PACE Makes a Comeback

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Posted by:
Peter Belisle
Energy and Sustainability, CEO

When Property Assessed Clean Energy (PACE) programs to fund energy improvements in 27 U.S. states were derailed in 2010 by opposition from the Federal Housing Finance Agency (FHFA), supporters of the program knew that it was too good an idea to disappear.

A year later, PACE has made a  strong comeback on several fronts. A lawsuit against FHFA by the State of California appears headed for a Circuit Court hearing next year. PACE programs for commercial property—which were not covered by FHFA’s action but were affected by similar concerns from first-mortgage holders—are moving forward in several large cities.

Now there is a push in the U.S. Congress to correct rescind FHFA’s warnings  to Fannie Mae and Freddie Mac, and prohibit discrimination against PACE homeowners and communities.

Co-sponsored by U.S. Reps. Nan Hayworth, M.D. (R-NY), Mike Thompson (D-CA) and Dan Lungren (R-CA), The PACE Assessment Protection Act of 2011 also establishes national PACE underwriting and consumer protection standards. Although municipalities would have some flexibility in administering the program, it makes sense to have some uniform standards in place.

For instance, owners must have at least 15 percent equity and a solid tax payment history to be eligible for funding, and projects are capped at 10 percent of home value.  Improvements must have an economic payback and contractors must be qualified.  First-mortgage lenders are assured that PACE liens will not accelerate in the event of a default.

A lot of the language in the proposed legislation is focused on homes, but the resurgence of PACE in the residential market will also fuel supply and demand in the commercial sector. With these changes, PACE could be better positioned than ever to solve the financing challenges for energy retrofits, solar installations and other energy related improvements in commercial property

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