Despite FHFA’s sustained effort to crush Property Assessed Clean Energy (PACE), PACE continues to re-surface as one of the most scalable and viable mechanisms to improve residential energy efficiency and create jobs without dependence on public subsidy.
Perhaps that is why yesterday, in a hearing held on Capitol Hill by the Senate Energy and Natural Resources Committee, PACE took center stage when Senator Al Franken asked the panel of invited experts to name the single most important thing Congress could do to scale up energy efficiency retrofits. In response to Senator Franken’s query, David Sundstrom, Administrator of the Sonoma County Energy Independence Program (SCEIP), indicated that PACE was a particularly scalable strategy – given that 28 states and District of Columbia have already enacted the enabling legislation needed for PACE – and the key action needed would be for Congress to encourage (or, if that approach is unsuccessful, then to direct) the Federal Housing Finance Agency (FHFA) to reverse its long-standing opposition to PACE.
Today’s hearing helped underscore why members of Congress should act swiftly to remove any barriers and obstacles to PACE:PACE saves homeowners and businesses money, creates much-needed jobs, and reduces energy use and pollution associated with our building stock. Moreover, PACE programs not only enjoy bipartisan support at the federal, state and local level, but also have been met with broad and enthusiastic response by the local communities they are serving.
A Quick Refresher on PACE
PACE programs, run by towns or counties, enable property owners to finance the initial cost of energy efficiency improvements or small scale renewable energy projects and pay them off in small increments that are added to property taxes over an extended period of up to 20 years. Improvements financeable under PACE can include better insulation, more efficient windows, more efficient heating and cooling systems, and solar panels, to name a few. Participation in PACE programs is entirely voluntary and, from the start, homeowners can save more on their energy bills than the cost of the payments thanks to the clean energy projects.
However, the Federal Housing Finance Agency halted the development of residential PACE programs in July 2010, citing concerns that these programs posed risks to existing mortgage lenders. FHFA’s opposition to PACE triggered tens of thousands of letters from businesses large and small, the clean energy industry, labor unions, investors, environmental groups, and many other stakeholders, urging FHFA to reconsider their opposition and pointing out the social, economic, and environmental benefits of PACE programs, and the minimal risk that these programs actually pose to existing lenders.
FHFA’s ongoing opposition to PACE fails to take into account the underwriting standards articulated in H.R. 2599, The PACE Assessment Protection Act of 2011, the role that lower energy costs can have in reducing risk of homeowner foreclosure or bankruptcy, and the role that energy efficiency improvements can have to increase property values. Robust standards governing participation, such as those prescribed in the H.R 2599 would go a long way toward mitigating FHFA’s stated concerns, but without the data to back up their opposition to PACE or the willingness to allow PACE programs to proceed on a trial basis, FHFA’s stance evinces an ideological rather than evidentiary premise for opposing PACE.
Yesterday’s Senate Hearing and More to Come on PACE
The message of yesterday’s hearing was clear—Congress and the Administration can and should take action to respond to the overwhelming need for privately-financed energy efficiency retrofit finance structures, and PACE is the most eminently scalable of known structures that serve this need. Congress and the Administration should strongly urge the FHFA to reconsider its opposition to residential PACE, which has kept all but a very small number of residential PACE programs frozen until FHFA’s position is changed. The Senate should also take action and introduce complementary legislation to H.R. 2599.
In addition to the actions that could be taken at the federal level to support PACE, individual, NGO, and corporate stakeholders nationwide currently have an opportunity to respond to FHFA’s proposed rulemaking opposing PACE: from now until July 30th, members of the public may share their views as to why FHFA should re-consider the harmful stance it has taken on PACE. FHFA’s proposed PACE rule can be read here and comments can be submitted here. It is critical that FHFA hear from as many stakeholders as possible who support the PACE financing mechanism.
In addition to Mr. Sundstrom, yesterday’s hearing featured directors and administrators from successful energy efficiency finance programs from across the country, including Indiana, Oregon, California, and Georgia. Also invited to testify was Susan Leeds, CEO of the New York City Energy Efficiency Corporation (NYCEEC), which NRDC’s Center for Market Innovation had a founding role in creating. Through NYCEEC, New York City’s commercial property owners will have access to capital for retrofits, and capital providers will have access to loan loss reserve funds to reduce their risk in financing energy retrofits in New York City. Leeds indicated at the Senate hearing that she would eventually like to make PACE financing available for New York commercial building owners.