A Turning Point For PACE Financing
A Turning Point For Property Assessed Clean Energy (PACE) Financing
As you may have read in my first REW post, PACE financing solves the problem of homeowners being unable to make crucial home improvements due to high upfront costs. PACE administrators like my company, Renew Financial, use private funds to fully pay for the entire costs of the home improvement, while the homeowner pays nothing at the time of the upgrade. The homeowner then repays the cost of his or her home upgrade through a voluntary new line item on their property tax bill. With PACE, homeowners can then repay the financing over a long period of time, making payments easier on a family’s budget.
During the past year, Renew Financial has worked closely with the California Legislature to strengthen PACE financing standards and consumer protections. Having developed the PACE financing model in 2007 when I was Chief of Staff to the Mayor of Berkeley, I brought a focus on serving the public to my company’s operations. Since the founding of Renew Financial nearly a decade ago, consumer protections have been at the heart of our business.
In September of this year, two bills – AB 1284 and SB 242 – were both approved nearly unanimously by the California Assembly and Senate. Then in October, they were signed into law by Governor Jerry Brown. PACE, which is already one of the most successful energy financing programs in California history, just got even better.
AB 1284 and SB 242 strengthen consumer protections for homeowners and empower California’s Department of Business Oversight (DBO) to oversee the PACE industry. This is a big step forward for PACE in California and for other states looking for model PACE standards.
Since creating the first PACE program in 2008, BerkeleyFIRST, I’ve come to understand the crucial role diverse coalitions play in creating strong, durable policy. Key stakeholders who were instrumental in shaping this year’s bills include consumer advocates, bankers, real estate professionals, environmental and clean energy groups, small business leaders and the DBO itself. The collaborative, year-long effort by Senator Nancy Skinner and Assemblyman Matt Dababneh was also essential. I am grateful to everyone who worked so hard this year to strengthen PACE for homeowners. The passage of these new standards is truly a turning point for PACE financing.
The new standards in AB 1284 and SB 242 include:
AB 1284, sponsored by Assemblyman Matt Dababneh:
- Regulatory Framework and Licensing. The California Department of Business Oversight (DBO) now has oversight over licensing and standards for the PACE industry. DBO regulates banks, credit unions and other non-bank lenders in California.
- New Underwriting Standards. New underwriting standards will include an evaluation of a property owner’s ability to pay, to determine that property owners can meet their annual PACE obligation in addition to their current debt obligations and basic household expenses.
- Tightening Existing Underwriting Standards. The bill strengthens and standardizes current underwriting standards for PACE financing based on home equity and on-time mortgage and tax payment history. It also requires that the most accurate Automated Valuation Models are used for establishing the value of the home.
SB 242, sponsored by Senator Nancy Skinner:
- Telephone Confirmation for all Homeowners. PACE program administrators will be required to call every property owner to confirm that he/she acknowledges and agrees to the key terms of their PACE financing prior to the commencement of work on the property.
- Right to Cancel. Homeowners will have a 3-day right to cancel their PACE assessment after they sign their contract.
- Marketing Standards. Program administrators are prohibited from paying “kickbacks” to contractors and may not pay incentives to property owners in exchange for PACE financing.
- Reporting Requirements. New reporting requirements will require PACE program administrators to report data to local government partners, including estimates on energy and water savings, local economic and job impacts, and the types of products installed and age demographics of homeowners served.
Taken together, these provisions are designed to ensure that every homeowner’s PACE experience is a positive one. At Renew Financial, we stand behind the industry’s longest record of establishing internal consumer protection policies. But recent news shows that these standards need to be enforced industry wide. There is no room in the PACE industry for bad actors, and we are proud to have supported legislation that will protect consumers. It is my hope that this set of policies will serve as a model for other states, whether already operating residential PACE programs or considering them.
Since PACE started in California, it has grown into a nationwide industry that has provided reliable, upfront financing to more than 150,000 families to make critical energy, water efficiency and renewable energy upgrades to their homes. In California alone, high efficiency air conditioners, solar panels and other measures financed by PACE will generate more than $3 billion in utility bill savings, will decrease carbon dioxide pollution by 4.2 million metric tons and will save 9 billion gallons of water. California’s PACE programs have also helped to create more than 15,000 local jobs in the state. Since they involve working on local homes, these are reliable jobs that cannot be outsourced overseas.
SB 242 and AB 1284 will ensure that PACE continues to work for the people of California, driving economic growth while protecting our environment. The billions of dollars in PACE-financed home improvements have helped hundreds of California communities – using no public dollars – to enable their residents to live more comfortably and efficiently. This new legislation ensures that PACE and Renew Financial can continue to impact California communities positively for many, many years to come.