DOB Proposes New Rules for Implementing Local Law 97

Here’s how you may be able to get two more years to comply with the impending climate law.

In 2019, the New York City Council passed the Climate Mobilization Act, a package of laws aimed to reduce greenhouse gas emissions from the city’s large buildings 40 percent by 2030 and 80 percent by 2050. The cornerstone of the legislation is Local Law 97 of 2019 (LL97), which established greenhouse gas emissions limits on these buildings and set compliance deadlines for them, the first occurring in 2024. To achieve these ambitious emissions goals, most properties larger than 25,000 square feet must limit emissions based on the building type and size or pay hefty fines.

With the 2024 compliance period around the corner, the DOB recently issued a new set of proposed rules on the implementation of LL97. According to the city, given the disruptions from the COVID-19 pandemic and the scope of work required in some buildings, some flexibility is warranted for buildings that won’t meet the 2024–2029 emissions limits. Under the proposed rules, owners may be able to get two more years to comply with the impending climate law, but only if they can demonstrate concrete steps towards decarbonization that will result in them achieving their 2024 targets by 2027 and their 2030 targets on time by 2030.

These proposed rules will be open to public comment during an online hearing on Oct. 24, 2023. According to DOB, it will publish additional rules related to LL97, as needed, in the future. We’ll give you an overview of the compliance timelines established by LL97, highlight the key takeaways from DOB’s latest set of proposed rules, and discuss financing and funding actions the city will undertake to help meet the goals of LL97.

Compliance Phases through 2050

LL97 places emissions limits on individual buildings that are measured in carbon emissions per square foot. Each building’s carbon limit depends on its size, property type, and compliance year. Starting in 2024, the law assigns emissions limits for 60 different property types from ENERGY STAR’s Portfolio Manager that reflect the wide variation in energy use among buildings.

The carbon caps become more stringent over a series of compliance periods through 2049 with the goal that all buildings will have met zero emissions requirements by 2050. To meet a building’s carbon caps, an owner can lower carbon directly through energy efficiency and switching to lower-carbon fuels. Owners can also use credits from eligible renewable energy generation (RECs) or greenhouse gas reduction projects (GHG offsets), or install solar or battery storage onsite to help meet the law’s targets.

The compliance periods are 2024–29, 2030–34, 2035–39, 2040-49, and 2050 onwards.

January 2024. The compliance period begins and covered buildings must limit annual emissions to their cap for calendar years 2024 to 2029.

December 2024. For buildings in which more than 35 percent of units are rent regulated, LL97 has delayed or altered requirements. These buildings fall under the law’s definition for “Article 321 buildings.” Under Article 321, these buildings need to meet one of the following conditions by 2024 to be in compliance:

• The annual building emissions did not exceed the carbon limits for 2030–2034; or
• If your building’s emissions are too high to meet 2030 limits, you can implement the applicable prescriptive energy conservation measures (ECMs) by Dec. 31, 2024.

Here’s the list of prescriptive ECMs. All applicable measures from the following list of ECMs must be implemented. You can omit a measure only if it’s not applicable to your building. For example, if your building doesn’t have steam traps, you can’t replace or repair them.

• 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;
• 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;
• Weatherizing and air sealing where appropriate, including windows and ductwork, with focus on whole-building insulation;
• Installing radiant barriers behind 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;
• Upgrading lighting to comply with the standards for new systems set forth in Section 805 of the NYC Energy Conservation Code and/or applicable standards referenced in the energy code on or before Dec, 31, 2024; and
• Installing timers on exhaust fans.

January 2026. If your building has at least one rent-regulated unit but not more than 35 percent, you’re allowed to delay compliance with LL97’s emissions limits until 2026. However, for all years following, your building will be subject to the same thresholds as all other buildings covered by LL97. In other words, buildings with at least one regulated unit and not more than 35 percent regulated units must begin complying with LL97’s carbon caps starting January 2026.

January 2030. Stricter emissions limits are placed on covered buildings for calendar years 2030–2034. And after 2030, in calculating carbon emissions, the carbon associated with a building’s electricity use will be lowered to reflect the project timeline for a lower-carbon grid powered by renewable energy in New York State.

January 2035. A new compliance period begins with stricter emission limits. Once again, the amount of carbon a building must account for from its electricity use will be adjusted again to account for the electrical grid using less carbon and more renewable energy over time. Also, some types of buildings such as Mitchell-Lama housing with no units that participated in a federal housing program or buildings that have no rent-regulated units but have income-restricted units through certain loans, grants, property tax benefits, or property disposition programs, have delayed compliance requirements with the law’s carbon caps that begin in 2035.

January 2040. Another compliance phase with stricter carbon emissions limits begins. This compliance phase lasts until 2049.

January 2050. All covered buildings must demonstrate compliance with an emissions factor of 0.00 beginning in 2050.

DOB Proposed Rules

DOB’s latest proposed rules are the agency’s second set of rules regarding implementation of LL97. These rules outline enforcement, including financial penalties, for building owners neglecting their legal responsibilities. And like the agency’s first rules package, which gave owners guidance on how to calculate their specific emissions limits and was adopted in December 2022, it was informed by the collaborative work of the city’s Local Law 97 Advisory Board and Climate Working Groups. Here are the key takeaways from the latest proposed rules.

Good faith standard for 2024–2029 compliance period. DOB has defined a set of criteria to determine whether an owner has made a good faith effort to comply with the law’s 2024 carbon limits. Applicable buildings would qualify for mitigated penalties. However, before being considered for good faith exemptions, buildings first have to demonstrate full compliance with other building energy laws, including benchmarking (Local Law 84); audits and retro-commissioning (Local Law 87); and lighting upgrades and submetering requirements (Local Law 88).

If these criteria are met, a building could qualify for good faith exemptions by meeting one of the following six criteria:

• Permits have been approved by DOB for retrofit work sufficient to meet the property’s 2024 limit, but it isn’t completed yet.
• Contracts are in place with Con Edison for electric service and panel upgrades that are capable of supporting building-wide electrification.
• Submit a plan for net zero carbon emissions by 2050. This option gives owners two more years until 2026 before fines apply. However, in exchange, owners can’t purchase renewable energy generation credits as part of reaching their emissions reduction targets. The plans must show concrete timelines, financing, and expected emissions reductions from planned alterations, and work for the 2024 emissions limit must be finished within 24 months. By 2028, owners must have work applications approved by DOB for work that reduces emissions in line with their 2030 carbon limit. If the above criteria aren’t met, penalties can be issued retroactively.
• Demonstrate the building was under its emissions limit in a prior year. This option can’t be used in 2024.
• The building is a critical facility, such as a hospital whose critical services would be significantly impacted by the penalties.
• Have applied for an adjustment based upon financial hardship. The owner must show that they’ve applied for or been granted an adjustment pursuant to Section 28-320.7 of the Administrative Code.

New credit for early electrification work. The proposed rules establish a new credit for early electrification work in a building that owners can apply towards compliance with their emissions reduction targets. These credits can be earned when installing and using electric heating, cooling, and domestic hot water equipment that meet specific minimum efficiency requirements. Buildings that electrify these systems can 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.

LL88 lighting and submetering requirements guidance. Local Law 88 requires buildings over 25,000 square feet to upgrade lighting in line with the NYC Energy Conservation Code by 2025 in all commercial buildings and in the common areas of residential buildings. It also requires that submeters be installed in commercial tenant spaces larger than 5,000 square feet by that same time. The proposed rule includes reporting details and penalties for both sets of requirements, and a hearing for this rule will take place on Oct. 26, separate from the LL97 proposed rules hearing.

Financing and Funding Actions

In conjunction with DOB’s proposed rules, Mayor Adams released a plan called “Getting 97 Done,” which aims to mobilize buildings covered by LL97 and provide additional implementation support. According to the plan, the city will work with the state, utilities, the federal government, and other stakeholders to fill gaps in funding needs in the following ways:

Partner with New York State. The city is working to craft responses to the NYS Public Service Commission’s order issued on July 20, 2023, directing energy efficiency and building electrification proposals. According to the order, Con Edison, NYS Energy Research and Development Authority (NYSERDA), and National Grid must develop proposals for energy efficiency programs out of $5 billion in statewide funding for the years 2026–2030. The July order puts a focus on disadvantaged communities and low-income populations with a goal of 40 percent of program benefits accruing therein. The city is advocating that Con Edison and NYSERDA programs be designed to prioritize assisting buildings that are far out of compliance with their LL97 targets.

Implement the J-51 tax abatement. The NYS Assembly and Senate recently passed a renewed J-51 tax abatement. If signed by the governor and adopted with City Council legislation, it could be used to offer eligible multifamily buildings property tax breaks to cover a portion of their LL97 compliance costs. If the governor signs the legislation, the Adams administration would work with the City Council to introduce legislation to enact the J-51 tax abatement, after which HPD would update the Certified Reasonable Cost (CRC) schedule to ensure that retrofits for LL97 compliance are eligible.

Help leverage Inflation Reduction Act (IRA) funding. The IRA includes tax credits that could account for roughly $625 million in value for buildings doing LL97 compliance work.

Collaborate with local nonprofit lenders. The city would like to utilize a portion of $20 billion in funding available from the federal Greenhouse Gas Reduction Fund (GGRF) to offer low-cost financing and credit enhancement for multifamily buildings, especially in state-defined disadvantaged communities.

Promote PACE financing. This is a mechanism that allows owners to finance the up-front costs of retrofits to their property and repay them through their property tax bill.

Work with NYSERDA and its NY Green Bank division. The city commits to encouraging private-sector companies to submit proposals to the U.S. Department of Energy’s Loan Programs Office’s (LPO) Title 1703 Clean Energy Financing Program, and support those proposals by offering State Energy Financing Institutions support under NYSERDA’s new State Energy Financing Fund. The Inflation Reduction Act provided an additional $40 billion of funding for the new State Energy Financing Institution (SEFI) program. SEFIs can provide financing support or credit enhancements for eligible clean energy projects.