The New York City Council recently enacted a sweeping package of bills aimed at constricting carbon emissions from buildings across the City in an effort to combat climate change. Known as the “Climate Mobilization Act,” the package sets lofty goals of reducing greenhouse gas emissions from certain buildings by 40% by 2030, and by 80% by 2050. The measure is similar to recent efforts by other cities to reduce carbon emissions. For example, numerous U.S. cities, including Boston, Indianapolis, Seattle, and Washington, DC, aim to be carbon neutral by 2050. However, while these efforts focus on the use of renewable energy sources, New York aims to curb emissions through requiring the use of green building products and materials in certain buildings. As such, impacts of the Climate Mobilization Act will be realized in a different manner than other efforts.
In seeking to achieve its goals, the Climate Mobilization Act requires buildings with more than 25,000 square feet to, among other actions, be retrofitted by installing energy efficient windows and insulation. To meet the 2030 goal, the Act mandates landlords to make such installations by 2024. If individuals wish to petition for an adjustment to a compliance measure, they must do so by 2021.
To mitigate costs associated with these requirements, the City is also implementing Property Assessed Clean Energy (“PACE”) financing. In some instances, PACE may finance up to 100% of the cost for necessary building improvements.
In light of its requirements and goals, the Climate Mobilization Act will have significant implications on New York’s real estate industry. For example, the increased costs of using green building materials may affect a lender’s determination of whether a borrower will be able to service a loan. Similarly, the fact that PACE payments will prime mortgage debt may also cause lenders to second guess a borrower’s ability to service a loan.
The Climate Mobilization Act will have substantial impacts on the New York City real estate market, and given New York’s trend-setting nature, it is likely that other major cities will follow suit with similar measures.