New York City’s Local Law 97, passed in 2019, aims to drastically reduce greenhouse gas emissions from large buildings. By 2024, condominium and cooperative buildings over 25,000 square feet must meet strict emissions limits or face heavy fines. While the law’s environmental goals are laudable, the legislation poses unique financing challenges for condo and co-op boards as they undertake retrofits to improve energy efficiency.
Assessing Costs and Financing Options
Performing an Energy Audit
The first step for any board is thoroughly auditing their building’s energy systems to identify inefficiencies. A professional engineering study can cost $10,000-$50,000 depending on building size and complexity. While expensive, the audit provides a critical roadmap for planning upgrades and identifying potential savings to help secure financing.
Understanding the Costs of Retrofits
Based on audit findings, boards must estimate costs to upgrade lighting, heating, ventilation, insulation and windows to improve efficiency. Large buildings may require heating and cooling equipment replacement costing millions. Accurately assessing upgrade costs is key for budgeting.
Securing Financing
Boards have several options to fund upgrades, each with pros and cons:
– Special assessments – spreading costs across all unit owners avoids interest payments but may overburden some financially.
– Loans – borrowing at favorable rates preserves owner capital but adds interest costs. Securing lender approval may require financial history review.
– Government incentives – grants and rebates can significantly offset costs but often require complex applications with no guarantee of reward.
– Energy services agreements – third party installs upgrades in exchange for sharing cost savings. This avoids upfront costs but reduces potential savings.
Unique Co-op/Condo Challenges
Navigating Complicated Decision Making
Unlike other buildings, co-ops and condos require board or owner/shareholder approval for major financial decisions, requiring extensive consultation and consensus. Streamlined processes are needed to meet tight compliance deadlines. Using electronic voting applications like www.ballotmanagment.com has helped boards meet their voting requirements which are usually a supermajority of owners in condos to approve borrowing above a certain threshold.
Managing Cash Flow Limitations
Many co-ops/condos operate on tight budgets with limited cash reserves. Large special assessments or loans may be unfeasible, especially amid broader economic uncertainty. Access to flexible government backed financing is crucial.
Upgrading Older Building Systems
The older systems found in many co-op/condo buildings often require more extensive upgrades to meet emissions targets, exacerbating costs. Access to qualified contractors may also be limited for outdated technology.
Call for Supportive Policy
While the environmental goals of Local Law 97 are admirable, many co-op and condo boards will struggle to finance the major capital projects required within the law’s tight timeline. To enable success, lawmakers must provide enhanced financing assistance, incentives and flexible compliance options tailored to the unique needs of residential cooperatives and condominiums. The road ahead will not be easy, but ensuring these buildings reduce emissions is critical for the climate future of New York City.
