United States: City Performance Standards and the Reserve Study

Building performance standards limit the energy use or emissions of existing buildings, not just new ones. New York City’s Local Law 97 is the best known. It applies to most buildings over 25,000 square feet, set its first limits from 2024 and tightens them significantly from 2030, with a penalty of 268 dollars per tonne of emissions above the limit. Urban Green Council’s analysis of 2024 benchmarking data found that only 43 per cent of covered buildings already meet the 2030 limits.

Other cities and several states have adopted their own standards, including Boston, Washington DC, Denver, Colorado, Maryland and Washington State, each with its own metrics and timetables. Several have faced delays, and in 2025 Washington DC’s mayor proposed pausing implementation there. Many more cities require annual energy benchmarking and publish the results.

Where a performance standard applies, the replacement of a gas boiler is no longer just a maintenance decision. It is a compliance strategy with a penalty attached to getting it wrong.

New York’s Local Law 97 reached its first compliance deadline in 2025, and the results are the first real evidence of how owners respond to a performance standard with penalties attached. Of 29,031 buildings required to report, about 7 per cent did not file. Of those that did, about 95 per cent met their emissions limits. Penalties collected so far are modest, around $270,000 from roughly fifteen buildings, against a statutory rate of $268 per tonne of carbon dioxide equivalent over the limit.

The first period was always going to be the easy one; the limits tighten sharply from 2030. What the first year shows is that most owners can meet a lenient limit with operational changes and modest works, and that the capital question arrives at the second step, when plant replacement and electrification become hard to avoid.

A performance standard converts a building’s energy use into an emissions figure using factors for electricity, gas and steam, and compares it with a limit set by occupancy type and floor area. The reading an owner needs is therefore in four steps. Benchmark the current position from the energy data most cities already require. Model the limits for each compliance period against that position. Identify which measures close the gap, in order of cost and disruption: controls and operations, lighting, heating plant and electrification, envelope. And time those measures against plant life and lease events so that compliance is achieved by replacement at the right moment rather than by premature spend or penalty.

In the register, the same works appear as ordinary plant, controls and fabric rows. What changes is their timing field, which is set by the compliance period as well as by condition, and their cost basis, which records the penalty exposure that makes the timing matter.

American commercial real estate has a well-established due diligence product in the property condition assessment, commonly performed to the ASTM E2018 standard and often required by lenders. It typically identifies immediate costs and projects replacement reserves over a term, frequently around ten to twelve years, alongside a separate Phase I environmental site assessment. Due Diligence Across Three Markets compares it with Australian and British practice.

Lender-driven assessments are efficient and consistent, but they are often designed around a loan rather than an owner’s strategy. A capital plan built for decisions asks different questions of the same building.

Net leases are common, especially triple-net structures in single-tenant retail, industrial and some office assets, where tenants carry taxes, insurance and many operating costs. Even so, structural and major replacement items often remain with owners, and the line between repair and capital varies by lease.

In shared residential and mixed-use buildings, reserve studies estimate future capital needs. After the 2021 collapse at Surfside, Florida introduced mandatory milestone structural inspections and structural integrity reserve studies for condominium buildings of three or more habitable storeys, a reminder that underfunded shared buildings can become a safety issue, as discussed in Why Shared Buildings Defer.

The United States is where insurance retreat from physical risk is most visible, with insurers withdrawing from or repricing exposed regions. For owners, building-level resilience, plant location, roof systems, flood protection, increasingly shows up in insurance terms. Climate as Physical Risk develops this. Local standards change with local politics and litigation, and this note is reviewed every six months.