Called the Property Assessed Clean Energy program or PACE for short, it allows homeowners to borrow tens of thousands of dollars for energy-efficient or hurricane-resistant improvements to their home with no money down and no credit check required.
MIAMI — A decade ago, if a Floridian wanted extra cash to replace a roof, install solar panels or a brand new air conditioner, the most common choice was a bank loan. But for the last few years, homeowners also have had a controversial new option.
Called the Property Assessed Clean Energy program or PACE for short, it allows homeowners to borrow tens of thousands of dollars for energy-efficient or hurricane-resistant improvements to their home with no money down and no credit check required. Instead, a new type of private lending industry — dominated in Florida by the company Ygrene Energy Fund — collects payments through property tax bills.
Many business and political leaders — including in Miami-Dade, which leads the state in PACE loans — have embraced the program as a key to covering the tremendous price tag associated with adapting to climate change.
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The program has produced billions of dollars of investment in solar power and hurricane readiness across the state along with, advocates say, a significant cut in carbon emissions.
"PACE financing has become an essential tool for homeowners, for local governments, for state policymakers to incentivize as many people as possible to address the risks for natural disasters and climate change," said Mike Lemyre, senior vice president for government affairs at Ygrene, which controls about 80 percent of Florida market and has become a familiar name through a television and radio advertising campaign.
But the program also has a rising number of complaints and critics, who contend the agreements — which amount to a lien on a home — can hurt some consumers, particularly the elderly and low-income at risk of getting in over their heads financially. Currently, there are no statewide laws requiring PACE providers to explain the costs of the improvements, check if the people who sign up can actually afford to pay back the money or understand the terms.
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"It's getting bad. It is bad," said Mike Fasano, the tax collector for Pasco County and a self-described watchdog for the program in the state. "There's nobody in the state — no agency, no entity, no one — that a homeowner can go to with issues with these PACE loans."
In response, California, which pioneered the loan-like product, hit the industry with major new regulations, including requiring lenders to make sure homeowners can afford the tax and designating a state body to oversee the program.
But in Florida, where those protections don't exist at the state level, the program is booming.
Ygrene sees big growth
A new study from the University of South Florida — funded in part with about $9,500 from Ygrene — makes a case for the PACE program's benefits. It found that since 2013, Ygrene's projects alone have reduced greenhouse gas emissions in Florida equivalent to driving 114,000 cars for a year and saved enough electricity to power 78,000 homes for a year.
Using an economic model that Ygrene developed, the researchers found that contractors have made about a billion dollars from the program, homeowners have saved more than a billion dollars in insurance premiums over the lifetime of the improvements, and that "soup to nuts" economic impact of Ygrene in Florida tops $2 billion.
The study also found Ygrene — and therefore, PACE — is exploding in Florida. From 2013 to 2018, the company signed $400 million worth of contracts with Florida homeowners. From August of 2018 to November 2019, Ygrene's data show it's signed another $342 million.
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That makes private investment funneled through the state-sanctioned PACE program a valuable tool for local governments, many of whom are counting on state or federal cash to cover the high price of climate adaptation, said Pradeep Haldar, an adjunct professor at the Patel College of Global Sustainability at USF and one of the authors of the study.
"If you're going to be dependent on federal money that could take a long period of time to happen and to implement," he said. "This is a very, very fast way."
Although it's one of the less popular choices in the program, the study found that solar investment in Florida jumped 150% during the 16 months researchers analyzed.
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"That was a big indicator that the public is ready to invest their own dollars on solar panels," said Zachary Oliphant, one of the study's co-authors and a graduate student in USF's department of criminology.
The 16-page report dedicates one paragraph to criticism of the program, noting that because the federal government won't buy a residential mortgage with a PACE lien on the property, PACE "may result in homeowners having difficulty selling their home or refinancing their mortgage." Originally, PACE programs charged customers a fee if they paid off their agreements early, but that has since been discontinued.
In response to the complaints from around the state, Lemyre said Ygrene's track record is "very strong," and that they have a "100 percent" resolution rate. He also noted that it's Ygrene's policy to call customers and explain the contract before they sign it.
"At least according to our research, PACE has far lower complaint rates than any other home improvement financing that we've been able to find," he said. "Approximately 2 percent of our customers file a complaint of some sort. It's overwhelmingly related to workmanship."
Controversy in the counties
But around the state, some Florida counties have taken steps to guard consumers against what one Collier County commissioner called "a defective program." In that county, commissioners banned all residential PACE activity, the Naples Daily News reported.
In Pasco County, the tax collector got so many complaints about the program that his office hired someone to contact every new person who signs up and explain PACE in more detail. They also have customers and PACE operators sign a disclosure form that spells out "the good, the bad and the ugly," Fasano said.
Last year, St. Lucie County voluntarily adopted the stricter standards first set in California that require PACE operators to check the credit of potential customers and make sure they can afford the higher tax bills.
In Miami-Dade, the largest PACE market in the state, County Commissioner Dennis Moss drafted a form that all new PACE clients would have to sign. It spells out the dangers (losing your home, having to pay off the loan before you can refinance or sell the property) and the full price of the improvements. Moss tabled the bill in July.
In Miami-Dade, calculations by the tax collector's office show the number of people who fell behind on their taxes after getting a PACE lien has steadily risen as the program has become more popular, but the total number of people in distress has hovered around 1%.
In 2018, about 8,000 residents had PACE liens and 103 fell behind in their taxes. The office estimates that of the nearly 12,000 homeowners who had PACE liens in 2019, about 141 will have trouble with their taxes.
So far, efforts to build in more consumer protections have failed in Tallahassee, despite urging from politicians around the state.
Last year, Miami-Dade passed a resolution urging lawmakers to expand the program to cover seawall replacement and converting homes from septic tanks to the sewer system, two pricey upgrades that will become even more necessary as seas rise.
Commissioner Rebeca Sosa, the resolution's main sponsor, said her legislation asked lawmakers to make sure new policies also forced PACE providers to disclose all costs upfront.
"That is the problem in the past," she said. "In some other programs, it comes as a surprise."
South Florida Democrats Barbara Watson and Jose Javier Rodriguez introduced bills doing exactly that this year — expanding the program to cover sea walls and septic tanks as well as also enforcing more consumer protections — but they haven't budged. Another pair of bills, designed to reform the program and slip the PACE loan into second position behind the mortgage, also withered in committees.
"Those bills would have fundamentally changed the nature of the product," Lemyre said. "That would greatly reduce the access to what has become one of the most affordable products for these kinds of measures."