Our industry is engaged in an important dialogue to improve sustainability through transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
New York City’s Local Law 97 (LL97) is about to shake things up for residential real estate. With the first compliance deadline in 2025, landlords, tenants, and investors are all trying to figure out what this means in practical terms.
For those unfamiliar, LL97 caps the amount of carbon emissions a building can generate. Go over the limit, and there’s a hefty fine—USD 268 per metric ton of excess carbon. For large residential buildings, that could mean millions in penalties. This raises a big question: Who’s paying for it?
The cost dilemma: Pay the fine or upgrade?
Building owners have a choice: invest in energy-efficient upgrades or accept the fines as a cost of doing business. Some major landlords with deep pockets are already planning to absorb the penalties, seeing them as more manageable than large-scale retrofits. Others are considering passing these costs down to tenants through higher rents.
That’s where things get tricky. Many renters in New York already struggle with affordability, with the median rent price being nearly double the national median—and still rising.
Legally defined “affordable housing” has a separate compliance pathway under LL97, but what about the thousands of buildings that don’t fall under that category but still house lower-income residents? Will landlords make energy upgrades and hike the rent, pricing people out? Or will they choose to eat the fines and try to keep tenants in place?
Who’s using what? The tenant accountability gap
Even if a building owner wants to distribute the cost fairly among tenants, it’s not always clear who’s responsible for what in terms of carbon emissions. Many NYC apartments don’t have individual metering for gas or heating, meaning tenants can’t see their impact, and have no direct incentive to reduce their energy consumption. If the heat’s free, why not crank it up on a freezing Sunday morning? Meanwhile, the landlord’s left picking up the tab. It’s a messy situation with no easy fix.
For newer buildings, individual metering is becoming the norm. But for older buildings–the ones that tend to have higher emissions–installing new metering systems is expensive and time-consuming. That means landlords looking to reduce emissions may have to take other approaches, such as upgrading insulation, switching to electric heating, replacing outdated systems–or simply finding other ways to incentivize tenants.
Will investors see an opportunity?
The first compliance threshold in 2025 is just the beginning. By 2030, emission limits will tighten, and fines will likely increase. The pressure to retrofit buildings isn’t going away. Landlords who wait too long may find themselves facing skyrocketing costs down the road.
For tenants, the big question is whether landlords will make upgrades that improve living conditions or just pass along penalties. Renters in NYC are already familiar with the balancing act of keeping a roof over their heads while costs climb. LL97 is adding a new variable to the mix.
As we get closer to the reporting deadline, more building owners will have to make tough calls. The market’s response to this law will tell us a lot about where sustainability and affordability meet (or clash) in NYC’s residential sector. One thing is certain: change is coming, and it’s going to be expensive.
If you’re sitting on a portfolio of older buildings, what’s your game plan? Invest in a costly retrofit or cross your fingers that fines stay manageable? Either way, there’s no easy way out.
The long-term outlook
The first compliance threshold in 2025 is just the beginning. By 2030, emission limits will tighten, and fines will likely increase. The pressure to retrofit buildings isn’t going away. Landlords who wait too long may find themselves facing skyrocketing costs down the road.
For tenants, the big question is whether landlords will make upgrades that improve living conditions or just pass along penalties. Renters in NYC are already familiar with the balancing act of keeping a roof over their heads while costs climb. LL97 is adding a new variable to the mix.
As we get closer to the reporting deadline, more building owners will have to make tough calls. The market’s response to this law will tell us a lot about where sustainability and affordability meet (or clash) in NYC’s residential sector. One thing is certain: change is coming, and it’s going to be expensive.
If you’re sitting on a portfolio of older buildings, what’s your game plan? Invest in a costly retrofit or cross your fingers that fines stay manageable? Either way, there’s no easy way out.
This article was written by Maja Christenson, Marketing Manager at EVORA Global. Learn more about EVORA here.