What Will NYC’s Gas Ban Mean for Real Estate?

By Published On: March 10, 20225.5 min read

Gas ovens are practically a proverb in New York City — at least in traditional walk-ups that haven’t been renovated in years.

That pattern could change, however. New York City’s local officials recently passed a bill that bans natural gas use in new buildings starting 2024. The law applies in 2024 to buildings that are under seven stories tall. Buildings that are seven stories or taller have to comply by 2027.

The only buildings that will be exempt from this new law are laundromats, hospitals, crematoriums, commercial kitchens and manufacturing properties. Buildings that illegally burn gas will be fined between $400 and $4,000.

New York City is the biggest city to significantly restrict natural gas. Other areas include California cities such as Berkeley, which banned gas in 2019, and San Jose and San Francisco, both of which have made similar commitments to reduce emissions.

The name of this law is “Intro. 2317,” and its part of New York’s City Council move to ban the use of gas in new buildings. The goal is to reduce fossil fuels.

But how exactly will this change how new buildings are being built? As New York City’s former mayor Bill de Blasio said at the press conference, “New York City is proof that it’s possible to end the era of fossil fuels, invest in a sustainable future, protect public health, and create good paying jobs in the process.”

Granted, the new law will restrict fossil fuel usage in newly constructed residential and commercial buildings. Strict emission standards will be phased in starting in 2023. It’s part of the city’s commitment to 100% clean electricity. But to the real estate community?

The Real Estate Board of New York (REBNY) said in a statement that new sources of renewable power (like offshore wind) wouldn’t come into effect for years. They expressed their concern about cost-efficient ways to implement a gas ban, too.

“While we appreciate that the efficient electrification of buildings is an important component of realizing these goals, these policies must be implemented in a way that ensures that New Yorkers have reliable, affordable, carbon-free electricity to heat, cool and power their homes and businesses,” REBNY wrote.

According to a study by clean energy think tank RMI, this bill would cut about 2.1 million tons of carbon emissions by 2040, equivalent to the annual emissions of 450,000 cars.

Russell Unger, who co-leads the Building Electrification Initiative at RMI, said there’s going to be a lot of contractors doing installs in buildings with all-electric equipment.

“People don’t care what powers their hot water heater, they don’t care what powers their heating system,” Unger told Tri States Public Radio. “But for some reason, they care about what’s going on in their stove. And so that’s why when you think about gas, the kind of classic image is that burner on the stove. And that’s not an accident. That is 50-plus years of very active investment into marketing by the gas industry.”

Mayor Bill de Blasio signs Intro. 2317-A.

Mayor Bill de Blasio signed Intro. 2317-A, a mandate phasing out the combustion of fossil fuels in new buildings and accelerating the construction of all-electric buildings. City Hall. Wednesday, December 22, 2021. | Image provided by Ed Reed/Mayoral Photography Office.

In New York City, 70% of its greenhouse gasses are caused by buildings. The new ban will push developers, landlords and residents to get at least 70% of its electricity from renewable energy sources like solar, water and wind power. The ultimate goal is to achieve a net-zero emissions goal by 2040.

“This is how to fight back against climate change on the local level and guarantee a green city for generations to come,” de Blasio said in a statement.

New York buildings of all sizes must be fully electric by 2027. It also requires the Mayor’s Office of Climate and Sustainability to conduct studies on heat pump technology and electrical grid readiness.

Gas company National Grid, which supplies natural gas to over 2 million residents on Staten Island, Queens and Brooklyn, said it will work to achieve net-zero emissions, but they need the technology for these upgrades.

According to National Grid’s Vice President of Corporate Affairs, Bryan Grimaldi, “the proposed legislation takes viable options to decarbonize off the table at a time when we need more paths to Net Zero, and not fewer.”

Meanwhile, the company’s spokesperson Karen Young said that “National Grid shares New York’s goal for economy-wide decarbonization,” adding that: “We recently announced the progress we’re making with our own decarbonization plan to transform our networks to deliver smarter, cleaner and more resilient affordable energy solutions.”

Another gas company, Consolidated Edison (more commonly known as Con Edison), which delivers both electricity and gas across the city, called the gas ban “a sensible and necessary step.”

But how exactly do buildings scale up and substitute natural gas? Buildings might end up getting their heat from hydrogen or low-carbon fuels like biomethane.

New York City has already led in reducing carbon emissions with the city’s buildings. There was the Climate Mobilization Act, an effort that began in 2019 and aims to reduce greenhouse gas emissions in buildings. Another piece of legislation is Local Law 97, which places caps on greenhouse gas emissions from existing large buildings.

The new law will accelerate a green transition and help achieve the city’s goal of carbon neutrality by 2050. A gas restriction could improve the health of city dwellers by restricting the installation of fossil fuel appliances, which are a primary source of indoor air pollution such as carbon monoxide and formaldehyde.

“New York City’s new law will deliver all-electric homes and buildings that no longer burn gas and oil for heating and cooking, eliminating ambient and indoor air pollution from combustion,” said Samantha Wilt, a Senior Policy analyst with the Natural Resources Defense Council. “It will also significantly reduce and eventually eliminate emissions that contribute to climate change as the electrical grid fully transitions to renewable energy supplied by wind and solar. These emission limits and the resulting new clean, electrified buildings will help pave the way for transforming all our homes and buildings into healthier, climate friendly places to live, work, and learn in the coming decades.”

According to Unger, the changeover of equipment in existing buildings will take time. “But this sets the table for it,” he said. “We’re doing it in a place where it is easiest to do it, which is the new buildings. We’re building a market by having the HVAC contractors, the designers, the distributors kind of poised and ready for this expansion. So it’s the place to start.”

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