PACE Supporters Challenge Proposed Legislation
Some industry groups oppose proposed federal legislation that would add consumer protection requirements for PACE loans.
Property Assessed Clean Energy loans, known as PACE loans, were developed to help finance energy-efficient retrofits on real property, such as solar panels and energy-efficient appliances and windows.
While PACE program specifics vary by state and municipality, the loans usually are initiated by the private companies approving contractors to make these improvements, with financing from proceeds raised by issuing municipal revenue bonds. The bonds are secured by the payments on the PACE loan obligation; the loan payments are added to the borrower's property tax bill and then paid through property tax installments, normally over 15 or 20 years. The outstanding PACE loan obligation then runs with the property (not the borrower) going forward.
The U.S. Senate and House are considering S. 838 and H.R. 1958, the Protecting Americans from Credit Entanglements Act of 2017, which would make the loans subject to federal consumer protection requirements because the alternative financing structure has been classified as a tax assessment rather than a loan.
Overall, PACE financing has empowered more than 100,000 American homeowners to make home energy and efficiency improvements.
"These improvements are on track to save homeowners billions of dollars on their utility bills while creating tens of thousands of jobs – many of them home-improvement contracting jobs – all at no cost to public budgets," said Greg Frost, a spokesperson for Renovate America, a financing platform for residential PACE loans.
While some industry groups, such as the Appraisal Institute and a number of state banking and real estate associations support the measure, some in the PACE industry see the measures as an attempt to kill the PACE program (see the original article here).
"Unfortunately, rather than accomplishing this in a constructive way, legislation being introduced in Congress is a thinly disguised effort to kill PACE by subjecting it to extraneous federal regulations, said David Gabrielson, executive director, PACENation. "We are hopeful we can work with the sponsor on the House side to improve the bill. The average PACE assessment is less than $25,000 – and as such, should come with clear disclosures and a three-day right to rescission – as required by law in California where most PACE assessments exist. More work can and should be done to ensure the best outcome for homeowners. But supporters of clean energy, job creation, and state and local authority to solve public policy challenges should reject a legislative process being driven by banking interests that only see PACE as competition for market share."
PACE providers fear the legislation as it is written would destroy jobs and small businesses and result in higher utility bills for families.
"Congress can and should come up with legislation that codifies robust national consumer protections while recognizing the innovation in financing that PACE represents," said Renovate America CEO J.P. McNeill in a statement. "With such a new federal framework, homeowners will have both strong protections and more options to afford home improvements than traditional financing now offers, and state and local governments can continue to leverage PACE to meet important public policy objectives and boost local employment at no cost to public budgets.”