Navigating Local Law 97: A Path to Carbon Neutral Buildings in NYC
By: Aidin Bina
Local Law 97 Overview
Local Law 97 (LL97) is a groundbreaking regulation part of the Climate Mobilization Act launched in 2019. Despite the ambitious proposal, buildings across NYC are gearing up to meet their first compliance period in May of 2025. LL97 aims to reduce carbon emissions on buildings over 25,000 SF by 80% by 2050 (1). The path to decarbonization is marked by a series of compliance periods gradually reducing the buildings’ carbon cap. Buildings will be forced to submit their GHG emissions annually to NYC’s Department of Buildings (DOB), and those that do not meet requirements will be penalized.
Expected Impact
LL97 arose from concerns surrounding climate change’s threat to New York City, including more frequent and severe weather, rising sea levels, and hazards to public health. This landmark legislation recognizes that over 70% of carbon emissions in NYC come from buildings and, therefore, aims to prune this source of climate change (2). Furthermore, the ordinance proposes positive long-term economic benefits for buildings that convert to renewable energy sources: LL97 could decrease long-term energy costs and increase building valuations for owners, a positive for all parties involved.
Coverage
The law covers, with some exemptions (outlined later), buildings that exceed 25,000 SF, two or more buildings on the same tax lot with a combined area exceeding 50,000 SF, and two or more buildings owned by a condominium association overseen by the same board of managers, with a collective area exceeding 50,000 square feet (3).
Currently, nearly 50,000 buildings, covering over 60% of NYC’s building area, are due for compliance. These properties are divided into 60 different categories, each facing different carbon caps that will progressively constrain buildings' greenhouse gas (GHG) emissions up until 2050 (1). The graph below illustrates LL97’s carbon caps on Multifamily housing, office, and hotel space.
Source: Urban Green Council (1)
Steps to Compliance
LL97 aims to have buildings that are not compliant with their carbon caps to make upgrades and retrofits that will reduce their carbon emissions. Renewals at the forefront of development and innovation include energy management systems (EMS), insulation improvements, lighting systems, HVAC systems, and renewable energy sources such as solar panels (4).
Towards the end of 2023, The LL97 Advisory Board finalized three rules regarding alternative pathways to compliance with the legislation. These rules were established for buildings taking legitimate and substantial steps towards decarbonization but that are unable to meet LL97’s requirements. The first two are referred to as the “good faith” pathways (5).
One system for displaying “good faith” is providing a “decarbonization plan”. In this instance, by May 1st, 2025, a registered design professional must certify an energy audit showing how the building will execute emission reductions by 2026. Furthermore, proof must be submitted by May 1st, 2028, that the DOB has approved the necessary work to satisfy the 2030 emissions limits, along with long-term plans to reach carbon caps by 2050 (5).
The second method is to attain proof of DOB approval for a project capable of fulfilling the first compliance period’s requirements, a timeline for the work, and the subsequent reductions in GHG emissions. If the scheduled project is not dependent on DOB approval, a signed agreement with the provider and proof of payment will be accepted (5).
Lastly, the 2023 amendments allow building owners to secure Renewable Energy Credits (RECs) to comply with LL97. RECs are representative of one megawatt-hour of electricity delivered to the grid from a renewable energy source. Renewable energy providers can sell these commodities to pass through the costs of producing green energy. Therefore, from the DOB’s perspective, RECs aid the transition to renewable energy and thus can be substituted for meeting carbon caps (5).
Non-Compliance, Fines & Penalties
Real estate deemed non-compliant will face fines and penalties on multiple occasions. First, buildings exceeding their allotted carbon emissions will be fined $268 for each metric ton of excess CO2. Second, failure to file a report will incur a fine of $0.50 for each square foot of property per month. Third, entities asserting false reports will surrender a $500,000 penalty (6). For instance, a 50,000-square-foot multifamily emitting 500 metric tons of CO2 would exceed its limit by 172.5 metric tons and be liable for up to $46,230 in fines (7).
Exemptions
The buildings exempt from LL97 regardless of the aforementioned coverage are as follows: Industrial facilities generating electric power or steam, city buildings, buildings on land owned by the New York City Housing Authority, rent-regulated buildings, houses of worship, buildings in project-based federal housing programs, buildings owned by housing development fund companies, and real property up to three stories, consisting of attached, detached, or semi-detached units, where each owner is responsible for their own HVAC and hot water systems (8).
Latest Developments
In 2023, a study carried out by the Real Estate Board of New York deemed 3700 properties non-compliant, provoking $900 million in fines annually by 2030. With a hulking 50,000 buildings due for compliance in May of 2025, the city is ramping up their enforcement unit to meet criticism of understaffing. Beginning the year with a mere 11 employees, the DOB has quickly built a crew of over 30 regulators and is looking to double that soon. The city’s reinforcement of LL97 hasn’t stopped there, allotting $4 million in funds to hiring new employees and attaining a $20 million grant backing the operation (9).
Critiques and Opinions
While Local Law 97 is recognized as one of the most aggressive laws to combat climate change the nation has ever seen, it has not gone uncriticized. While the DOB claims to assert hefty fines, it is important to note that the assessment of costs of fines vs. retrofitting is different for all buildings. While newer buildings with updated systems might meet carbon caps at a lower cost, older buildings with dated infrastructure might require more work. Thus, many adversaries of LL97 argue that the current fines are insufficient to outweigh the costs of retrofitting for all NYC buildings. Retrofits are costly, and for many NYC property owners, cash flowing on their 25,000+ SF buildings, $268 per ton of excess carbon is paltry. Even with the newly adopted “good faith” pathways, some property owners might factor in fines to their cost estimates and financial model in hopes of saving short-term capital.
Conclusion
With pressure from climate activists and adversaries of climate legislation, Local Law 97 prevails as a groundbreaking regulation aiming to target NYC’s largest carbon polluters-buildings. As the first compliance period approaches in May of 2025, property owners are working to balance the pressure from LL97 with the financial and logistical challenges of retrofitting. With enforcement approaching, LL97 poses both a challenge and an opportunity for NYC to become a global leader in the push toward decarbonization.
Sources:
What is Local Law 97?, Urban Green Council
Local Law 97, NYC Sustainable Buildings
LL97 in Focus: Jumpstarting multifamily building upgrades, Urban Green Council
Update on New York City Local Law 97: Relaxed Rules Impact the First Compliance Period, Kramer Levin
LL97 ESPM Property Type Conversion Version 1.1, NYC Buildings
Greenhouse Gas Emissions Reporting, NYC Buildings
More About the Author: Aidin Bina