“A Tale of Two PACEs: Commercial Success vs. Residential Repose”
2012 was America’s warmest year on record. Many companies worry about their carbon footprint, and millions of consumers are willing to pay for proven energy efficiency technologies. Considering that buildings consume more than 40% of all energy used in the U.S., energy efficiency retrofits have tremendous potential to reduce waste and save money. However, these improvements often require significant upfront capital expenditures, and may take several years to pay for themselves. This capital outlay is just too much for most property owners. Additionally, lenders are reluctant to finance retrofits unsecured by the underlying property.
The Property Assessed Clean Energy (PACE) program was developed as an innovative way to solve these problems. PACE, which originated in California in 2008, is a voluntary program under which a municipality issues low interest bonds to the public. The municipality then lends the funds received from the issuance to property owners (both residential and commercial) to pay for the energy improvements.
This Stroock Special Bulletin looks at commercial PACE, which is thriving, and residential PACE, which, in the face of FHFA opposition, is not faring as well.