Will PACE financing damage the mortgage market?

Michael Giberson

Tom Konrad examines the question, “Will PACE financing damage the mortgage market? PACE is “Property Assessed Clean Energy” financing, a financing mechanism through which cities sell bonds and then loan the proceeds to property owners to improve building energy efficiency.

As noted here previously, I’m not opposed to the PACE approach to investments in energy efficiency in principle, but I have a host of worries about how PACE gets practiced. If PACE is just a way for homeowners to scrape up subsidies – i.e. to improve their properties and make their neighbors’ pay for it – then I’m against it.  If my local government was proposing such a program, I’d worry that mismanagement would lead to future obligations for non-participating taxpayers. What is the mechanism that ensures civil servants will be effective loan officers? Will they get bonuses for doing good work or just be paid the same salary and promoted on schedule whether or not the loans they approved achieve intended results?

Actually, if I add up all of my practical concerns, they probably sum to my being opposed to PACE in principle. I’ll be surprised if, ten years in, a thorough audit of PACE programs revealed that their benefits exceeded their costs for all people involved.

Maybe the more interesting question is how and why the retail energy and home mortgage marketplaces became so bollixed up that a municipal-government-sponsored home-improvement-lending tax authority work-around is seen as a promising way to help consumers make sensible energy-related improvements to their homes.

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2 thoughts on “Will PACE financing damage the mortgage market?

  1. The country is broke. California is broke. LA is broke. The people who live in LA are broke. They do not have jobs. Their houses are worth less than the amount they owe. They are not credit worthy. LA is not credit worthy. California is not credit worthy.

    When you are broke, you need to cut your spending, pay off your debts, and not borrow more money. Ideas for borrowing money are harmful to people who are broke.

    I am sticking with it. This is a horrendously bad idea. I am not sure if they really can prime pre-existing first mortgages, but if worries about kill this program, so much the better.

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