Is it any surprise that New York City real estate is the most coveted? The Big Apple is considered the commercial center of the world, and as Susan Paige states in her guide on real estate investing it is all about location. In order to be a good real estate investor though, you need to know the landscape, and for investors looking at NYC you need to be aware of the latest regulations. The NYC Council recently passed a nine-package bill called the Climate Mobilization Act that will affect the real estate market and it could be one of the most disruptive in history.
In a nutshell, it’s a long-term plan for the city’s 50,000 largest buildings to reduce their collective carbon footprint. Commercial Observer shares the vital details of the nine-bill act. One of the act’s main premises is a 2016 report from the Mayor’s Office of Sustainability, explaining how although the 50,000 largest buildings in NYC only account for 5% of its properties, they’re responsible for more than half the entire city’s energy consumption.
In an effort to mitigate this, commercial and residential buildings over 25,000 square feet must now meet new environmental requirements by 2024. Landlords must reduce the carbon emissions of their buildings by at least 40% by 2030, and 80% by 2050. Failing to adapt to the new environmental requirements by 2024 comes with a hefty $2.4 million annual fine. Here’s the rub: big-time real estate owners and developers have voiced opposition to the act. According to Real Estate Board of New York (REBNY) president John Banks, the act does not fully consider the repercussions of its requirements. Although REBNY will comply with the act, Banks had this to say: “The approach taken today will have a negative impact on our ability to attract and retain a broad range of industries, including technology, media, finance, and life sciences, that provide opportunity and continued economic growth that is so important for our city.”
Many other experts have voiced concerns over how the new environmental requirements will impact the city itself. Forbes got in touch with some of these experts to get their perspective on the matter. For instance, Energy Watch LLC chief operating officer Diana Sweeney said that NYC’s electricity grid might not be ready for the coming changes. Sweeney notes that one of the ways to comply with the new requirements is by switching to electric-powered heating systems. And the 50,000 largest buildings adopting such systems could cause a sudden spike in electricity costs for NYC residents. Compass broker Martin Eiden provides a succinct summation of the act’s effects: “good for the city and planet long term, bad for individual unit owners short term.” This is something to consider if you are thinking of buying property in New York.
There is some good news for developers. Even though the coming changes will entail a thorough overhauling of infrastructure, they will be considered alterations and not new developments which incur more expensive fees. Yoreevo explains that the NYC Department of Buildings will only consider a structure as a new development if alterations increase the floor area by more than 110%. The site also notes how a new development will force the owner to comply with current building codes, while alterations simply get implemented. It’s a small victory for developers. But if you consider the fact that the green, new, and mandatory alterations will cost the city billions, every penny saved counts.
Furthermore,The Real Deal explains that if owners are unable to meet the energy cut targets, the legislation actually provides alternate ways to comply with the requirements. This includes purchasing carbon credits, or renewable energy from the grid. New York as a location is changing and investors need to be aware of what’s happening in the city, to be able to make good investment choices.