New Federal Housing Administration PACE Guidance Released

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This week, the Federal Housing Administration (FHA) announced clear guidance that will expand access to renewable energy, energy efficiency, and other home resiliency projects for American homeowners. The guidance, signaled last August by President Obama and the FHA, allows residential Property Assessed Clean Energy (PACE) assessments to interact with single family home mortgages secured by the FHA in the event of purchases, refinances, and loan modifications. The first specific federal housing policy endorsement of PACE recognizes that PACE is solving a marketplace failure no other form of financing is solving at scale, and builds momentum for the expansion of PACE.

Per the Administration’s press releaseIn order to enable homeowners seeking clean energy technologies in their homes to leverage a range of financing options, the Federal Housing Administration (FHA) today announced guidance that makes clear the circumstances under which it will insure mortgages on properties that include Property Assessed Clean Energy (PACE) assessments. FHA will now approve purchase and refinance mortgage applications in states that treat PACE obligations as special assessments similar to property taxes. Read more about FHA’s new guidance.

FHA’s action is part of a larger Administration effort to expand access to clean energy
technologies to every American family with the option to transition to solar energy and make improvements to their homes to cut their energy bills. Read more.

PACE is showing promise as an effective way to finance energy efficiency, renewable energy, water conservation, and other resilience upgrades to homes, including new heating and cooling systems, lighting improvements, solar panels, water pumps, and insulation. PACE pays the costs for such enhancements and is repaid through an assessment added to the property’s tax bill. State and local governments sponsor PACE financing to encourage energy efficiency, solar energy deployment, advance resilience, create jobs, promote economic development, and protect the environment.

“Today, we’re seizing the opportunity to shape a cleaner and more sustainable nation,” said Ed Golding, HUD Principal Deputy Assistant Secretary for Housing. “Using PACE, families will be able to make their homes more energy efficient and sustainable in the long run, while still keeping their costs affordable today. As PACE programs continue to develop across the nation, the positive impact on families, jobs, and the environment will only grow.” Continue reading the FHA press release here.

PACE financing allows homeowners to access 100 percent of their financing for energy efficient home improvements up front and then repay the entire cost of the project over time through their property taxes. The cost of the project is repaid at a fixed rate over a term based on the useful life of the installed product(s).

In California, the birthplace of PACE and its first widely successful residential market, more than 90,000 homeowners have chosen PACE financing. ResidentialPACE has created more than 15,000 clean energy jobs and generated more than $3 billion in local economic impact. PACE is projected to save homeowners more than 10 terawatt hours of energy, lowering utility bills by $3 billion, and reducing carbon emissions by more than 3 million tons and water consumption by almost 5 billion gallons. Residential PACE is also now available in Florida, and will soon expand in Missouri and Colorado as well.

Today’s guidance is a significant step forward in balancing dual national goals: expanding renewable energy and energy efficiency, and protecting our housing finance system. This Federal guidance gives clarity to state and local governments enacting or adopting PACE legislation, for the first time recognizing PACE as any other property tax assessment, not as a conventional loan product.

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