PACE Offers Innovative Financing for Home Improvements
Measures to improve a home’s resistance to storm damage and/or enhance energy efficiency are often deterred by formidable upfront costs. The Property-Assessed Clean Energy (PACE) program seeks to remedy that situation by offering an innovative mechanism for financing windstorm damage protection and energy efficiency improvements on private property. Local governments, state governments or other inter-jurisdictional authorities, when authorized by state law, fund the up-front costs of improvements on commercial and residential properties.
Property owners who voluntarily choose to participate in a PACE program repay their improvement costs over a set time period—typically 10 to 20 years—through property assessments, which are secured by the property itself (at least 10 percent equity required) and paid as an addition to the owners' property tax bills. It is non-credit based financing, with no minimum FICO score required (but the property owner must be current on mortgage and property tax payments with no bankruptcies).
A PACE assessment is a “debt of property,” meaning the debt is tied to the property as opposed to the property owner(s), so the repayment obligation may transfer with property ownership, if the buyer and new first mortgage holder agree.
Florida is one of the most active PACE markets in the nation. PACE has logged an estimated impact of $805.3 million in completed energy efficiency and resiliency projects across the U.S., with $216.4 million in Florida alone. It also claims 3,240 new jobs created and sustained in Florida, as well as $22.2 million saved in insurance claims.
Unlike some other states, PACE programs in Florida are not run by governments but rather by third-parties such as the Ygrene Energy Fund through its program YgreneWorks™. As the first and largest PACE provider in Florida, Ygrene has now funded more than 2,000 projects in Miami-Dade and Broward Counties, and enabled renewable energy efficiency and hurricane resiliency retrofits for businesses, homeowners and multifamily housing across the state. PACE-financed projects in Florida are overwhelmingly residential (96 percent) and are for high-efficiency impact windows and doors (47.2 percent) and roofing (32.8 percent).
Rafael Perez of the Ygrene noted that more than 50 percent of YgreneWorks projects in 2015 in Florida were for “hurricane preparedness,” including impact resistant windows, doors and roofing, foundation strengthening and secondary water barriers. In the Miami-Dade district, hurricane resilience projects are even higher, accounting for close to 75 percent of retrofit projects.
In the AAMA Southeastern Region, Florida makes the PACE program available for both homes and commercial properties. It is also active in Atlanta, Georgia. PACE is not currently active in Alabama, Louisiana, Mississippi and Tennessee. PACE enabling legislation for commercial only has been passed in the Carolinas, Texas and Virginia.
Perez provided commercial and residential case examples, in which energy savings amounted to about 35 percent due to the measures installed. An example residential case study turned a project valued at $60,000 into 48 percent property insurance savings and 36 percent monthly energy savings. Solar panels installed in another home netted 96 percent energy savings for a $21,000 investment.
On the commercial side, Brandsmart USA, a chain of consumer electronics and appliance stores based in Hollywood, Florida, has become the biggest commercial user of PACE funds in the state so far, with projects totaling $5 million. Brandsmart already is “cash-positive” on PACE at its south Miami-Dade store after the first year, saving about 10 percent more on energy bills and maintenance than it costs to back the money – and all without paying a dime upfront.
Such results demonstrate that in most cases, PACE loans pay for themselves through the costs saved by the improvements financed.