New Program Will Support Clean Energy And Efficiency For Low-Income Residents

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On Thursday, the federal government and California Governor Jerry Brown announced a new program to resolve one the greatest hurdles for energy efficiency in low income communities: how to pay for it. The Department of Housing and Urban Development, the State of California, and the MacArthur Foundation have partnered together to develop a pilot program that finances energy efficiency and renewable energy to multifamily housing units in California using the Property Assessed Clean Energy, or PACE, program.

“This partnership will open up a whole new channel for private capital to come in and deliver energy savings to a population that would benefit enormously, without any new expenditure of public funds required,” said Ben Healey, of the Connecticut Green Bank.

PACE is not a new idea. It began as a pilot project in Berkeley in 2007, and more than half of U.S. states and the District of Columbia had adopted PACE legislation as of April 2013. PACE programs offer financing for energy efficiency and renewable energy improvements to homes but, unlike a regular bank loan tied to the borrower, a PACE loan is tied to the property. Homeowners repay the loan as a lien on their property taxes.

Doing it this way alleviates homeowner concerns about the upfront costs of energy efficiency. It also ensures that homeowners will see a return on those costs through energy savings regardless of how long they live in their home. Since lower-income households spend a disproportionate amount of income on energy bills, HUD’s multifamily PACE program could result in greater financial stability for low-income residents while simultaneously reducing energy-related carbon pollution and its associated health impacts.

These structures are already working in states like Connecticut that have installed solar panels and cut utility bills for dozens of the state’s affordable housing units.

“In Connecticut, together with the CT Housing Finance Authority, we are currently using PACE-secured solar Power Purchase Agreements to finance solar installations, with no money down, on dozens of affordable multifamily housing properties across the state,” Healey continued. “These PPAs can offer electric savings of up to 50%, freeing up cash for property owners to reinvest in deferred maintenance, address health and safety concerns, and otherwise upgrade their properties.”

Despite the strong state support for PACE, efforts to expand the program hit a stumbling block in 2010 when the Federal Housing and Finance Administration called for a “pause” to PACE programs attached to homes financed by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The FHFA cited concerns that PACE loans often took repayment priority over home mortgages in cases of default. This action chilled residential PACE programs, but commercial PACE programs continue. Commercial property-assessed clean energy (PACE) financed projects climbed to nearly $60 million in 2013.

Thursday’s announcement may help address those FHFA concerns. As part of the initiative, the Department of Energy will study whether PACE delivers its intended benefits, and HUD will issue guidance clarifying how the agency can approve PACE programs in HUD-assisted and HUD-insured housing in California. With this pilot program, the Administration is taking affirmative steps to make energy efficiency and renewable energy a more accessible option for low-income households.

Danielle Baussan is the Managing Director of Energy Policy at the Center for American Progress.