Dozens of building owners intend to pay fines for not complying with the city’s sweeping building decarbonization law in the coming years instead of investing in costly climate-friendly upgrades to their properties, according to new research from the Center for the Urban Future reviewed by Crain’s.
Local Law 97 requires most large building owners to reduce their properties’ carbon emissions by retrofitting lighting, insulation and other systems with more efficient technologies. But in more than two dozen interviews with building sector executives, the non-partisan think tank found that several property owners say it’s more cost efficient to pay fines for not complying with the law instead of investing in upgrades like heating and cooling systems that use electricity instead of fossil fuels.
Under the law passed by the City Council in 2019, building owners are on the hook to pay $268 per ton of carbon dioxide emissions that exceed their property’s 2024 limit, which under the law is determined by a formula and vary by property. Building owners must file reports with the city by May proving that their properties are in compliance or face fines. The Department of Buildings has said that fewer than 11% of buildings required to meet the law’s mandates are not in compliance with the 2024-2026 emissions targets.
Those emissions reduction targets, however, are set to increase by 2030 and the cost of compliance for landlords will significantly exceed current penalties, said Eli Dvorkin, editorial and policy director at Center for the Urban Future.
“It’s a tough sell,” said Dvorkin. “For many building owners, it just comes down to pretty basic math, and right now the payback period for those investments is long and getting longer with higher interest rates and rising costs for borrowing.”
The city may need to impose higher fees to exert greater pressure on large, cash-rich property owners to invest in sweeping green building retrofits, or property owners will simply absorb the fines as a cost of doing business, said Dvorkin. Increasing the law’s penalties would require legislation from the City Council to amend the law.
The influential Real Estate Board of New York, which initially opposed Local Law 97, is against harsher penalties to enforce the law. “Local Law 97 already imposes devastating fees on property owners with limited pathways to compliance,” REBNY spokesman Christopher Santarellii told Crain’s in a recent statement.
Some Council members have already shown a political appetite for giving Local Law 97 more teeth with a bill introduced last month that would prevent building owners from relying on purchasing energy credits to offset their electric emissions, instead of making upgrades to the buildings to cut carbon emissions.
The city and state must also bolster incentives and financial assistance to property owners, with new funds and tax credits, if officials want property owners to comply with the climate law, said Dvorkin. The city’s building department did not immediately return requests for comment.
“The green economy isn’t just going to build itself,” said Dvorkin. “The willingness of the government to invest in the policies in place, will be, I think, the deciding factor in whether the city is able to meet its goals not only for the sake of our climate but for our economy.”
