DOB Adopts Second Rules Package for Implementing Local Law 97

The city’s landmark climate law went into effect Jan. 1.

DOB recently adopted a second major rules package for the implementation of Local Law 97 of 2019, the city's carbon emissions law that places limits on greenhouse gases coming from the city’s largest buildings. DOB’s second set of Local Law 97 rules became effective on Jan. 20.

NYC’s climate law mandates that buildings of 25,000 square feet or larger comply with stringent guidelines aimed at reducing greenhouse gas emissions. According to DOB, the law covers close to 50,000 buildings across the city, and those buildings account for 60 percent of New York City’s building area and half of the city’s building emissions. The emissions limits, established by the City Council in 2019, went into effect on Jan. 1, 2024, and are integral to meet the city’s aggressive target of carbon neutrality by 2050. The goal includes a 40 percent cut in emissions from buildings by 2030 and an 80 percent reduction by 2050.

While DOB’s first rules package gave owners guidance on how to calculate their specific emissions limits and was adopted in December 2022, DOB’s second set of rules places more emphasis on promoting compliance rather than penalties. The latest rules define what a good-faith effort to decarbonize is, clarifies Local Law 97’s prescriptive path requirements for Article 321 buildings, and provides guidance on Local Law 88’s lighting and submetering requirements. Here are the takeaways from DOB’s new package of rules for Local Law 97.

Article 321 Buildings

DOB’s latest rules provide clarity on what’s required of Article 321 buildings that must follow Local Law 97’s prescriptive path requirements. The latest rules promote compliance rather than penalties and may allow owners of buildings subject to Article 321 additional time to comply as long as they can demonstrate progress.

Certain Local Law 97 covered buildings with rent-regulated units are treated somewhat differently, and the first compliance report for many of these buildings are due in 2025.

For applicable buildings, the rules specify which prescriptive energy conservation measures they must perform, how to document them, penalties for noncompliance, and guidance for those struggling to meet the requirements. According to DOB, half of all multifamily buildings and one-third of all covered properties fall into this category.

Certain buildings, per Article 321, must demonstrate that, for calendar year 2024, either their emissions are below the applicable 2030 limits under Article 320 or that applicable prescriptive energy conservation measures have been fully implemented by Dec. 31, 2024. This applies to:

• Buildings in which more than 35 percent of units are rent regulated, regardless of whether they contain units with income restrictions;
• Housing Development Fund Cooperatives (HDFC cooperatives); and
• Buildings that have HUD project-based assistance (Section 8, 202, 811, CoC, etc.), including buildings on NYCHA land that participate in the PACT program.

For buildings that are subject to Article 321, where an owner chooses to follow the Prescriptive Energy Conservation Measures path, the following must be fully implemented no later than Dec. 31, 2024:

• Adjusting temperature set points for heat and hot water to reflect appropriate space occupancy and facility requirements.
• Repairing all heating system leaks.
• Maintaining the building’s heating system, including but not limited to ensuring that system component parts are clean and in good operating condition.
• Installing individual temperature controls or insulated radiator enclosures with temperature controls on all radiators.
• Insulating all pipes for heating and/or hot water.
• Insulating the steam system condensate tank or water tank.
• Installing indoor and outdoor heating system sensors and boiler controls to allow for proper set-points.
• Replacing or repairing all steam traps such that all are in working order.
• Installing or upgrading steam system master venting at the ends of mains, large horizontal pipes, and tops of risers, vertical pipes branching off a main.
• Upgrading lighting to comply with the standards for new systems set forth in section 805 of the New York City Energy Conservation Code and/or applicable standards referenced in the energy code on or before Dec. 31, 2024.
• Weatherizing and air sealing where appropriate, including windows and ductwork, with focus on whole-building insulation.
• Installing timers on exhaust fans.
• Installing radiant barriers behind all radiators.

Good Faith Standard for Avoiding Penalties

In the adopted rules are details for the 2024–2029 compliance period on how owners can show they are making a “good faith effort” to reduce carbon emissions to mitigate penalties and instead continue to invest that money into energy efficiency retrofits. In other words, while the law technically goes into effect this year, building owners can avoid penalties until 2026 if they demonstrate good faith efforts to reduce their carbon outputs.

Before being considered for good faith exemptions, buildings first have to demonstrate full compliance by submitting their Local Law 97 building emissions and Local Law 84 benchmarking by May 1, 2025. Also, owners must attest that they are in compliance with lighting upgrades and tenant submetering requirements as required by Local Law 88 by May 1, 2025.

If these criteria are met, a building could qualify for good faith exemptions through a mediated resolution with DOB by meeting one of the following six criteria by May 1, 2025:

Submitting a de-carbonization plan. This plan shows net zero carbon emissions by 2050. This option relieves owners of penalties until 2026 but, in exchange, prohibits the use of renewable energy credits in the first compliance period.

The plan must include an energy audit, inventory of equipment, and demonstrate concrete timelines, financing, and expected emissions reductions from planned alterations to reach net zero emissions by 2050.

Submission of approved DOB application for retrofit work. With this option, the owner submits an approved DOB application for work that will result in the building meeting its 2024–2029 emissions limit, along with a timeline for completion and estimated emissions reductions from the work. Or the owner can show that service provider contracts are in place for work that doesn’t require a permit, but it isn’t completed yet.

Evidence of electrical service upgrades. With this option, the building owner provides evidence that electrical service upgrades for electrification are occurring. Owners can show contracts are in place with Con Edison for electric service and panel upgrades that are capable of supporting building-wide electrification.

Submission of building emissions report. With this option, owners demonstrate the building was under its emissions limit in a prior year during the 2024–2029 reporting period. As a result, this option cannot be used in 2024. For example, if 2024 was under limits, but 2025 or later was over limits, 2025 fines can be mitigated.

Critical facility or financial hardship. Having a building that’s classified as a critical facility or having applied for a financial hardship adjustment are the last two options for a good faith exemption. If a building is a critical facility, such as a hospital whose critical services would be significantly impacted by the penalties, then a good faith exemption applies. Another option is if the owner can show that it had applied for or been granted a financial hardship adjustment by the DOB pursuant to Section 28-320.7 of the Administrative Code.

New Credit for Beneficial Electrification

The rules offer a new “beneficial electrification” credit for properties that install and use energy-efficient electric-based heating, cooling, and domestic hot water systems to displace the use of fossil fuel sources and/or less efficient electric-based heating systems.

The rules allow buildings that electrify these systems to apply a negative emissions coefficient to the electricity consumed by qualifying equipment that’s installed before 2030, with an even more favorable coefficient for systems installed before 2027. The credit can be applied to mitigate penalties up until 2036, and buildings that install equipment earlier will have greater flexibility to apply the credit. The rules specify criteria to calculate annual electricity use by the system based on either a metered or deemed electric use approach.

Local Law 88 Lighting and Submetering Guidance

The adopted rules include guidance for meeting Local Law 88 of 2009’s lighting upgrades and submetering requirements. Local Law 88 requires buildings over 25,000 square feet to upgrade lighting systems and install electrical submeters in “tenant spaces” by Jan. 1, 2025, to promote energy efficiency in buildings.

According to the building code, a covered tenant space doesn’t include the units in apartment or R-2 buildings. As a result, Local Law 88 requires upgrades in line with the NYC Energy Conservation Code by 2025 in all commercial buildings greater of 25,000 square feet and in the common areas of residential buildings greater than 25,000 square feet. It also requires that submeters be installed in commercial tenant spaces larger than 5,000 square feet in the same time frame.

DOB’s rules address how to report on compliance for lighting upgrades and submeter installation in tenant spaces, and penalties for failing to report the same. Reporting will be due no later than May 1, 2025, in a form and manner determined by DOB with a professional attestation regarding inspection of the lighting system and implementation of upgrades for compliance.

Also, penalties for failure to submit a report will be $1,500, issued annually until filed. And penalties for failure to install submeters in covered tenant spaces in commercial buildings will be $500 for each space, assessed annually until all submeters are installed.