NYCHA makes a market: Here’s how

For NYCHA, which manages 2,400 build­ings as the largest resi­den­tial land­lord in New York City, major inno­va­tions in the infra­struc­ture of resi­den­tial build­ings are a neces­sary — but at times daunting — reality. When things break, like an old boiler, it can be tempting to repair and replace existing systems; but in the long term, new, cleaner tech­nolo­gies that are appearing on the market are often a wiser investment. 

As NYCHA advisor Tom Sahagian put it, ​“If a building covered by Local Law 97 replaces a boiler now, they will either lock in fossil fuel emis­sions for decades to come, or be saddled with an expen­sive stranded asset if the building even­tu­ally installs heat pumps.”

That’s why, in 2022, the city­wide housing authority chose to look ahead with a $70 million invest­ment in the Clean Heat for All Challenge. The pilot project led to the devel­op­ment of new all-elec­tric window-unit heat pumps that were then swapped in for central steam heating systems in 24 apart­ments at Woodside Houses. 

To fund the effort to create these new heat pumps, New York Power Authority (NYPA) has provided upfront finan­cial support, and New York State Energy Research and Development Authority (NYSERDA) is providing $13 million for the demon­stra­tion phase, with funds approved through the Regional Greenhouse Gas Initiative Operating Plan. 

This chal­lenge-driven inno­va­tion model is remi­nis­cent of another successful product chal­lenge NYCHA initi­ated 30 years ago to replace its refrig­er­a­tors. The 1990s refrig­er­ator compe­ti­tion, into which NYPA invested $38 million of funding, resulted in a refrig­er­ator that used about 30% less energy than the Department of Energy’s stan­dard at the time. NYPA had committed to ordering and installing 20,000 new refrig­er­a­tors for NYCHA in each of the four years following the successful launch of the product.

The winner of the refrig­er­ator contest in the 90’s ended up cutting energy consump­tion by half, compared to existing models NYCHA was using at the time. The bulk orders allowed for a cost reduc­tion in the prod­ucts; prices for fridges continued to decrease as the company part­nered with other public housing author­i­ties throughout the region. Thus, the compe­ti­tion allowed the agency to help shape a product not just for itself, but for the broader market — which is part of NYCHA’s goal with the new window-unit heat pumps.

Each Midea heat pump unit bought in bulk through NYCHA cost roughly $1,700. With three units per apart­ment, that’s around $5,100 to $6,780 per home, or nearly $7 million for an entire devel­op­ment. Still, the rates NYCHA secured are less than Midea’s commer­cial pricing for their heat pumps, which is about $2,800 to $3,000 per unit. And over the long run, the energy savings are substan­tial — around 85 percent savings for heating, compared to the existing gas-fired boiler plant that creates steam heat, and about 50 percent utility cost savings.

NYCHA’s scale gives it leverage most prop­erty owners don’t have. The agency’s Clean Heat For All Challenge called on manu­fac­turers to develop brand new window-unit heat pump tech­nology. In return, the agency promised volume — contracts for 30,000 units over three years.

Decarbonization still costs more upfront, but utility savings and main­te­nance reduc­tions, along with invest­ments like NYCHA’s, could make the systems cost-compet­i­tive over time, and these pumps in partic­ular don’t require a building-wide upgrade to elec­trical panels, which can be quite costly. If the units prove successful in NYCHA build­ings, they’re likely to become a solu­tion for aging multi­family build­ings across the city and beyond.