New laws in New York State and New York City require buildings to increase their energy efficiency and significantly reduce their greenhouse gas emissions. “Sustainable Affordable Housing: Strategies for Financing an Inclusive Energy Transition,” recommends policy and business changes to increase private financing available for affordable housing to upgrade heating and cooling systems and transition to electrification at home. building scale. The paper’s proposals include property tax cuts for electrified buildings and longer amortization for loans used to decarbonize buildings.
Existing buildings directly account for 33% of statewide greenhouse gas emissions and approximately 60% in cities across the state.
According to the white paper, to comply with New York laws, about 6.8 million homes in the state will need to switch to electric heat or low-carbon fuels. Of the total number of households that will need to be electrified, an estimated one million are low- to middle-income households in buildings of five or more units. The majority of these accommodations are in New York City and are subject to Local Law 97.
The New York State Climate Action Council estimates that annual investments in statewide energy upgrades will increase from approximately $5 billion in 2030 to $30 billion in 2050. Comply New York City Local Law 97, which sets a series of deadlines beginning January 1, 2024, will require costly upgrades. In the event of non-compliance, building owners are exposed to substantial penalties.
The white paper’s authors find that while market-rate properties should be able to fund upgrades through additional debt or rent increases, landlords of affordable housing may find compliance difficult to achieve. finance, given rent restrictions on affordable properties. The white paper argues that identifying pathways to fund affordable housing retrofits is a central issue in meeting New York State and New York City’s climate goals, as nearly half of New York City residents New York State have low to moderate incomes.
Recommendations from the white paper include:
- Provide tax incentives to early adopters of low-emission heating and cooling systems
- Provide tax relief to utility companies to incentivize them to reduce electricity rates for low-carbon buildings
- Simplify and harmonize existing tax incentive programs to help homeowners fund building system retrofits
- Recognize the increased future value of carbon neutral buildings in assessments
- Create mortgage products that address decarbonization
- Impose lower interest rates on loans used to retrofit building systems to meet climate goals
The New York Fed hosted a series of roundtables over the summer, in partnership with the New York State Energy Research and Development Authority and the Community Preservation Corporation. The discussions aimed to help real estate developers and lenders understand climate adaptation risks to their collateral portfolios and identify public and private financing options to decarbonize New York’s affordable housing. The white paper is the result of these discussions. It was developed as part of the New York Fed’s community development efforts, which focus on three areas: health, household financial well-being, and climate risk.
Media Advisory: New York Fed to Release White Paper October 19 on Strategies for Financing a Clean Energy Transition for Affordable Housing in New York