NYC C-PACE after the June 2026 rules: financing Local Law 97 work

This guide is for the owner of a New York City building who is looking at a carbon bill under Local Law 97 and wondering whether C-PACE is the way to pay for the work instead. It covers what the law asks, what the city’s PACE programme is, what the 26 June 2026 guidelines changed, where the state bill stands, the first multifamily deal, and when the honest answer is that C-PACE does not fit. Every source below was checked on 15 October 2026. For the statewide picture, see our New York C-PACE page.

Local Law 97 in one paragraph

Local Law 97 of 2019 applies to “covered buildings”, which the law defines, as they appear in Department of Finance records, as a building over 25,000 gross square feet, two or more buildings on the same tax lot that together exceed 50,000 gross square feet, or two or more condominium buildings governed by the same board of managers that together exceed 50,000 gross square feet. From 1 January 2024, a covered building may not have annual emissions above the limit set for its occupancy group, and the owner must file a report by 1 May each year starting in 2025. If that report shows the building over its limit, the owner is liable for a civil penalty of not more than the difference between the limit and the reported emissions, multiplied by $268. In plain terms: up to $268 for every metric ton of carbon dioxide equivalent over the line, every year the building stays over it.

The arithmetic is worth doing before you speak to anyone. A building 400 tonnes over its limit faces a penalty of up to $107,200 for that year; the same building 40 tonnes over faces up to $10,720. Those are illustrative numbers, not a forecast for your building, but the gap between them is the whole decision.

What NYC’s PACE programme is, and who runs it

NYC PACE is a commercial PACE programme. NYC Accelerator describes it as a programme of the Mayor’s Office of Climate and Environmental Justice, run as a public/private partnership administered by the New York City Energy Efficiency Corporation (NYCEEC) and funded by approved private capital providers. NYCEEC approves both the PACE capital providers and the projects.

The guidelines describe the programme as a platform for qualified lenders. The owner borrows from a private lender, and the loan is repaid in instalments through a charge on the property’s tax bill. NYCEEC states that the City collects the repayments with property taxes and remits them to the lender, and that the full amount of a PACE loan can never be accelerated, even on default.

Eligibility is broad but has edges. Under the guidelines a site must be in one of the five boroughs, and a residential property must have three or more units; NYCEEC says one- and two-family homes are excluded. Commercial, industrial and office properties, properties owned by tax-exempt organisations, and certain condominium buildings are eligible. The programme requires consent from the mortgage holders on the property.

For a Local Law 97 owner, two features matter most. First, the guidelines list eligible improvements including HVAC systems, domestic hot water systems, electrical service upgrades, building enclosure measures such as windows and insulation, energy and heat recovery ventilators, and EV charging. That is most of a typical decarbonisation scope. Second, the programme’s Technical Certification Workbook, according to NYC Accelerator, may ask for the projected savings from Local Law 97 civil penalties that the project avoids. The penalty you would no longer pay is part of the case for the loan.

What changed in the v4.0 guidelines (26 June 2026)

The current NYC PACE Financing Program Guidelines are version 4.0, revised 26 June 2026.

New construction and major renovation are sized on value. For a New Construction or Major Renovation project, unless the Technical Guidance Supplement says otherwise, the PACE loan cannot exceed 35 percent of loan-to-value as stabilised, plus reasonable financing costs and capitalised interest. The value must come from an accredited third-party appraisal completed within two years of project submission. CRE Daily reported on 16 September 2026 that this replaced a cost-based formula and could increase loan sizes by roughly 40 percent for qualifying projects.

Embodied carbon is an eligible measure. The guidelines treat Embodied Carbon Reductions — greenhouse gas emissions resulting from the energy used for building materials and construction — as a qualifying energy efficiency improvement for New Construction, Major Renovation and Adaptive Reuse projects. On a New Construction or Major Renovation project, no more than 50 percent of the PACE loan may finance Low Carbon Materials, and the cap of 35 percent of loan-to-value as stabilised still applies. On an Adaptive Reuse project, in no case may more than 65 percent of the PACE loan go to the embodied-carbon elements.

The all-electric rule stays. All New Construction and Major Renovation projects must result in all-electric buildings that meet the programme’s Low Carbon Building requirement, with listed exemptions such as commercial kitchens and laboratories. Such a building is treated as a Pre-Qualified Project and is exempt from the savings-to-investment test.

The press also reported that lenders may now release funds in tranches. That wording comes from the coverage, not from the guidelines; what the guidelines say is that funds for an effective project may be disbursed according to the financing agreement between the lender and the borrower.

The state bill: A5404C / S1335C

There is also a state bill. Assembly Bill A5404C, the same as Senate bill S1335C, relates to the municipal sustainable energy loan programme regarding qualifying water improvements, qualifying resiliency improvements and, in a city with a population of one million or more, the use of low carbon intensity building components. Its sponsor in the Assembly is Assembly Member Stern.

On 15 October 2026 the New York State Senate’s page for the bill showed its status as “Passed Senate & Assembly”. Both houses passed it on 4 June 2026. The page showed no delivery to the governor and no signature. Nothing in this guide depends on it being signed. The 26 June 2026 guidelines are what the programme applies today.

Herald Towers: the first NYC multifamily deal

North Bridge closed $8.5 million of C-PACE financing for Herald Towers, a three-tower apartment complex at 50 West 34th Street in Midtown Manhattan; the Mann Report published the announcement of the closing on 9 March 2026. North Bridge described it as the first multifamily C-PACE deal completed in New York City. According to the announcement, the owner, JEMB Realty, is using the financing to replace ageing heating and cooling systems with electrified, high-efficiency equipment across the residential portion of the property, which comprises 690 units, and the deal was framed explicitly around Local Law 97. REBusinessOnline reported the same deal on 21 April 2026.

Two things are worth noticing. The loan is a small fraction of a building that size: it pays for a defined scope of systems, not a recapitalisation. And it was a retrofit of an existing building. If you own a multifamily building, our C-PACE for multifamily guide covers the sector more broadly.

Penalty versus payment: how to frame the decision

C-PACE does not make Local Law 97 cheaper by itself. It turns a capital project into a long-term charge on the tax bill. The decision is whether that annual charge, set against the penalties avoided and the energy saved, is better than the alternatives: paying the penalty, paying cash for the work, or borrowing some other way.

Build three numbers before you talk to a lender:

1. The penalty you face, year by year, using up to $268 per metric ton of carbon dioxide equivalent over the limit. The law sets one set of limits for 2024 to 2029 and another for 2030 to 2034, so model both periods rather than assuming this year’s overage is the permanent one.
2. The energy saving and avoided penalty the engineer certifies for the proposed measures. For a retrofit that must pass the programme’s savings-to-investment test, the guidelines count avoided Local Law 97 penalties as a saving.
3. The annual PACE charge for the scope, over a term, not counting the construction period, that the guidelines limit to the weighted average useful life of the financed measures. Our C-PACE calculator will give you a first estimate of the payment.

If the avoided penalty and energy saving cover most of the annual charge, C-PACE is doing what it is meant to do. If the charge dwarfs them, you are financing a project the building does not need, and paying interest to do it. The full state-level picture is on our New York page.

When C-PACE is not the answer for an LL97 building

Say this plainly, because the site’s position depends on it: for some Local Law 97 buildings, C-PACE is the wrong tool.

• You owe the City money. The guidelines require that the borrower is not delinquent in any taxes, civil penalties or other debt to the City, or in water and sewer charges, when the PACE loan closes.
• Your lender will not consent. The programme requires mortgage holder consent. If yours will not give it, there is no closing.
• The overage is small. If the building is a few tonnes over, the penalty may be smaller than the legal, engineering and programme costs of a PACE closing. Fix it with operations or a small cash project.
• The retrofit will not pay for itself and is not fully electric. A retrofit that is not fully electric and is not made up entirely of pre-qualified electrification measures must reach a savings-to-investment ratio of 1.0 or more. If it cannot, the programme will not finance it.
• The building is not covered at all. A single building of 25,000 gross square feet or less, alone on its tax lot and not part of a condominium group over 50,000 square feet, falls outside the Local Law 97 definition. C-PACE may still help, but the penalty argument does not apply.

If you are unsure which side of these lines your building sits on, send us the details. We are an advisory and placement service, not a lender, and part of the job is telling you when not to borrow.