Key facts
- New York City has expanded its C-PACE program to include embodied carbon financing.
- This financing covers emissions locked into building materials, making preservation more competitive than demolition.
- The city is the only municipality nationwide to implement this embodied carbon change.
- Manhattan has 19.2 million square feet of office-to-residential conversions underway.
- C-PACE debt is repaid through voluntary assessments on property taxes and follows the property, not the owner.
New York City has expanded its Commercial Property Assessed Clean Energy (C-PACE) program to include embodied carbon financing, a move designed to encourage more office-to-residential conversions. This update allows the program to finance emissions embedded in a building's materials, such as concrete and steel, making the preservation and reuse of existing structures a more financially attractive option compared to demolition.
The city is the sole municipality nationwide to enact this specific embodied carbon change, while Colorado is the only state with such a provision in its laws. This development follows recent structural issues identified in a major conversion project in the city, which highlighted the potential for cost overruns and funding challenges in such endeavors.
Manhattan alone is currently undergoing office-to-residential conversions totaling 19.2 million square feet. This momentum is partly attributed to a state tax break passed two years ago, which offers property tax exemptions for qualifying conversions. The C-PACE financing mechanism allows property owners to repay debt through voluntary assessments on property taxes, with the debt attached to the property itself rather than the owner, thus not impairing value in cases of bankruptcy or foreclosure.
Globally, C-PACE has evolved from a supplemental tool to a foundational one for conversions. A notable example is The Geneva conversion in Washington, D.C., which secured $465 million in C-PACE financing. Typically, C-PACE covers upgrades like energy-efficient systems and sustainable building elements. In New York City, the C-PACE loan-to-value cap is set at 35% of a property's stabilized value, similar to Texas's recent increase to the same cap.