square
foot by 2050. Building owners must
pay $268 annually for every metric
ton of CO2 by which they exceed
the emissions limits. Affordable housing,
houses of worship, and nonprofit
hospitals have alternative compliance
pathways. The 2024 limits
affect approximately the bottom 20
percent of performers, whereas the
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2030 limits will affect about 65 percent
of large buildings in the city.
Given the novelty and complexity
of LL97, it took the NYC Department
of Buildings until December 2023 to
clarify aspects of the law such as onsite
renewable resources, time-of-use
emissions calculations, Renewable
Energy Credits, " beneficial electrification, "
and a definition of " good faith
efforts " that building owners can use
to apply for a two-year extension of
the first deadline.
So, what does it all mean for the
real estate industry? It's the middle
of 2024, and the clock is ticking.
2024 is the first year that emissions
must be measured against the LL97
limits. By May 1, 2025, owners of
covered buildings must submit proof
that their buildings met the limit in
2024 or start paying annual fines of
up to a million dollars, and possibly
more. And even if a building is under
the 2024 limit, it is likely to exceed
the second round of limits, and
owners need to start planning for
2030 compliance now.
Complying with LL97 requires
a long-term, whole-building decarbonization
strategy that incorporates
energy modeling, capital
planning, and tenant leasing and
fit-outs-requiring involvement from
operations, construction, and leasing
teams. Building owners should evaluate
how their buildings currently
compare to the LL97 limits, review
their short- and long-term capital
plans, and evaluate how current and
potential new tenants can reduce
and be accountable for their own
emissions. Because LL97 regulates
emissions, not energy use, building
owners must evaluate efficiency
Christopher Cayten
initiatives in terms of emissions, not
just energy. Because the city has set
2030 electricity emissions factors
based on New York state's aggressive
grid decarbonization goals (50
percent lower than 2024's), LL97 is
pushing building owners to electrify
systems now powered by fossil fuels.
Asset values of NYC buildings are
already being affected, with buyers
discounting prices to cover or mitigate
emissions fines. High-performing
buildings with low emissions intensities
and robust plans to move away
from fossil fuels are more attractive
to investors, lenders, and tenants as
they seek to align with their broader
climate and ESG goals.
If you invest in New York City or
are pondering it, you need a comprehensive
strategy to address LL97
now and into the future. It could
make or break your next deal.
And New York City is just the
beginning. Twelve other cities have
already passed BPS, and the National
Building Performance Coalition
includes more than 30 more jurisdictions
that have committed to passing
BPS by Earth Day 2024. UL
CHRISTOPHER CAYTEN is a partner and head of
strategy at New York-based CodeGreen Sustainability.
2024 Spring Issue of Urban Land

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