New Carbon Offset Program Aims to Electrify Low-Income Housing in NYC

Under new rules from the Department of Buildings (DOB), carbon offset certificates — available to help buildings comply with Local Law 97 — are going to have the circular benefit of generating funds to electrify low-income buildings, including some co-ops. The rules give buildings flexibility to lower fines by effectively buying continued fossil fuel use. The city has announced the money generated by the offsets will go into a specific fund, named the GreenHOUSE Fund, to help decarbonize affordable housing, including the city’s cash-strapped low-income co-ops. 

The rules proposed by the DOB allow buildings to lower penalties by offsetting up to 10% of its excess carbon emissions with credit certificates. There’s no financial incentive to buy offsets because they cost the same as the penalties, at $268 per ton of carbon emissions. However, there are reasons why a co-op or condo would be better off purchasing offsets in advance of the May 2025 emissions reporting deadline rather than being in violation of Local Law 97. “It could affect loan covenants, borrowing ability, and the marketability of apartments if you have outstanding violations,” says William D. McCracken, partner at the law firm Moritt Hock & Hamroff.

Buildings of all sizes will be eligible for the decarbonization funds from GreenHOUSE Fund cash pool. This means co-ops and condos of less than 25,000 square feet and exempt from emission caps under Local Law 97 can still take steps to reduce fossil fuel use. “It’s a nice way to tie investment in the city and in affordable housing to make the offsets give back,” McCracken says. 

The fund also goes some way to reassure offset skeptics who argued that allowing buildings to buy their way out of violations might prevent some from doing the hard work of decarbonizing their buildings. “Now it’s not totally selfish to buy offsets since you are pitching into this fund for affordable housing,” McCracken says. In contrast, funds generated by penalties go into the city. “Some building owners would prefer to fund projects to reduce greenhouse gas emissions, even if there are constraints that prevent them from doing that at their own buildings,” says DOB press secretary Andrew Rudansky. “This program would facilitate that,” he says. 

Carbon offsets are also the price a cash-strapped building will have to pay to enter into discussions with DOB about any kind of penalty adjustment ahead of the reporting deadline. To do this, a board needs to provide a detailed description of why it is unable to achieve compliance and an affidavit stating how the building has sought to meet its targets. It must also buy the maximum amount of offsets available. 

An estimated 89% of apartment buildings are able to meet Local Law 97 requirements for the first compliance period, so increased revenue from carbon credits might be slow to materialize. The GreenHOUSE Fund, however, already includes money from the Resilient & Equitable Decarbonization Initiative (REDi), a joint venture between the city’s Housing Preservation and Development (HPD) and New York State Energy Research and Development Authority. Jennifer Leone, HPD’s chief sustainability officer, says the additional offset funds will make a difference. “We can stop turning away buildings that are good candidates because we don’t have enough money,” she says.