Letter Grades for Buildings' Energy Efficiency Are Coming

The physical condition of a building and the value of the apartments inside are about to come together in an unlikely place: the alphabet. That’s because, beginning on Oct. 1, 2020, New York City buildings larger than 25,000 square feet, including co-ops and condos, will receive a letter grade rating their energy efficiency. Similar to the sanitation letter grades in restaurant windows that guide the decisions of many diners, the energy-efficiency letter grades will be posted in lobbies and are expected to guide the decisions of many apartment buyers. Well-run buildings that use less energy will be more desirable, the thinking goes, and therefore more valuable. Inefficient buildings, less so.

When the coronavirus pandemic led to the state-mandated shutdown of nonessential work in mid-March, the city’s Department of Buildings (DOB) gave co-op and condo boards and other building owners a reprieve. Normally, they’re required to submit their annual energy and water consumption levels by May 1 of the following year to the U.S. Environmental Protection Agency’s (EPA) online benchmarking tool, Energy Star Portfolio Manager. But in light of the shutdown, the DOB extended that filing deadline to Aug. 1, 2020. The DOB website issued a terse reminder in July: “Applicants who do not submit a fully compliant report by Aug. 1, 2020, will be subject to violations for each quarter they have been noncompliant.”

When the letter grades go up on building walls, they’ll include a numerical grade that reflects the building’s Energy Star rating. The EPA computes these numbers by using a nationwide database to compare the energy used by buildings that have comparable size, usage, occupancy, hours of operation, location and other factors. An A grade will be awarded to buildings with an Energy Star score of 85 or above, meaning they’re as energy-efficient as at least 85 percent of comparable buildings nationwide. A grade of B will be awarded to buildings that score 70 to 84; a C for 55 to 69; a D for less than 55; and an F for buildings that are required to submit benchmarking information but fail to do so. There will also be an N grade for buildings that are exempted from Local Law 95 or are not covered by the Energy Star program.

How do buildings get their report cards and what are they supposed to do with them? The DOB explains: “The grade and the score will be made available by the department in the form of a Building Energy Efficiency Rating Label on Oct. 1 of each year. An owner must access the Building Energy Efficiency Rating Label through the DOB NOW Public Portal, download, print and display it annually by Oct. 30 in a conspicuous location near each public entrance to the building until Oct. 1 of the following year.” Failure to display the letter grade will result in a violation from the DOB and an annual fine of $1,250.

The letter-grade system has its critics. They point out that it’s unfair for the top 10% of buildings to get an A grade while the next 40% will get a B. And the Energy Star grades don’t take building density into account, while critics contend that more densely occupied buildings are more energy-efficient than sparsely occupied ones and they should be rewarded accordingly. These objections aside, most co-op and condo boards will soon be posting their buildings’ very first letter grades, there for all residents and apartment buyers to see.