By now, you’ve seen us talk plenty about PACE, the popular finance model that helps property owners overcome the upfront costs of green retrofits and boosts local job growth in the process. (In case you have missed it, welcome back, and check our PACE resource page for more info). You’ve probably also heard that Fannie Mae and Freddie Mac issued letters suggesting that property owners they lend to may be prohibited from participating in PACE programs (not insignificant considering that together these two organizations back around half of U.S. home mortgages). Then just last week, the lenders’ regulators at the Federal Housing Finance Authority (FHFA) issued a statement further mischaracterizing the programs and their risk to lenders. This all stops PACE programs dead in their tracks, attacks a long-standing local government authority, and throws a massive wrench in American green job growth and investment. Not good.
Over the past few months, the FHFA and its lender compadres have raised a number of concerns about PACE programs, which are a new twist on a century-old local government authority to finance projects that benefit the public good. Through deliberate discussion and careful analysis with administration officials and other stakeholders, each of those concerns was subsequently resolved as adding near-zero risk to the mortgages. And yet Fannie, Freddie and the FHFA have continued undermining PACE.
Enough talk. It’s time for legislative action to keep these quasi-public entities — themselves the subject of much scrutiny for their role in the subprime mortgage crisis — from putting the brakes on green economic recovery. That counter-attack is now in full swing.
Leaders in Congress are stepping up to the challenge. Just moments ago, Representative Thompson (D-CA) introduced “the PACE Assessment Protection Act,” which would require Fannie & Freddie to use underwriting standards that “facilitate the use of property assessed clean energy programs to finance the installation of renewable energy and energy efficiency improvements.” That’s House-Bill-speak for making sure that Fannie and Freddie can’t deny or trigger defaults on mortgages for upstanding PACE participants. We expect to see their colleagues in the Senate follow suit with their own PACE legislation.
Other policymakers from all levels of government and both sides of the aisle have joined the fray to protect local governments’ rights to implement PACE. On Wednesday, California’s Attorney General filed suit against Fannie, Freddie and the FHFA. That comes a day after the town of Babylon, New York, one of PACE’s early adopters, announced its intention to sue as well. Leaders from Governor Schwarzenegger (whose letter is most impressive when read in Terminator-style accent) to Governor Ritter, from Mayor Newsom to Mayor Bloomberg, are urging positive action (see the full roster of high-profile correspondence at PACENow.org)
Hundreds of organizations including businesses, municipalities, and non-profits like Vote Solar are voicing support for legislation. We could use your help too. If you’re representing an organization, please check PACENow.org to find contact information for your Federal Legislation Outreach Team Leader. If you’re a concerned citizen (and who isn’t), take action here. Your elected officials in Congress need to hear that you support PACE legislation.
A bit more about all that’s at stake . . .
Vote Solar, NRDC and other partners have helped enable PACE programs in more than 20 states nationwide (and counting). With strong support from the Obama administration, $150 Million in federal funds has been allocated to PACE programming. And cities and counties from coast to coast have made moves to get PACE programs up and running for their residents. By putting boots on roofs and hammers in hands, these green retrofits would create thousands of local jobs. Even modest estimates for national PACE implementation expect the creation of approximately 160,000 long-term, green jobs for our economy. Fannie, Freddie and FHFA have taken aim at one of the most significant national efforts we’ve ever seen for driving green job growth, energy bill savings and greenhouse gas reduction in our built environment.
And as if the future of our environment and our economy don’t put the stakes high enough, Fannie and Freddie’s success would also deal a significant blow to local government rights. Local governments have the constitutional authority to assess property taxes and use those taxes to pay for projects that benefit the public good. For over a hundred years, cities and counties have been using a widely adopted mechanism of land-secured financing to make improvements to sewage systems, sidewalks, and other projects that serve a public purpose. PACE programs use that same authority to finance energy efficiency, solar, water conservation, and other approved green retrofits on private property. If Fannie Mae, Freddie Mac and FHFA strip away these special financing districts for clean energy, it also calls into question the other 37,000 special assessment districts allowing public improvements like sewers and sidewalks.
PACE is not a perfect solar silver bullet for every resident of every city. But we at Vote Solar strongly adhere to the premise that the more business models, financing options and product offerings available, the better chance we stand in making solar a cost-effective, mainstream energy source. By tapping a new pool of capital and marrying efficiency with renewables, PACE is one model that offers a vision of entirely new scale and scope. And as federal climate and energy legislation continues to languish, the true value of this type of local tool for greenhouse gas reduction becomes more and more evident.
We think PACE deserves to move forward. We hope you’ll join us in asking Congress to make sure that Fannie, Freddie and FHFA don’t stand in the way.