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The meteoric rise of Property Accessed Clean Energy (PACE) financing over the past few years has been surprising even to those working in clean energy finance. Since its inception in 2009, PACE has enabled $3.3 billion in renewable and energy efficiency investments in people's homes, $2.8 billion of which occurred in 2016 alone.
The growth of the PACE market has been so remarkable that it's getting attention outside of the efficiency world as well as inside it. The Wall Street Journal recently published an article calling PACE the "fastest growing loan category." But in the same article, it ominously compared PACE to the subprime mortgage crisis. If true, this would certainly merit even more attention, this time from regulators and possibly even law enforcement. Fortunately, it's not.
The pros and cons of PACE
PACE financing smooths out the up-front costs of clean energy investments by paying them out of a capital fund that gets repaid through property taxes. Homeowners and commercial building owners agree to a voluntary tax assessment, and the local government collects the payments on the property tax bill and pays back the PACE financer. The tax assessment offers PACE financers security, which allows them to offer lower rates in return. When it works well, everybody wins.
Although PACE appears to be working well, the tax assessment---PACE's central feature--- makes some people nervous. When homes go into foreclosure, property taxes get paid before mortgages. Since a PACE assessment is part of property taxes, mortgage lenders are concerned that it would leave less money to pay them back in a foreclosure. And since a state or county can force a home into foreclosure if owners don't pay their taxes, lenders are worried that if someone doesn't make their PACE payments, the property will go into foreclosure even if the mortgage is up to date... T
To continue reading this blog post, visit: http://aceee.org/blog/2017/03/what-wall-street-journal-got-wrong
