The Real Estate Roundtable urged the U.S. Department of Energy (DOE) on Wednesday to follow a newly released policy guide as the agency awards grants for states and localities to develop Building Performance Standards (BPS). The guidebook developed by the Roundtable’s Sustainability Policy Advisory Committee (SPAC) reflects RER’s ongoing commitment to addressing climate change while ensuring the economic sustainability of real estate investments and the communities they support. (Letter, Oct. 8)

Building Performance Standards (BPS)

• State and local governments are increasingly adopting BPS laws that impose energy and climate performance mandates on real estate.

• These laws typically set annual limits on how much energy buildings can use and how much greenhouse gases (GHGs) they can emit, with an ultimate goal of reaching net zero emissions around 2050.

• International groups also apply pressure for energy and emissions performance limits on buildings to drive global investments in real estate. (Roundtable Weekly, July 19)
  

• The Department of Energy (DOE) in August announced $240 million in federal grants to help states and localities implement BPS laws. (Roundtable Weekly, Sept 6).
  

• The inconsistent nationwide BPS “patchwork” poses significant challenges for property owners and policymakers alike. These laws must be backed by studies and adequate resources to ensure they achieve significant emission reductions—while continuing to further parallel efforts to support the recovery of business districts and increase the supply of affordable housing.

• “Our members face a variety of local and state legislative initiatives around building performance standards which lack consistent, implementable, fact-based frameworks. The federal government has the research and analysis heft to create and maintain a voluntary system of fair, reasonable, and effective BPS guidelines to help inform these efforts ” said Anthony E. Malkin, Chair of the Roundtable’s SPAC (Chairman and CEO, Empire State Realty Trust).

• “Our peer-reviewed, 20-point policy guide intends to help start and guide a discussion of the subject,” he continued. 

BPS Policy Guide: 20 Key Points

• RER’s policy guide should shape how DOE disburses tens of millions of taxpayer-funded federal grants to states and cities across the country. It outlines 20 key points that should be prioritized when developing and implementing BPS laws. These include:

• Develop science-based and data-driven standards. Policymakers should base building performance targets on robust cost-benefit analyses, housing affordability studies, grid resilience assessments, and actual data on energy usage.
  

• Align standards across jurisdictions. Property owners face confusing and inconsistent mandates. Policymakers should harmonize rules to ease multi-jurisdictional compliance and use landmark federal programs as a uniform means for compliance.
  

• Provide clear compliance resources and fair remedies. Policymakers should ensure that BPS laws come with transparent, accessible compliance pathways that building owners can follow. This includes offering practical resources, technical assistance, and incentive programs to help owners plan for “life-cycle” capital investments and retrofits. Enforcement mechanisms should offer building owners reasonable opportunities to correct non-compliance before imposing fines.

RER welcomes engagement on the 20-point policy guide to help craft BPS laws that are fair and effective.

Commercial real estate owners face soaring insurance costs as back-to-back hurricanes place financial strain on insurers and the National Flood Insurance Program (NFIP). The implications for property owners, especially in coastal areas, are severe, with insurance premiums skyrocketing and coverage harder to secure.

Storm Impact and Market Challenges

• Milton is the second major storm to strike Florida in less than two weeks. The hurricane could cause over $50 billion in damages, with worst-case losses approaching $175 billion, according to Wall Street analysts. (CNBC, Oct. 8)

• Potential insured losses from Milton are expected to be substantial and could amount to $60 billion, according to an S&P Global Inc. report. (Bloomberg, Oct. 9)

• Without a robust, long-term NFIP, property owners face escalating risks from future storms, leaving both homeowners and commercial real estate properties vulnerable. (Roundtable Weekly, Oct. 4)

• With more severe storms expected, CRE property owners are struggling to cover rising costs—sometimes opting to forego upgrades or sell assets to manage financial pressures. (NYT, Oct. 8)

• According to Marsh McLennan, premiums on commercial properties have increased by an average of 11% nationwide, and even more in storm-prone areas. The report also states that owners with "significant exposures and sustained losses" can expect rates to climb by 50% to 100%.

• “High-magnitude catastrophe losses, the enduring challenges of the pandemic on the supply chain, fluctuations in the employment market, and rising inflation have banded together to create a perfect storm that threatens the sustainability of every property portfolio.” (Marsh McLennan report)

Federal Challenges and Response

• Lawmakers remain divided on addressing FEMA's potential disaster fund shortfall, which could jeopardize rebuilding infrastructure like roads and water facilities. Speaker Mike Johnson has indicated no plans for Congress to reconvene and approve more disaster funding. (PoliticoPro, Oct. 9)

• The Biden administration is confident that FEMA’s disaster relief fund has sufficient resources to support recovery efforts for both Helene and Milton. However, they have raised concerns about the fund’s solvency through the remainder of the hurricane season ending in November. (PoliticoPro, Oct. 10)

• Milton could also spark debate again in Washington, D.C., about the need for a national catastrophe insurance program. (PoliticoPro, Oct. 9)

NFIP Under Pressure

• With nearly two million NFIP policies in areas hit by Helene and Milton, the program's $15 billion in coverage may fall short, prompting debates over whether to raise the NFIP's borrowing authority, forgive debt, or appropriate funds to cover policyholders' claims. (Politico, Oct. 9)

• House Financial Services Chair Patrick McHenry (R-NC) and the committee’s lead Democrat, Rep. Maxine Waters (D-CA), have previously collaborated on long-term NFIP reform. However, they now hold differing opinions on how to free up funds for claims if needed.

• Rep. McHenry leans toward raising the NFIP’s borrowing cap or appropriating additional funds, while Rep. Waters has consistently supported debt forgiveness. Currently, Congress has set a $30.4 billion limit on the NFIP’s borrowing capacity from the Treasury.

• The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms. These measures are essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy.

The Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs. RER will continue advocating for targeted policy solutions that can help alleviate increased insurance costs for housing providers nationwide.