When property owners want to invest in renewable energy, such as the installation of a new solar energy system, what is the largest barrier standing in their way? The upfront cost. Over the past year, this dilemma has been addressed through the PACE (Property Assessed Clean Energy Financing) program. PACE allows cities to set up finance districts capable of issuing low-interest bonds. Homeowners can then opt in to borrow this money for renewable energy installations or improvements. They will pay back this loan through a long-term assessment on their property taxes.
One of the key benefits of this program is the ability to transfer the payments to future property owners. If the payback period lasts 20 years, but the initial property owner moves after 15, the final 5 years will be paid off by the new property owner. Therefore, this transfer removes the major risk of this investment.
Recently, homeowners received letters from Fannie Mae and Freddie Mac suggesting that they are prohibited to participate in the PACE program if they have mortgages from these lenders. While this action inhibits local government’s right to assess property taxes and use those taxes to benefit the public good, the debate has recently heated up as Fannie Mae, Freddie Mac and the FHFA question the senior lein status of the PACE program.(Read more)
This affordable, low-risk program will not only benefit property owners, but the economy, as it is expected to create an estimated 160,000 long-term green jobs. President Obama allocated $150 Million in federal funds to PACE programming, and twenty states have already enacted the program. Now, we have to clarify to both the FHFA and the general public that this investment is worthwhile and will not adversely affect any mortgage lenders. Instead, it will create jobs and transition us into a sustainable, clean energy economy!
Want to see the PACE program in action? Check out the pilot programs, BerkeleyFIRST and ClimateSmart.