The Success of Residential PACE
In 2008 the first PACE Pilot program was launched in California. By 2013, 31 states and D.C. had adopted PACE enabling legislation because it made immediate sense to state and local governments. Energy efficiency is the least expensive energy we can buy because the low hanging fruit measures, weather sealing and improving insulation, cost so little compared to the energy saved.
- HERO PACE program, operated by Renovate America and offered across the state of California, currently active in Riverside County, San Bernardino County, Orange County, Kern County, Fresno County, and San Diego County. HERO program has recently securitized $104 million worth of residential PACE assessments.
- Sonoma County Energy Independence Program, operated by the Sonoma County, CA, one of the oldest PACE programs completed over $55 million in residential PACE financings.
- mPower Placer, operated by the County, Placer County, CA, with over $6 million in residential PACE financings completed.
- Ygrene, operated by Ygrene Energy Fund, currently active in Sacramento and Coachella Valley, CA and Miami-Dade County, Florida
- Long Island Green Homes - Babylon, NY
- Set the PACE St. Louis, launched summer 2013, operated by the city, City of St. Louis, MO
- CaliforniaFIRST, active in 167 cities and counties, has recently announced to launch a residential program.
The programs are saving homeowners money, increasing property values, creating jobs and lowering greenhouse gas emissions. Actual data shows that PACE homes are less likely to default, and many studies have found that homes with EE/RE upgrades sell at higher prices relative to those without.
Residential PACE programs have significant positive economic and fiscal impacts. A study conducted by the ECONorthwest research found that four million in spending on projects across four cities (Columbus OH, Log Island NY, Santa Barbara CA, San Antonio TX) generated $10 million in gross revenue, $1 million in combined federal, state, and local tax revenue, and 60 jobs. Spending a $1 million in each of the four cities on solar PACE projects results in:
- The impact on total economic output ranges from approximately $718,000 to $872,000 at the individual city level
- The impact on jobs ranges from 6 to 8 additional jobs at the individual city level, and is 35 for the
- rest of the US, and 60 for the US as a whole
- Total tax revenue impact at all levels of government is $1.102 million at the US level
Spending a $1 million on energy efficiency projects in each of the four cities results in:
- The impact on total economic output ranges from approximately $717,000 to $939,000 at the individual city level
- The impact on jobs ranges from 5 to 8 additional jobs at the individual city level, and is 35 for the rest of the US, and 61 for the US as a whole
- Total tax revenue impact at all levels of government is $1.058 million at the US level
How Residential PACE Works
PACE uses the same kind of land-‐secured financing districts that American cities and towns have relied on for over 100 years to pay for improvements in the public interest. Over 37,000 land secured districts already exist and are a safe and familiar tool of municipal finance for street paving, parks, open space, water and sewer systems, street lighting, and seismic strengthening, among others. Below are 4 simple steps involved in putting together a residential PACE program. For more information on how to start a PACE program, please see Start a Program page.
The Federal Housing Finance Agency and Residential PACE
In 2010, the Federal Housing Finance Agency issued a statement declaring that PACE assessments are not valid and should be treated like “loans” that can not be senior to mortgages. FHFA argued that PACE assessments are also “unlike routine tax assessments” because they are voluntary and are “typically longer in duration.”
Regulatory agencies like the FHFA are obliged to conduct a rulemaking, a process designed to allow public comment and open access to the proposed rulemaking records, before announcing a new regulation. In the case of PACE this rulemaking process did not take place and the Agency released a Statement on Certain Energy Retrofit Loan Programs where it advised Fannie Mae and Freddie Mac to avoid buying mortgages with PACE assessments. Consequently, in August 2011, the United States District Court for the Northern District of California provided that the agency must undertake a formal rulemaking process. In compliance with the court’s mandate, the FHFA issued a proposed rule on June 15, 2012. The Agency filed a motion to extend the deadline for issuance of its Final Rule to September 16, 2013.
However, in May 2013, a U.S. Appellate Court reversed a lower District Court order that had required the FHFA to conduct a rulemaking process regarding PACE. The higher court found that FHFA was acting in its conservator role when it issued its July 2010 statement banning PACE, as opposed to its regulatory role, and was therefore immune to legal challenges.
It remains unclear whether or how FHFA, Fannie Mae, and Freddie Mac will react to the recent Appellate Court ruling. Municipalities and home owners who choose to sponsor and use PACE financing should do so with a full understanding of the possible consequences that the FHFA has alluded to, including finding home owners in breach of the uniform security instrument (the standard mortgage).
Click here to view history of communication with the FHFA.
Click here to learn more about the FHFA rulemaking and read the comments.
Federal Legislation in Support of Residential PACE
California’s Effort to Revitalize Residential PACE
On March 24, 2014, Representative Mike Thompson introduced HR 4285. The bill, commonly known as PACE Assessment Protection Act, has 10 co-sponsors.
Learn more about the bill from the press conference in Somers, NY.
“With my neighbors already facing astronomical energy costs, we need to get rid of needless bureaucracy and start helping our homeowners invest in the technology of the future,” said Rep. Sean Patrick Maloney. “Communities like Bedford, Somers and Pound Ridge are leading the nation to reduce energy consumption through PACE financing, and we need to cut through the red tape to ensure they can continue create jobs and increase energy efficiency by expanding this innovative program.”