Advertiser Disclosure

advertising disclaimer
Skip to main content
renewable energy

NYC Is Enforcing Energy-Efficiency Grades -- and Most Buildings Are Failing

Jan 27, 2021 by Maurie Backman
FREE - Guide To Real Estate Investing

Take the first step towards building real wealth by signing up for our comprehensive guide to real estate investing.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

Many property managers and owners don't put a lot of thought into how energy-efficient their buildings are -- until, of course, they start getting graded on it. Such is the case in New York City today.

Beginning in October 2020, the city imposed a rule stating that buildings 25,000 square feet or larger are required to submit to an energy assessment and post their letter grades so passersby can see how energy-efficient they are. Buildings are graded from A to F, which is based on the U.S. Energy Star Score. Each building owner must provide energy and water consumption data, as well as details on how the building is used and occupied. The buildings are then rated accordingly.

So far, things aren't going well.

About half of the roughly 40,000 buildings that had to post energy-efficiency grades received a D or lower (F scores were only given to buildings that didn't comply). And while some well-known New York City landmarks are scoring A's, others are performing quite poorly.

Will building owners address their energy-efficiency shortcomings?

Right now, there's no fine associated with scoring poorly on energy efficiency. But that's going to change in 2024, when buildings will start to be assessed fees that could range into the hundreds of thousands for those that fail or perform poorly.

All of this is part of New York City's attempt to reduce emissions by at least 80% by 2050. The city's buildings are responsible for almost 70% of the city’s carbon emissions due to their extensive heating, cooling, and lighting needs.

Of course, holding buildings to a certain standard isn't a totally new concept. Just as restaurants are routinely inspected for cleanliness and given grades announcing their results, so too are buildings now being held more accountable. But whereas restaurants can request follow-up inspections from the Health Department to address sanitary issues, buildings will only be given a chance to lock in a grade once a year.

As such, the stakes are high -- not just because of the upcoming fines, but because of the way poor energy performance could hurt a building's reputation.

If a building is flagged as being notably not energy-friendly, it could be a turn-off for tenants -- both residential and commercial. As such, buildings could lose revenue by virtue of having outdated systems.

But also, outdated heating and cooling systems cost buildings money, so it's in property owners' best interest to start investing in upgrades. A good place to start in this regard is an energy audit, where a professional comes in, inspects all systems, and makes recommendations that can be implemented to reduce energy usage.

In fact, it would be wise for New York City building owners to start that process now, well before fines start coming into play. That way, if there are extensive issues that need to be addressed, they can get started sooner rather than later.

The Millionacres bottom line

It'll be interesting to see how buildings evolve in light of this new energy-efficiency grading system, and whether other cities opt to follow suit in effectively forcing building owners to step up their game. But either way, instituting these rules is good for cities, and it's good for the planet, so property owners in other metro areas should gear up to be graded as well.

Unfair Advantages: How Real Estate Became a Billionaire Factory

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.

But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.

The Motley Fool has a disclosure policy.