Building Letter Grades

Environmental activists applauded when the New York City Council passed legislation requiring owners of buildings 25,000 square feet and larger to post letter grades reflecting their building’s energy efficiency. The A to F letter grades, similar to those now posted in restaurants, will start appearing in 2020 and be based on actual energy and water usage, derived from mandated annual Local Law 84 benchmarking data.

Some of the loudest applause came from Russell Unger, executive director of the Urban Green Council, a nonprofit that has been a longtime champion of the letter-grade system. “Doesn’t every New Yorker want to live in an A building, just like they want to eat in an A restaurant?” Unger says.

Not so fast, argue the editors of Crain’s New York Business. They note that some buildings with superb Leadership in Energy and Environmental Design (LEED) ratings will get mediocre letter grades under the city’s system. LEED ratings measure the efficiency of a building’s design, construction, operation, and maintenance. “One Bryant Park, the Durst Organization’s LEED Platinum tower, will get sullied with a C,” the Crain’s editors write. “For a restaurant to score that poorly, it basically has to have rats scurrying around in plain view.”

Not quite, counters Unger. “That’s like comparing apples to oranges,” he says. “LEED ratings look at broad sustainability, while the letter grade is for actual energy consumption.”

Indeed, while LEED ratings consider a building’s water and energy consumption, they also take into account building materials, indoor air quality, proximity to public transit, and nearby amenities such as parks and restaurants, and other factors. The letter grades, on the other hand, will reflect the building’s Energy Star rating. The Environmental Protection Agency computes that rating using a nationwide database comparing the energy consumption of buildings of 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 90 or above, meaning they’re as energy-efficient as at least 90 percent of comparable buildings nationwide; a B will be awarded to buildings that score 50 to 89; a C for 20 to 49; a D for 0 to 19; and an F for those that fail to submit required benchmarking information. There will also be an N grade for buildings exempted from Local Law 84 or not covered by the Energy Star program.

Unger says that including the numerical grades will add nuance to the letter grades. For instance, a building with an Energy Star rating of 88 will receive a B grade, but the board and brokers can still claim, accurately, that the building is only slightly less efficient than an A-rated building.

Now is the time for co-op and condo boards to start improving the efficiency of their building’s heating, cooling, and water systems. Two years from now, there will be grades in the lobbies for all the world to see.