Here Are Ways to Pay for Retrofits to Reduce Carbon Emissions

The looming New Year is going to be a time of reckoning for many co-op and condo boards. It’s when they’ll begin to wrestle with the demands of the city’s Climate Mobilization Act, which requires buildings 25,000 square feet and larger to reduce greenhouse gas emissions by certain target percentages in 2024, 2030, and beyond. 

After calculating their current building emissions and preparing a long-term plan for reducing them to meet the law’s targets, co-op and condo boards will then confront the elephant in the room: how do we pay for the necessary retrofits? 

Fortunately, the Climate Mobilization Act itself contains provisions to help manage costs. For one, the city may grant an adjustment of the annual building emissions limit to buildings under “financial hardship,” as defined by specific metrics of arrears, taxes, or certain other particular circumstances. For another, the law establishes a sustainable-energy loan program used around the country. Called PACE, an acronym for Property-Assessed Clean Energy, the program is available to cooperatives, though virtually never to condominiums. It allows boards to get long-term, inexpensive financing to do qualifying types of renovation projects that have a public benefit such as reducing greenhouse-gas emissions. 

Of course, federal, state, and city incentives have long been available to help lower the cost of green capital projects. "I think there will be a continuing need for incentives," says Mark Chambers, director of the Mayor’s Office of Sustainability. "They'll change as markets change, but I anticipate continued incentives since so much property needs to meet the reductions. We'll continue to advocate for incentives at the state and national level." 

To meet the ongoing emissions reductions that kick in after 2030, both co-op and condo boards should take a long view and combine a variety financing elements. "Look at when your underlying mortgage expires and how much are you’re going to need over the next 10 to 15 years,” advises Dan Wurtzel, president of FirstService Residential New York. “And put together a plan so money is there from refinancing, secondary financing, and maybe you mix in an assessment.” 

Condos are more restricted in traditional financing since there's little common-property collateral because each resident's apartment is real property. Condo boards sometimes turn to relatively high-interest private lenders. But, says Wurtzel, "even banks will finance loans to condo associations now – it requires a supermajority of unit-owners to approve it." 

In co-ops and condos, Wurtzel adds, "your budget will determine whether you want to go out and get financing or start assessing over 5 or 10 years. Start this early enough to build up a war chest of reserves. The bottom line is, it's not okay to say, ‘We don’t need to focus on this now since it’s five, 10 years away.’ The amount of carbon emissions is going to have to continue to be lowered."