When I first heard about PACE financing programs a couple of years ago, I wasn’t quite sure how they worked or what their advantages would be. But the more I learned the more the approach made sense to me, to the point where we actually signed up to finance a 4.2-kW PV system for our home through Boulder County, Colo.’s ClimateSmart Program.
PACE stands for Property Assessed Clean Energy, referring to the fact that the loan you take out from your local program—in our case funded by county-issued bonds—buys you a zero-down low-interest loan paid back through your property tax assessment (over 15 years for us). Aside from installing renewables, you can use these loans to beef up insulation, upgrade windows, and install high-efficiency HVAC systems, among other improvements.
Our home is fairly new and pretty efficient, so we wanted to go for grid-connected PVs, and, coupled with a local utility company rebate and the 30% federal tax credit, it was a no-brainer. We were thrilled to swap out our electric bills to cover the associated increase in our property taxes and reduce our household’s carbon footprint in the process.
The deciding factor though was that our ClimateSmart loan was tied to our property, and the balance was transferable upon the sale of our home. So I felt comfortable installing a large system with a payback period that would likely extend beyond the years we plan to stay in the house.
That’s why it was so surprising and disturbing when the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae, Freddie Mac, and 12 federal home loan banks, stopped the programs dead in their tracks over its concerns that PACE loans would take senior position as priority liens over existing mortgages, increasing risk for lenders and secondary market underwriters. And while PACE advocates argued that their programs have the proper safeguards in place and are similar to other tax assessments accepted by the FHFA, the agency has directed Fannie, Freddie, and the banks to stay away from them.
The timing couldn’t be worse. In some of the more established of the 30 programs, PACE funding has been credited with actually driving business growth and job creation through the recession, not to mention accelerating the environmental benefits associated with the funded improvements. ClimateSmart customers here in Boulder County were lined up months deep on waiting lists to get their projects completed—including a four-month backlog of residential PV installations. That’s all come to a screeching halt now. Talk about a buzz kill.
The only good news is that FHFA’s announcement has generated a firestorm of action against it. The state of California is suing the federal government to remove the blocks, Congress is considering a bill (HR 5766) that would require Fannie and Freddie to adapt their standards to facilitate PACE financing, and industry organizations like the AIA are calling on Congress to pass the legislation.
It’s been hard enough to get to this point in our industry’s evolution without needless roadblocks slowing us down at a critical juncture. And while I don’t usually “write my Congressman,” this time I’m all over it. Go to www.pacenow.org to learn more about PACE programs and how you can help.