Understanding Local Law 97’s real-world consequences
In 2019, New York City enacted Local Law 97 — legislation intended to curb greenhouse gas emissions associated with the city’s buildings. While the motivation was to lessen the city’s environmental impact, the law could easily have the opposite effect.
Typically referred to by its number, Local Law 97 might sound mundane or arcane. But it’s ambitious, and essential for New Yorkers to understand — especially at a time when Zohran Mamdani, Andrew Cuomo, Eric Adams and others running for mayor are debating how to make housing in this city more affordable.
The law requires most buildings over 25,000 square feet to meet new greenhouse gas emissions limits. Even with exceptions for a few industrial facilities, apartment buildings that meet specific rent-regulated unit thresholds, some city-owned buildings and religious places of worship, this law is expected to apply to approximately 50,000 buildings (out of about a million buildings citywide). These limits become stricter over time, with the goal of slashing such emissions by 40% by 2030 and to reach net zero by 2050.
Specifically, the law requires each of the 50,000 buildings to collect detailed data on their total energy consumption by source (for example, electric, gas, oil, solar, etc.). This can be complicated by the fact that different forms of energy may be consumed for different purposes, such as heating, air conditioning, running computers, preparing food or operating factory equipment. Each source of energy is then multiplied by an “emissions factor” that is based on various factors, the most important being the specific type of energy it is. These are then summed to get an estimate of the total emissions for the building.
The data needs to be certified by a licensed professional and reported to the city annually starting this year. If the report indicates greater emissions than are allowed for the size and type of building for the year in question, significant fines are imposed. These fines can be mitigated in several ways, such as by purchasing beneficial electrification credits, renewable energy credits and the like.
The law has been embraced by a wide array of elected officials, including the Democratic nominee for mayor, Zohran Mamdani. The New York City Buildings Department, under Mayor Adams — who personally lobbied against some of the law’s more onerous provisions — called the final bill “one of the most ambitious plans for reducing emissions in the nation.” But will it?
The economic impact
In order to assess the law’s effects, we have to first look at its costs. The cost of retrofitting the 50,000 largest buildings in New York City to meet the law’s increasingly onerous standards is difficult to estimate, especially since the law’s requirements can, in theory, be met by conserving energy. I wrote “in theory” because approximately two-thirds of the city’s residential real estate and an even larger share of its commercial real estate is rented to tenants who are given no incentive to conserve their energy use under this law. Therefore, most building owners will face costs directly related to how much energy their tenants consume, something over which they have little control. This could lead to the anomalous situation where the owner of a more energy-efficient building is required to spend more money and do more work retrofitting their building than the owner of a less energy-efficient building simply because the former rented to a tenant who, for whatever reason, uses more energy.
The city estimates that roughly 15,000 buildings would need to invest between $12 billion and $15 billion just to meet the 2030 emissions cap. Assuming owners implement the easy and cheap fixes first to reduce emissions, achieving the required 100% reduction by 2050 is certain to cost a multiple of that.
These tens of billions of dollars in construction costs are not the only expenses associated with this law. For example, they do not include the cost of complying with the complex reporting and professional certification requirements, which can be particularly significant for smaller buildings and landlords. They do not include any of the fees that will be charged by the City for filing the reports, for failing to meet the timelines imposed or for other types of noncompliance with the law’s many requirements. They do not include the cost of trying to reconcile the inevitable situations where work is performed and the law’s complex algorithm does not yield the expected emissions reductions. Finally, they do not include the cost associated with the complicated system of credits that can be purchased to delay, but not ultimately avoid construction work.
Who will pay for all of this? It depends.
If the building is a market-rate rental, either commercial or residential, the landlord gets the bill. But given the strong demand for space in the city and the lack of new construction, much — if not most — of the cost will be passed on to tenants.
If the building is a rent-regulated rental — rent-regulated buildings have a different schedule under the law, but they’re still required to comply with the mandates — again the landlord gets the bill. Much of that cost will be passed along to tenants, but this will only happen to the extent possible under rent-regulation law; if rent hikes in a given year are limited to 2%, or possibly held flat in a Mamdani administration, owners, many of whom say they’re already struggling to keep up with rising maintenance costs, will wind up eating the increased fees.
Finally, and most obviously, if the building is owner-occupied, the owner pays.
What is the effect of all of this? Higher expenses for New Yorkers, whether they live, work or own property here. The irony should not be lost on us that this law is bearing down on New York at the precise time when mayoral campaigns are promising a laser focus on making the city more affordable.
These are not the only costs associated with Local Law 97. According to the New York City Comptroller's office, there were 26,310 vacant rent-regulated apartments in New York City as of 2023. Landlords explain that they have no choice but to keep these apartments vacant because the cost of bringing them into compliance with current building codes is too high given the amount of rent that can legally be charged. The upgrades required by Local Law 97 may therefore result in even more of our housing stock being pulled from the market, putting more upward pressure on rents. At worst, this could deprive some buildings of a path to profitability, leaving them to consequently be abandoned. Furthermore, any loss of existing units will not be made up for with new units since the law increases construction costs, discouraging new development.
The environmental costs
This is where we finally get to the environmental impact — and the perverse possibility that a sweeping local statute intended to reduce emissions may well wind up having the opposite effect. People and businesses locate in New York City for a variety of reasons. To the extent that it becomes more expensive, some of those people and businesses will locate elsewhere. And when they locate elsewhere, they’re leaving the densest and most mass transit-rich city in America for places where people live on much more land and overwhelmingly get around by private automobiles, invariably causing much higher greenhouse gas emissions.
How much more greenhouse gas emissions this will generate is difficult to estimate precisely, but consider these facts. Free standing suburban homes are estimated to use 25% more energy than urban apartments. Vehicle trips consume much more energy, whether gas or electric, than mass transit trips, five million of which are taken each day by people in New York City. New York City’s density also allows for much shorter trips, many of which can be accomplished by walking or biking with no environmental impact. Finally, the Trump administration is proposing to loosen, if not obliterate, federal greenhouse gas emission limits, making the rest of America even less eco-friendly than New York City.
Every person and business lost to a suburb or less dense metro means more harm to the environment, which does not respect municipal borders. Therefore, forcing tenants and landlords to spend tens of billions of dollars to make their already low carbon footprint even lower is far from the optimal way to help the environment. A far better way would be avoiding making New York even more costly, thereby encouraging the rest of America to abandon their less eco-friendly lifestyles and move to what is already the most environmentally friendly place in America.