What’s Happening in Federal and Local Law and What It Means for Real Estate Investors
Across the U.S., cities, states, and the federal government are engaged in active, and conflicting, policy and legal debates over natural gas appliance use in buildings. For real estate investors, developers, and building owners, understanding how these dynamics are evolving is increasingly critical to project planning and long-term asset strategy.
This recap outlines key legal developments as of today, explains the federal law at the center of the issue, and highlights what to watch moving forward.
What is the EPCA and Why Does It Matter?
At the center of these discussions is the Energy Policy and Conservation Act (EPCA), a federal law passed in 1975 that grants the U.S. Department of Energy (DOE) authority to set energy efficiency standards for household and commercial appliances, including furnaces, water heaters, air conditioners, and refrigerators.
The law has two important provisions relevant to today’s debate:
- Efficiency Standards: DOE can require appliances to meet minimum energy performance thresholds.
- Preemption Clause: States and localities generally cannot establish their own appliance efficiency standards that differ from federal requirements
The central legal question now being tested: Does EPCA’s preemption clause also limit the ability of states and cities to restrict or phase out gas appliances through building-level requirements, or does it apply only to appliance efficiency standards?
Courts have reached differing conclusions, and the answer has significant implications for building design, asset operations, and long-term asset value.
What’s Happening at the Federal Level
Efficiency Rules Under Review
In 2023 and 2024, DOE finalized updated efficiency standards for certain gas-fired appliances, including residential furnaces and commercial water heaters. These rules significantly raise minimum performance thresholds beginning in 2028 and could, in practice, accelerate the phase-out of some lower-efficiency, non-condensing equipment over time.
This distinction matters because non-condensing systems, which have lower efficiency, rely on traditional vertical venting, while higher-efficiency condensing systems often require different configurations. As a result, compliance may involve broader system upgrades rather than simple equipment replacement.
Industry groups have challenged these rules, arguing they exceed DOE’s statutory authority by effectively eliminating an entire category of viable product. The DOE, on the other hand, has maintained that venting is not a protected performance characteristic under the statute.
As of mid-2026: Supreme Court Review Adds Further Uncertainty
On June 8, the U.S. Supreme Court sent a case involving DOE efficiency standards for non-condensing gas furnaces and water heaters back to the D.C. Circuit Court of Appeals for further review, rather than issuing a final ruling on the merits. The decision leaves the updated standards in legal and regulatory limbo pending continued proceedings.
The recent Supreme Court’s order allows the Trump administration to argue its differing position to the lower appeals court.
What’s Happening at the State & Local Level
While federal policy remains in flux, state and local governments continue to advance building electrification through a range of policy mechanisms, not all of which take the form of explicit gas bans.
Evolving Legal Landscape
Recent court decisions have highlighted a growing divide in how EPCA preemption is interpreted.
- Recent federal court rulings in Montgomery County, Maryland and Washington, D.C. have allowed certain building electrification requirements to move forward, suggesting that restrictions on fuel use in buildings may be treated differently from appliance efficiency standards under EPCA.
- By contrast, a prior federal appellate decision found that Berkeley, California’s gas infrastructure restrictions were preempted by EPCA, creating an ongoing split among jurisdictions.
- In New York, statewide restrictions on fossil fuel use in new buildings are progressing through phased implementation and continued legal review, with outcomes that could further shape the national landscape.
Bottom line: whether and how electrification requirements are enforceable today depends heavily on jurisdiction, and legal clarity continues to evolve.
Electrification Continues to Advance
Regardless of federal rollback, jurisdictions are continuing to push toward electrification across the country using multiple policy pathways:
- California cities such as San Jose and San Francisco have adopted “reach codes” that require or strongly incentivize all-electric new construction.
- Massachusetts has enabled municipalities, including Boston, to adopt fossil-fuel-free building requirements through a state pilot framework.
- Washington State and cities like Seattle are advancing energy codes that effectively require electric space and water heating in many new buildings and for equipment replacements.
- Cities such as Denver are incorporating electrification into broader building energy and performance standard frameworks.
In many cases, these policies are structured around building energy codes, emissions limits, or building performance standards (BPS), rather than explicit bans, a distinction that is becoming increasingly important in light of ongoing litigation.
BPS policies are continuing to emerge and become more stringent. Jurisdictions including Washington, D.C., New York City, Boston, and Denver have adopted requirements for existing buildings to meet defined energy or emissions thresholds over time, typically with financial penalties for noncompliance.
While not framed as fuel restrictions, these standards are already influencing system-level decisions by placing increasing pressure on higher-emissions equipment and making electrification a more viable long-term compliance pathway. GreenGen’s benchmarking and performance standards guidebook highlights how these policies are beginning to shape capital planning decisions today.
Key Building Performance Standard (BPS) Markets
• Washington, D.C.
• New York City, NY
• Boston, MA
• Denver, CO
• Seattle, WA
• Statewide: Colorado, Maryland, Oregon, Washington
What This Means for Real Estate Investors
For investors and developers, this regulatory environment introduces both uncertainty and clear directional signals:
- Plan for local requirements first. Electrification policies will continue to be driven at the state and local level, and compliance with federal standards does not ensure compliance with local codes or performance mandates. Jurisdiction-specific diligence is essential early in project planning.
- Expect retrofit-driven costs. While gas bans primarily affect new construction, some markets target equipment retrofits and building performance standards drive retrofits in existing buildings. Assets with legacy gas infrastructure, particularly those reliant on non-condensing systems, should plan for infrastructure upgrades to future-proof against electrification mandates.
- Account for transition risk in underwriting. Lenders, insurers, and institutional investors are increasingly incorporating regulatory and decarbonization risk into decision-making. Buildings in jurisdictions with aggressive performance standards or electrification trends may face tighter financing conditions or valuation pressure if not proactively addressed.
- Design for flexibility. Given ongoing legal uncertainty and evolving policy, projects that allow for future electrification are better positioned to adapt without costly mid-cycle retrofits.
- Monitor timelines—but focus on direction. Compliance timelines remain fluid as rules evolve and are challenged. However, the broader trajectory among global markets and institutional capital continues to favor lower-emissions, higher-efficiency building systems.