More People Should Be Paying Attention To Local Law 97

I really think more people should be paying attention to NYC's Local Law 97.

New York City's Local Law 97, or Climate Mobilization Act, is a package of legislation aimed at addressing climate change in the city. LL97 is basically a carbon tax, which sets emission limits for buildings over 25,000 square feet and fines those that do not comply.

You might be wondering: "Why are buildings front and center of climate legislation?" Buildings are responsible for approximately 71% of NYC's CO2 emissions. If you want to address a problem, go after the biggest culprit. And for New York City—or pretty much any city, really—that's the real estate industry. LL97 goes into effect in 2024, with steeper fines and stricter emissions standards in subsequent years.

So what can building owners and operators do to prepare?

1. Conduct an energy audit
2. Upgrade building systems
3. Generate and store renewable energy on site
4. Improve building envelope
5. Reduce building energy waste

Complying with Local Law 97 will require a significant investment in retrofitting costs, but the alternative of doing nothing is even more expensive. Three forces completely outside of the real estate industry's control are forcing owners to decarbonize:

1. Capital markets: Higher cost of capital for energy-inefficient assets
2. Private markets: Tenants with ambitious net zero pledges (Amazon, Netflix, Google, etc.) want to lease from sustainable real estate to decarbonize their entire supply chain across Scope 1, 2, and 3 emissions
3. Local regulation: Real estate is regulated locally, and Local Law 97 is a perfect example. Mayors are some of the most powerful people in the country when it comes to decarbonization

Buildings that do comply, however, will benefit from the incentives available under Local Law 97:

• Tax abatements based on the amount of energy saved and can be worth up to 5% of the assessed value of the property
• Renewable energy certificates, which can be sold to other buildings
• Energy efficiency certificates, which can be sold to other buildings
• Carbon offsets, which can be used to offset future fines or be sold to other buildings that need to offset excess emissions

I'll be writing a lot more about this topic—local regulation on the real estate industry is unbelievably important in reaching net zero. And this is squarely what we're focused on at Fifth Wall, connecting our portfolio companies decarbonizing the built world with our 110+ strategic LPs in real estate who want access to their technology.