Legislators introduce bill to resuscitate PACE program for green upgrades to homes

The PACE program, which made installations of energy-efficient solar panels, insulation and water conservation systems more affordable for homeowners, has been stalled by a technical roadblock.


Brad Bartz of ABC Solar carries a solar panel to be used with a pump for a jacuzzi at a home in Palos Verdes Estates in November 2009. (Jay L. Clendenin, Los Angeles Times / July 21, 2011)

A government program that helped homeowners finance and install green upgrades before a technical roadblock stalled it last year may be resuscitated by Congress.

A group of legislators introduced a bill Wednesday to jump-start the Property Assessed Clean Energy program, known as PACE. The program made installations of energy-efficient solar panels, insulation and water conservation systems more affordable.

More than half of the country had approved some version of the program in which local governments provided funding for home improvements. Homeowners paid back the funds in installments through surcharges on their annual property taxes.

But the Federal Housing Finance Agency balked at a component of the program, saying that in case of a foreclosure on the property the PACE funds would have to be paid back before the mortgage.

The housing authority, which oversees mortgage finance giants Fannie Mae and Freddie Mac, warned last summer that PACE posed "unusual and difficult" financial risks for lenders. The lenders in turn told homeowners that participating in the program could be a violation of their mortgage terms and could be grounds for foreclosure.

Since then most governments have backed away from the program.

But the PACE Protection Act from Reps. Mike Thompson (D-St. Helena), Dan Lungren (R-Gold River) and Nan Hayworth (R-N.Y.) would force the housing finance agency to rescind its warning. To mitigate the potential risks of homeowner defaults, the trio worked in more stringent standards for PACE applicants, such as lowering the scope of green improvements relative to property size.

"We've tried everything to work with them, but they're just being stubborn," Thompson said of the housing finance agency. "It's come down to introducing legislation, which is not the route we wanted to go."

The agency said in a statement that it was willing to offer input on PACE-related legislation. However, it said it "continues to have concerns with the first lien created by certain PACE programs and the absence of effective consumer protections."

The program helped create construction jobs in Sonoma County when the housing industry was free-falling elsewhere, said Thompson, who represents the region.

The nearly 2,500 PACE projects on the books helped generate income and tax revenue for municipalities — about $60,000 per home, according to a new study from advocacy group PACENow. Owners of retrofitted homes also generally had lower mortgage default rates.

"Not only do you get the lower utility rates and contributing to saving on energy costs, it's really done wonders to put people to work," Thompson said. "It's a huge answer to the question of how we solve this energy problem."

Other financing options have begun to spread as PACE struggles to find its footing.

Lease programs from installers such as SolarCity and Sun Run eliminate the upfront costs of solar panels. A company called One Block Off the Grid, which arranges group deals for solar installations and offered a Groupon special last year, announced a nationwide discount this week.

Sponsors of the new bill say the wider array of options will increase rather than hinder demand for PACE by making energy efficiency seem more affordable.

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