PACE Financing Is the Solution to America’s Silent Housing Crisis

April 5, 2017

In January, my company, Renew Financial, announced it had financed over $1 billion in clean energy and energy efficiency upgrades. It is an exciting and important milestone. In 2008, after inventing Property Assessed Clean Energy (PACE), I started Renew Financial with visionary and determined people who believe in the power of this financing product. No other financing tool has the ability to truly transform our energy use and democratize access to clean energy.

PACE is a simple concept: empower property owners to finance the entire cost of certain efficiency and renewable energy upgrades to their homes and businesses, and then gradually repay those costs as a line item on their property tax bill. The concept may be simple, but the goal is big: allow everyone to live more comfortably and affordably by embracing energy efficiency and renewable energy projects. This goal is aligned with public demand — poll after poll shows Americans want more clean energy and energy efficiency.

But behind the scenes, PACE is also leading the charge to solve what should be seen as nothing less than another housing crisis. Studies have shown that over 25 percent of residential energy use in the U.S. could be eliminated — for free — with energy retrofits. The cost of the retrofit can be more than made up in energy savings. The reality for many homeowners, particularly those with homes over 40 years old, is that even greater savings is possible.

Our nation’s housing fleet is aging and needs a serious upgrade. Nearly 30 million owner-occupied homes were built before 1970, according to the 2013 American Housing Survey. This means nearly 40 percent of all owner-occupied homes in the country were built in 1969 or prior. We hear it repeatedly from policy makers: “America needs better infrastructure!” — and few can disagree. But you seldom hear policy makers talk about the median age of houses — actual physical houses — being over 40 years old. Or note that millions of homes in this country were built a century or more ago.

70 percent of American families know that energy efficiency is of crucial importance, and many are concerned with serious energy efficiency problems at home. Too many families live in houses with inefficient appliances, drafty attics, old leaky windows; or in houses that would save money with solar panels or a solar water heater. Every year $130 billion is wasted on unnecessary energy costs.

An ACEEE report highlighted in USA TODAY, states "[United States] energy consumption per person, 6.8 tons of oil equivalent, was more than three times China's 2 tons and was only exceeded by Canada's 7.2 tons." In fact, the U.S. ranks near dead last on energy efficiency. And the environmental impact of saving that energy is huge. To combat climate change, drought and environmental degradation, there really is “no place like home” to make an impact. PACE is the powerful tool we need to do so.

PACE financing earned Scientific American’s recognition as one of the “top 20 ideas that can change the world” because many of the energy-saving upgrades we finance would not be possible without the no-money-down structure that PACE provides. Instead, homeowners and businesses would be forced to pay for upgrades using credit at highly variable interest rates — or, even more likely, forego the upgrade altogether. But with PACE, even accounting for gradual repayment of the renewable energy or efficiency project, homeowners save money instantly by reducing utility bills, often to the tune of 30 percent annually.

These savings can make a big difference for many families. The sad truth is that incomes have stagnated for many Americans and over 60 percent of Americans have less than $1,000 in their savings account.

A home upgrade that costs in the range of $5,000 to $25,000 can provide a homeowner or business owner a significant return on investment over a 10- or 15-year period. But the upfront price tag will prevent most Americans from taking advantage of this opportunity. PACE provides an opportunity for private industry to help these consumers who would otherwise be stuck with inadequate home energy appliances and technologies.

And we are making economic and environmental progress on an enormous scale. Our transparent financing tools have helped to:

  • Conserve 877 million gallons of water — enough water for 48 million showers
  • Realize over $1.5 billion in energy savings over the life of its projects
  • Cut total greenhouse gas emissions by 2.3 million metric tons — equivalent to the yearly emissions of 485,000 cars
  • And create more than 15,000 jobs across 15 states

Success stories like this are why a Member of the California Energy Commission recently wrote that PACE was the “single most successful” policy tool the state has for promoting energy upgrades.

Unfortunately, there are some still out there trying to prevent PACE from expanding and serving more homeowners. Just like we have seen incumbent industries work to slow the spread of wind and solar, there are self-interested opponents working to ensure that PACE is not a financing option they need to compete against. But PACE can’t be stopped. It continues to gain momentum across the country, with 33 states having passed PACE authorization laws. Regulators and mortgage entities have begun to change their tune as well, including the strong support for PACE in the guidance from the Federal Housing Administration (FHA) in July 2016.

Going forward, what matters most for our company and the rest of our fledgling industry is continuously improving PACE — building on its success while adding new consumer protections and oversight. PACE is already one of the most, if not the most, consumer-friendly financing products on the market. We are going to make it even better.

More financial security for Americans. More comfortable homes for American families. Reducing greenhouse emissions. PACE is making this possible.