In January, the Obama administration announced a new partnership with the state of California to promote energy efficiency and renewable energy in the multifamily housing market. As part of this new agenda, President Obama established a target of 100 MW of renewable energy across federally subsidized housing by 2020. The program aims to deliver both climate change and economic benefits, estimating that improving energy efficiency in the country’s subsidized multifamily homes by 20% would deliver a $7 billion annual savings and a reduction of 350 million tons of carbon in 10 years.
Property Assessed Clean Energy (PACE) financing will have a big role to play in achieving the goals of the White House and the state of California. PACE programs enable customers to finance up to 100% of an energy efficiency or renewable project and repay the debt as a property tax assessment over a period of up to 20 years. These programs are locally defined by city or state legislation.
The off-balance sheet financing model hit a major roadblock in 2010 when the Federal Housing Finance Agency (FHFA) put residential PACE programs on hold over a battle initiated by Freddie Mac and Fannie Mae over the first lien status of the energy efficiency debts of a PACE-funded project. The FHFA argued the PACE debts put a heightened risk of default on home mortgages and that Freddie Mac and Fannie Mae should not back mortgages on properties with PACE debt.
Four years later, FHFA has not formally changed its stance, but PACE programs are once again funding residential projects. The government of California was so certain the program did not add default risk that the state legislature passed SB 96 in 2013. SB 96 established the PACE Loss Reserve Program and ultimately rejuvenated programs throughout the state. California is not alone in the local drive for PACE financing. In fact, according to PACENow, the non-profit advocate for PACE financing, there are over 25,000 PACE projects underway across the United States, and 18% are supporting improvements in the multifamily housing segment.
The opportunity for energy management in the multifamily market is opening the door to growing business in the private sector, as well. For example, Bright Power, a company specializing in comprehensive energy management solutions for multifamily housing, including energy audits and benchmarking, energy efficiency upgrades, and solar, announced a $5 million round of financing that will help support the company’s entry into the California market. The overall buildings market is ripe for the adoption of renewable energy and investment in energy efficiency, and innovative financing models are helping customers overcome the upfront capital challenge. An upcoming Navigant Research report will examine the evolving market for energy efficiency financing as a part of Navigant Research’s Building Innovations syndicated research service.
Tags: Building Innovations, Building Systems, Energy Efficient Buildings, Finance & Investing
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