Property-assessed clean energy, or PACE, financing has had a rough ride over the past few years, but it’s poised for a comeback. On the home front, we’ve got federal regulators considering ways to unblock a financing model that could spur billions of dollars in residential energy retrofits. And on the commercial side, we’ve got some showcase projects that could unlock a market even bigger in scope.
That’s not bad, considering the death many analysts were predicting for the PACE model in 2010. That’s when the Federal Housing Finance Agency told mortgage giants Fannie Mae and Freddie Mac that they couldn’t underwrite mortgages for homes that sought to pay back home energy efficiency upgrades, solar panels and other projects through property taxes.
Residential PACE programs underway in 27 states were cut short. Sure, you could still fund your home improvement project through PACE programs. But you couldn’t pass the tax burden on to someone else when you sold or refinanced, which was PACE’s big selling point.
But now the FHFA is being court-ordered to reconsider whether its rules on PACE financing should be “maintained, changed or eliminated” (PDF). The agency has opened the matter for public comment through March 26, 2012. PACE backers from the industry and the nonprofit world are promising to make their views known. On the other hand, FHFA has appealed the case to U.S. District Court, where it may win a more favorable ruling.
In the meantime, FHFA’s ruling doesn’t apply to commercial mortgages. That’s allowed cities and counties to form special districts that promise building owners the key benefit of PACE: tying investments to the property, not the owner. That way, it costs them nothing. In fact, if the energy savings outpace the quarterly tax payments, it’s actually making them money.