U.S. Reps. Mike Thompson (D-St. Helena, CA) and Jared Huffman (D-San Rafael, CA) on Wednesday applauded the Obama Administration for its announcement of a cross government partnership, the “Clean Energy Savings for All Americans Initiative,” which includes an expansion of Property Assessed Clean Energy (PACE) programs.
This administrative action comes after Reps. Thompson and Huffman urged the Department of Veterans Affairs (VA) to enable veterans to receive VA-secured home loans to take advantage of PACE programs.
Under this new initiative, the administration will work to ensure that every American household has access to solar power to cut their energy bills, combat air pollution and tackle climate change.
The Obama Administration will take several actions to allow American homeowners, including low- and moderate- income households and veterans to use PACE financing.
Specifically, the Federal Housing Administration (FHA) released guidance outlining how properties with PACE assessments can be purchased and refinanced with an FHA-insured mortgage, the VA issued policy guidance on PACE-financed homes, clarifying when veterans are able to access PACE programs, and the Department of Energy provided best practices for new and existing residential PACE programs throughout the country, as well as committing to provide technical assistance to support these programs.
“By providing homeowners with an innovative financing tool to make energy efficient retrofits to their homes, PACE programs not only enable significant reductions in energy consumption, but they create jobs and can increase a property’s value – without costing taxpayers a dime,” said Rep. Thompson. “I’m glad to see the Obama Administration take this important step to ensure that more homeowners in California and across our country – including veterans – can take advantage of PACE programs.”
“PACE financing is truly a win-win: it helps reduce energy consumption and cuts greenhouse gas emissions, while also slashing energy bills for Americans,” said Rep. Huffman. “I thank President Obama and the VA for listening to those of us who have been urging bold action on PACE, for expanding access to these programs to include veterans, and for taking these concrete actions towards a cleaner energy future.”
After the Federal Housing Finance Agency (FHFA) issued a ruling in 2010 that essentially prohibited federal financing of PACE programs, Thompson introduced legislation, known as the PACE Assessment Protection Act, in three consecutive Congresses to overturn the FHFA’s ruling and has been a leader in the bipartisan effort to encourage the administration to find a solution that will allow PACE programs to continue.
In August 2015, the Department of Housing and Urban Development (HUD) announced that it intended to allow FHA-financed properties to use the PACE program if it met certain conditions. This week’s announcement by the Administration makes good on that promise.
The administration announced the following actions.
Supporting the scale up of Property-Assessed Clean Energy (PACE) financing
Since 2009, the Obama Administration has been working to provide homeowners the opportunity to finance solar and energy efficiency improvements at no upfront cost through a mechanism called PACE, including through the Middle Class Taskforce and by releasing a Policy Framework for PACE Financing Programs.
The Obama Administration is taking a number of new actions to allow American homeowners, including low- and moderate- income households and veterans to use PACE financing.
This innovative financing mechanism allows homeowners to benefit from energy improvements immediately and pay back the cost over time through their property taxes.
If the property is sold, including through foreclosure, the remaining PACE assessment will stay with the energy efficient property and the next owner will become responsible for the remaining PACE assessment.
The PACE initiatives announced today will unlock alternative sources of capital for low- and moderate- income Americans and veterans to scale up solar, promote energy and water efficiency retrofits, and create more resilient homes, leading to reduced energy bills, more empowered consumers, and cleaner communities.
Issuing guidance on how to use FHA Mortgage Insurance with PACE financing
For more than 80 years, the Federal Housing Administration (FHA) has provided low- and moderate- income households and underserved communities access to safe and affordable housing through FHA mortgage insurance.
Each day, more than 3,000 people close on a home for which the mortgage is insured by FHA. Today, FHA is releasing guidance outlining how properties with PACE assessments can be purchased and refinanced with an FHA-insured mortgage.
This action is intended to support renewable energy and energy efficiency investments in single family housing, support retrofits that boost resilience to climate risks, and remove existing barriers to using PACE financing.
The key requirements outlined in FHA’s guidance are – the PACE assessment does not take first lien position ahead of the mortgage and the assessment transfers from one property owner to the next, including through a foreclosure sale.
The guidance also requires appraisers to analyze and report on the impact of PACE-related improvements to the value of the property.
Unlocking PACE financing for veterans
In support of the administration's longstanding commitment to create a clean-energy economy and help Americans take advantage of clean energy technologies, the Department of Veterans Affairs (VA) is issuing policy guidance on PACE-financed homes.
The guidance will clarify the circumstances under which Veterans are able to take advantage of PACE programs in conjunction with their VA Home Loan Guaranty benefit, providing a new opportunity for veterans to participate in the clean energy economy and save on their energy bills.
Providing best practices for new and existing residential PACE programs throughout the country
DOE is releasing a draft of their updated Best Practices Guidelines for Residential PACE Financing for public comment from stakeholders, including consumer advocates, public policy leaders, and industry.
This public comment period is critical to ensuring the highest levels of consumer and lender protections. Across the nation, 15 states have already adopted residential PACE-enabling legislation.
Overall, nearly 100,000 households have utilized PACE programs to finance over $2 billion in energy saving improvements to their homes.
The updated guidelines reflect the evolving structure of the PACE market and incorporates lessons learned from various PACE programs that have been successfully implemented since the original guidelines were issued.
They provide best practices for residential PACE programs, including protections to both consumers who voluntarily opt into PACE programs, and to lenders who hold mortgages on properties with PACE assessments.
The guidelines can also be used by PACE program administrators, contractors and consumers to plan, develop and implement programs and improvements that effectively deliver home energy and related upgrades.
DOE’s updated Best Practice Guidelines for Residential PACE Financing rely upon important progress that the Department has made in a critical partnership with industry, including a formal partnership with the Appraisal Foundation to develop guidance on valuation of energy efficiency in residential and commercial buildings that was launched in 2011.
DOE is also partnering with the Appraisal Institute to integrate energy efficiency into appraisals and real estate transactions and deliver education and training to appraisers through the Better Buildings Home Energy Information Accelerator, where they have enlisted the support of the Real Estate Standards Organization, the Council of MLS, Homes.com, and National Association of Realtors.
Providing technical assistance to make it easier for states and communities to stand up smart PACE programs
DOE will provide technical assistance to support the design and implementation of effective PACE programs, including conducting a series of webinars and online workshops to facilitate peer exchange and provide access to PACE experts; conducting research on the lessons learned from state and local residential PACE programs, including analysis of the impact of PACE on community adoption rates of energy efficiency improvements and per household energy consumption, and various program design strategies, and effectiveness of PACE relative to other financing mechanisms.
DOE is also working with state energy offices, local government representatives, residential PACE industry representatives, and subject matter experts to focus on residential PACE program design (including consumer protection options) and the development and dissemination of detailed program best practices.
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