Industry Groups Worry Massachusetts Climate Bill Could Derail Development

Legislation would slash emissions by 50% of 1990 levels by the end of this decade

Written By: Scott Van Voorhis | This article was originally published in Engineering News Record on January 6, 2021

A sweeping and newly passed Massachusetts climate change bill could derail development projects and thwart construction as the battered economy struggles to regain its footing, industry groups warn.

NAIOP Massachusetts, which represents major commercial and residential developers, says the goals of the bill, which would slash emissions by 50% of 1990 levels by end of this decade, are laudable. The NextGen Roadmap bill even won praise from one of state’s largest business groups, Associated Industries of Massachusetts, as well as from environmental organizations.

“Overall, we were heartened when those commitments were made,” said Anastasia Nicolaou, Vice President of Policy and Public Affairs at NAIOP Massachusetts.

However, NAIOP Massachusetts, as well as the Greater Boston Real Estate Board, two groups that represent major developers and the many of the firms that work with them, say they have major reservations about a specific provision in the bill they contend would drive up construction costs and make development much costly and difficult.

In particular, a provision in the newly passed NextGen Roadmap bill would enable individual cities, towns and suburbs to mandate tough, net-zero-energy building codes could hurt construction and development at a time when the economy remains shaky, they say.

The rules are needed because “projects and buildings municipalities approve for construction this year will still be up and going strong in 2050, when the entire economy of Massachusetts, in all its aspects, must put out “net zero” emissions,” said State Sen. Mike Barrett and Rep. Thomas Golden, both Democrats and the chairs of the Legislature’s climate change committee, in a statement. “So we give the force of law to the creation of a ‘net zero stretch energy code’.”

Yet for developers, achieving net-zero emissions in new office or other commercial buildings is “rarely achievable,” especially when it comes to structures more than 10 stories, Nicolaou of NAIOP Massachusetts contends.

While some legislators have argued that a wave of new solar-power construction could help make net-zero a reality, Nicolaou is skeptical there is currently enough clean energy to fulfill demand.

“Carbon reduction is increasingly important – we just need to ensure we get there in a practical and feasible way,” she said.

The goal could drive up construction and maintenance costs, seriously undermining the feasibility of large-scale commercial or residential projects.

“Net zero increases the cost of construction … current rents would not be able to cover the increases,” Nicolaou said. “It could have the effect of driving our innovation economy right out of the state.”

Meanwhile, the relatively broad and ambiguous wording of the net-zero energy provision also has the potential to cast a large degree of uncertainty over development projects currently under review by local officials, or getting ready to start the review process, Nicolaou said.

The bill leaves it up to the state Dept. of Energy Resources to develop the new, net-zero energy stretch code, which could then be adopted by individual communities.

But as it stands now, there is no definition yet of what net-zero energy will mean in practical terms, or to what types of buildings it would apply to.

And while the tough new energy code would not go into effect unless it is adopted by various cities and towns, officials in Boston, Somerville and Cambridge, where the lion’s share of construction in Eastern Massachusetts takes place, wrote letters of support for the new legislation, Nicolaou said.

“Any project currently being planned or designed anywhere in Massachusetts will have to seriously consider moving forward without knowing what requirements will be in place,” she said.

Greg Vasil, president and CEO of the Greater Boston Real Estate Board, expressed similar concerns.

There will be an impact with process and there certainly will be an impact with costs,” Vasil said. “Everyone recognizes the need to do something with climate change,” Vasil said, calling it a “balancing act.”

Local communities that go beyond the state building code and implement net-zero requirements could force some developers who had planned on building more affordable workforce housing to instead focus on luxury units.

A project, for example that previously would have cost $400 to $500 a square foot to build, might cost $525 a square foot.

“These codes can be onerous and can really drive up costs,” Vasil said.

Gov. Charlie Baker (R) released his own plan this week that would cut emissions by a sizable but slightly smaller 45% over the same time period.

Officials in Baker’s office have said the governor is reviewing the climate change bill passed by the state’s Democratic-controlled legislature, and have not indicated either way whether he will sign it.

Meanwhile, both development and real estate groups said they will also be keeping a close eye on new rules proposed by Boston officials to deal with another facet of climate change— more frequent flooding as sea level rise.

The Boston Planning and Development Agency is pushing a plan for an overlay zoning district that could cover parts of the city that are increasingly prone to flooding.

New projects bigger than 20,000 sq ft, in turn, would have to go through an additional step in the city review process, one that would require developers to make design changes or take other measures to deal with potential flooding.

“It’s understandable why the review has to take place,” Vasil said. “The real catch is how it works practically and how it affects construction costs and what they market will bear and no bear in terms of those costs.”

Lawmakers also sent a $16.5 billion transportation bond bill to Baker’s desk. The bill authorizes billions of dollars in bonds for highway and bridge maintenance, train modernization, and major capital projects such as an MBTA Red Line-Blue Line Connector and the extension of commuter rail service to the South Coast. It also funds the approaches to the two Cape Cod bridges.

Real Estate Industry Applauds Senate Leadership on Climate Change, Opposes Net-Zero Energy Code

Industry Groups Concerned Provisions Will Chill Economic Development, Increase Housing Costs

BOSTON, MA – NAIOP Massachusetts, The Commercial Real Estate Development Association (NAIOP); the Home Builders & Remodelers Association of Massachusetts (HBRAM); The Associated General Contractors of Massachusetts (AGC MA); and the Massachusetts Association of Realtors (MAR) applaud the Massachusetts Senate for recognizing that climate change is an economic development, public health, and environmental issue that affects every resident in the Commonwealth. 

As the Commonwealth leads the nation in climate mitigation and adaptation, technical and economic realities cannot be ignored. Senate Bill 2477, An Act setting next-generation climate policy includes a proposal to enact an opt-in stretch energy code that defines net-zero building. Achieving a net-zero energy building with today’s technology is not always feasible. As an example, very few net-zero lab properties or residential or office projects over 10 stories have ever been built. The projects that were able to achieve net-zero did so at a cost premium. If implemented, this net-zero code would increase the cost of the construction and maintenance of residential and commercial buildings.  Current rents could not cover the increased costs associated with such requirements.  In addition, the change would dramatically alter project design, in some cases preventing the project from being built at all – threatening the creation of new housing during the existing housing crisis, negatively impacting housing affordability and serving as a financial barrier to homeownership for thousands of young families seeking to purchase their first home.

In addition to increasing costs, it would have the effect of undoing the uniformity of the State Building Code by creating multiple codes – resulting in codes that would vary by community and little to no predictability for developers. This lack of uniformity threatens public safety and security by creating confusion surrounding implementation and enforcement, one of the reasons that the Board of Building Regulations & Standards was charged with implementing a statewide code.

Finally, we are concerned that some communities may adopt the net-zero code as a way to block development.

While we believe that net-zero construction may be possible in the future, we caution the Legislature against codifying timelines that are currently impossible to achieve, and instead encourage the continued investment and development of diverse technologies that will achieve our climate goals.


NAIOP Contact: Anastasia Nicolaou / 650-380-9440

Home Builders Contact: Benjamin Fierro / 617-429-3053

MAR Contact: Justin Davidson / 781-839-5510

AGC MA Contact: Robert Petrucelli / 781-235-2680, ext. 114

NAIOP Coastal Resiliency Legislation Heard Before Joint Committee on Environment: NAIOP CEO Joined by Climate Resiliency Expert

Last week, NAIOP CEO Tamara Small and NAIOP Climate Change Resiliency Committee Co-Chair, Stephanie Kruel of VHB, testified in support of NAIOP’s coastal resiliency legislation, S. 430, An Act Relative to Coastal Resiliency Projects.

NAIOP CEO Tamara Small and NAIOP Climate Change Resiliency Committee Co-Chair, Stephanie Kruel of VHB testifying before the Joint Committee on Environment, Natural Resources and Agriculture.

As climate change continues to threaten homes, businesses, and infrastructure, Massachusetts’ coastal communities will need flexibility to properly implement their coastal resiliency plans. Many of these plans, including the Climate Ready Boston initiative, will require the use of fill to protect the City against the impacts of rising sea levels and climate change. Such projects could include berms, waterfront parks, and seawalls. S.430 provides a framework for these critically important projects to be reviewed and approved.

“Many laws and regulations, including the Wetlands Protection Act, were written decades ago and did not anticipate the potential impacts of sea level rise, nor the range of solutions that might be required to reduce flood risk,” testified Kruel. “As noted in the October 2018 Coastal Resilience Solutions for South Boston report, to be able to implement proposed resiliency measures, some existing regulations and permitting requirements may need modification to consider the impacts of sea level rise and flood protection projects. In the same vein, Bill S.430 is intended to prevent provisions of the WPA and 310 CMR 10 from inhibiting the construction of coastal resiliency projects.”

“Coastal municipalities in the Commonwealth must be given the tools and resources they need to implement their coastal resiliency plans,” said Small. “We believe that the flexibility this bill provides allows for the public and private sectors to work together to protect communities from the impacts of climate change.”

NAIOP believes that S. 430 is a critical component to the Commonwealth’s climate resiliency efforts and will continue to advocate for the passage of this legislation.

Hurricane Sandy’s Message for Boston

A recent Boston Globe Editorial, “After a near-miss with Sandy, more preparations are needed,” advocated for policy makers to focus on climate adaptation measures to protect Boston from future storms and flooding.  NAIOP wholeheartedly supports convening public and private interests to discuss short-term and long-term solutions that are practical and feasible.

An important first step would be to create incentives for building owners and developers that would make climate change planning part of their design process.  Focusing on carrots instead of sticks will be an important first step in changing the way some in the industry view this issue.  As an example, we should be encouraging, not penalizing, the relocation of utility spaces to upper floors.  This relatively simple step would have preserved many of the systems that were destroyed in New York and New Jersey.  However, current codes do not exempt these areas from the allowable building envelope, causing landlords to worry about losing rentable space to mechanical equipment.  A change should be made that would provide additional square footage for those developers that commit to doing this.

The Globe editorial suggested that restrictions be put on ground-floor uses in areas that will be prone to flooding.  However, as with the scenario above, it is critical that the impact of decreased rental income and increased construction costs be mitigated.   Furthermore, some of our current laws would prevent such a policy.  As an example, our Chapter 91 statute mandates the use of the first floor space for public access.

Yes, we need to find ways to efficiently prepare our coastal cities for the increased frequency of powerful storms, but we should also be ready to adjust our policies to incentivize the public and private sectors to make appropriate infrastructure and building redesigns, not penalize them with red tape and unnecessary costs.

Out front on climate change

This article appeared in the Summer 2012 issue of Commonwealth Magazine.

Massinc’s recent research report, Rising to the Challenge: Assessing the Massachusetts Response to Climate Change, was billed as “the first independent assessment of state action on climate change.” We, at NAIOP Massachusetts, believe that it missed an opportunity to provide a more complete, non-partisan account. Although it is acceptable to inquire into the progress that the state is making to reduce greenhouse gas emissions as required by statute, this report is by no means a sufficient analysis of the issue.

The Massachusetts Global Warming Solutions Act, passed in 2008, required the state’s secretary of energy and environmental affairs to set a greenhouse gas reduction goal of between 18 and 25 percent for the year 2020 (one of the most ambitious in the nation). Ian Bowles, who was the secretary at the time, chose to set that target at 25 percent. The secretary was required to submit an action plan to the Legislature that could assist in meeting this goal; however, there was no requirement that the plan be followed or that other means could not be used to achieve this target.

We have no argument with the statute’s basic premise that climate change is a serious global problem and there need to be international and national plans in place to reduce greenhouse gas emissions in a timely manner. But we feel that questions need to be raised regarding the practical challenges of emissions reductions—where and how they can best be achieved, at what cost, and over what period of time?

Climate change is not a local issue. One state’s reduction in greenhouse gas emissions will have little impact on how that state will be affected by global climate change. Any other expectation is un­realistic. However, pursuing policies that could unintentionally hinder growth will most definitely put the Commonwealth at a competitive disadvantage when it comes to attracting or retaining jobs.

MassINC’s stated goal was to uncover the facts and reach independent conclusions based on evidence. Its approach was developed from the perspective that the state has committed to achieving ambitious greenhouse gas reduction goals, and that there should be a dialogue about the best way to do so. Unfortunately, the report comes up somewhat short. Rather than offering a dialogue, the report simply checks off which measures in the plan have or have not been completed to date. It accepts these recommended measures as the only path to achieving the required reductions and lacks any qualitative critique of these mitigation methods.

A comprehensive assessment of this issue would include a serious discussion of the economic and financial impacts that will result from recommendations of the state plan. This includes a cost/benefit analysis of any presumed impacts on businesses and residents. However, the only mention of cost impact in MassINC’s report is general statements from environmental advocacy groups indicating that these measures are fully balanced by the savings they will produce. The groups also imply that the costs would be less detrimental as valued against the cost of building a new power plant, which is a very unsuitable standard by which to judge individual policies. In addition, many of the policies outlined in the plan would have dramatic impacts on the economic development goals of the Commonwealth and should be questioned accordingly

The report is also lacking more substantive examination of the controversial decision to fund many of the alternative energy and efficiency programs with increased electricity costs for ratepayers. What are the impacts of the plan’s recommendations? What are the associated costs to those existing businesses that are dependent on high energy consumption? Are these investments the right ones for the Commonwealth? Does the growth of new jobs created by the grants and incentives justify the jobs lost due to high energy costs?  Besides the anecdotal evidence, what are the firm data regarding these investments and the return in terms of jobs, tax revenue, and economic development?

Also overlooked is the question of whether the aggressive greenhouse gas target for Massachusetts will significantly alter the projected impacts of climate change in the Commonwealth. The report describes projected climate change threats that include a rise in sea level, more frequent severe storms, and temperature spikes in the summers. If the Commonwealth is successful in meeting (and even exceeding) its greenhouse gas reductions at a substantial cost to the public, does anyone credibly believe such reductions would meaningfully reduce potential climate change impacts?

The Massachusetts Department of Energy Resources needs to be more open and transparent with its decisions to pursue mitigation plans. These should be grounded in sound economic cost-benefit analyses using data from its regulated industry stakeholders. Advancing policies without reliable data and analysis of their impact could cause the state to make decisions that have unintended negative consequences on our future economic growth.

Critical first steps would be to educate the marketplace, provide additional support to make these methods financially attractive, and recognize that the state of the economy is an important determinant of when to require greater efficiency measures. We should be researching whether there are more cost effective ways to get to the appropriate goals before we accept and mandate the most expensive solutions.

Increased energy efficiency in new development and existing buildings is a prime target for achieving the 2020 target goals. But it is important to keep in mind that not all markets around the Common­wealth are created equal. Statewide energy mandates for all building types will create a disincentive to develop new properties in areas where the markets cannot absorb the increased costs. Unfortunately, many of the “one-size-fits-all” government proposals do not account for varied building types or tenant energy requirements, and they rarely take into account actual investment/payback ratios.

The more stringent energy efficiency requirements disregard the mismatches between who pays the cost of an option (owner) and who gains the benefit (tenant), making it difficult to justify economically the investment in the first place. There is also too much emphasis being put on regulating the energy efficiency of the building shell. Much of a building’s energy use actually falls within the tenant spaces and therefore is not directly influenced by mandates for increased energy code efficiency. However, with appropriately scaled tax incentives, owners could receive financial benefits for the upfront investment and tenants could see reductions in their operating costs.

On a national basis, rather than using regulatory mandates, President Obama has announced the Better Buildings Initiative, an innovative economic development program using tax incentives to make existing buildings more energy efficient through retrofit projects. The amount of the incentive would grow with increased energy savings, encouraging ambitious projects and also rewarding more moderate retrofits that achieve meaningful levels of energy savings.

Since Massachusetts has among the highest energy costs in the nation, it makes good business sense to reduce a property’s controllable operating costs, especially if it can help to also reduce greenhouse gas emissions. Becoming more energy efficient is an important consideration in today’s commercial real estate industry. Many developers, owners, and tenants understand that it makes economic sense to find ways to increase initial capital investments for energy efficient technology and design elements that will result in a reasonable payback of energy savings.

As a result, the market is becoming more responsive to the need for energy efficiency, especially with volatility in energy costs, and a more educated and demanding tenant base. We have already seen that, without regulatory requirements, more buildings are now built as LEED-certified “green buildings.” Before the state moves toward aggressive mandates, policy makers should consider incentive-based solutions. Doing so could leverage and support private investments in order to help businesses reach higher levels of energy efficiency. MassINC should follow-up its report with a more critical look at the existing, proposed mitigation measures, as well as other alternatives, which could lead the Commonwealth down the right path to our greenhouse gas reduction goals.