So I attended a session today in Las Vegas entitled "Transforming Existing Buildings Through New Media: An Idea Exchange." The primary purpose was to discuss how new media and social tools can help promote the home performance industry and associated businesses. It became clear that the industry is made up of smart, dedicated and passionate individuals and the best single place to reach those individuals is this board.
My take away from today's session: social media becomes powerful because it can rapidly organize and project (and dissect and break down as well) a message, a movement, a thought, an inkling, a swelling up, a demand, a vision.
Though many things need to done to grow this fledgling industry (largely consumer and contractor education), the one thing that can help jump start it more broadly than anything else is PACE legislation. We took a real blow last year when Home Star died and then suffered a coronary when FHFA slayed PACE.
This is the major reason why retrofit work isn't moving as fast as it otherwise would be. PACE solves the critical MONEY problem. It provides financing to homeowners and it remains tied to the home and not the homeowner. No longer does the concern "What if I move in a few years?" impact the retrofit decision.PACE is a truly novel financing program that costs the government nothing, reduces energy bills and pays auditors and contractors for their valuable services. This is why the current pending PACE legislation, which is seeking to overturn the FHFA rule, has bipartisan sponsorship and support in the House. Despite our messy politics there are areas of common agreement but the legislation needs more momentum. Your representatives need to hear from you.
The website http://pacenow.org/blog/ has all of the latest news and developments regarding the legislation and sponsors and business supporters. They have a form letter of support which is easy to fill out and e-mail to your rep. It takes 2 minutes. Let's give 'em an earful.
Hi Steve, My community tried to get PACE going and actually have the money available, but the support group fell apart so it is currently going nowhere. However, during my participation I had several questions about PACE and the direction it was headed in today's economy and basically no one was willing to answer them. Maybe the session you attended touched on some of them?
1. Our program required a 25% improvement to qualify. My question was, what's wrong with 22%, or 19%. or even 10%? My state is overzealous in their efforts to bank carbon credits (a bit of an assumption on my part) and they are willing to force home owners to overextend themselves and pay higher prices so that the state is sure to qualify for their carbon gains. Bottom line is, fewer home owners are willing to undertake extensive projects and related debt, so little or nothing gets done.
2. They bent a little in the end, but they do not like DIY improvements, again, if the work is not done by certified contractors it becomes harder to get it qualified for CC's. Yet DIY is and has long been recognized as being the number one best investment for saving energy.
3. Where PACE does fit for a certain group of people, it is not necessary for those who have good equity in their homes as a home equity loan can be very simple and are often available at a low interest rate. This approach eliminates all of the mandates and simply allows home owners to do or have done what they feel they can handle.
4. Along those same lines, SCORE is a simple energy preview that can and should identify that low hanging fruit. It should also begin the education process, the sequencing of various work, the need for combustion safety, and the various savings that can be achieved with each improvement. If that low hanging fruit were harvested in all of the homes in America the savings would be significant and the educational gains would be more than significant.
Perhaps at some point the public will come to understand that reducing their energy use pays for the work required and they will stop waiting for the next, better government giveaway and get the work done.
Good points. A few comments in response:
1. I think many PACE programs probably put a 25% improvement threshold in because it is usually seen as reasonably achievable, and a smaller amount will usually not justify the transaction costs. I agree with you completely that homeowners don't want to take on the debt for energy improvements. The value proposition is just not quite there - insulation and air sealing just have limited sex appeal. Even though they'll reduce energy bills most effectively, homeowners typically wonder whether it's a good investment. Will they recoup the cost if they move? PACE solves this.
2. DIY is great, but the vast majority of homeowners can't/won't/don't want to do this on their own, especially when combustion safety analysis is required.
3. Even homeowners with high home equity are often reluctant to take out home equity loans for energy improvements because dealing with the banks is extremely onerous (assuming they can even get a home equity loan at a competitive rate) and the debt is tied to them personally. PACE avoids this painful process completely and finances the asset, not the homeowner. Given the option I think the vast majority of homeowners will choose PACE. This is also a lot easier of a sell for home performance contractors - automated, low cost asset financing.
4. SCORE sounds like a great tool, but ultimately this industry is suffering from a financing problem. When developed thoughtfully, PACE is an elegant, costless way that will address 3 key problems this country has:
1. Get contractors back to work (unemployment is 25%)
2. Improve home values and durability
3. Reduce energy consumption
PACE is not panacea for the industry, but is a valuable policy tool that a large number of homeowners would be interested in.
I'll try to be gentle. Follows the numbers above.
1. IMO, A 25% benchmark encourages fraud. The answer that was finally given me from a full service contractor, He can make any home meet the 25% requirement, and the PACE representative liked that answer. I could go on but I don't like throwing mud.
2. Maybe it is our country heritage, but up here in the northeast it is just the other way around, they want to do much of the work and are insulted at the implication they aren't capable of such. The government still allows people to purchase ventless combustion heaters and whole house fans with just a watered down warning hidden in an instruction book that no one ever reads. So print up a combustion safety pamphlet (probably already done), add a super good web site on the subject, and move on. Oh and mandate a CO detector or two.
3. Apparently you have never applied for home equity :). There is a home equity line of credit. It may vary from bank to bank, but mine took less than 30 minutes, cost nothing, and they sent me a checkbook with a $50,000 open balance to use as I wish. We pay interest only, each month (currently about 3.5%) and principal when we want. I DIY or hire whomever I want, and they are usually my neighbors or people I know I can trust.
As for the debt being attached to me personally or attached to my house, PACE or home equity are both attached to the house and will be paid by whomever buys my home, not soon I hope. Transferring a PACE loan to the next buyer, to paraphrase my local broker, complicates a sale and should be avoided.
4. "SCORE sounds like a great tool, but ultimately this industry is suffering from a financing problem."
Different point of view. IMO, the industry is suffering from over financing and a lack of education. PACE is primarily an education opportunity
"Get contractors back to work (unemployment is 25%)" Now you're getting close. This isn't about energy, it's about creating jobs. So requiring 4 people to due the job of one is considered better. This isn't heart surgery, it's hammer and nail stuff, but it is the current hot topic so it is being used to spend more money than we can afford. Why does our government feel that the best business in town needs any additional support? Advertising always helps, maybe some lower cost materials (think spray foam at half the cost), but the trail of bureaucracy now necessary to provide some quality energy advice has passed ridiculous.
In short, this is "A Home Owner Financed Stimulus Program" Sorry, but we don't have room here for my full answer on this, so here's the Math: 125,000,000 homes invest on average $20,000 each and you have a stimulus of 2.5 trillion dollars. And the side benefit of reducing our energy use. Which do you think they consider more important?
"Improve home values and durability" It sounds like a nice talking point, but they need to get the real estate people on board as there is little or no added value to a home for energy improvements, everything is comps. Heck, even our tax assessor doesn't recognize energy efficiency improvements, for better or worse.
"Reduce energy consumption" :) That's where it all started and that's where it should have stayed. Our government is pushing energy efficiency too hard. They need to remember that leading our country is a much better way to get the desired results.
I guess we're just going to have to disagree. If you think our government is pushing energy efficiency too hard, there's probably not a whole lot we're going to agree on (except that I like Justin Beiber too).
As I noted, PACE isn't a cure-all, but it's one additional policy tool that a lot of communities intended to use and we have an opportunity to reinstate through bipartisan legislation. PACE is in fact a technology agnostic financing solution (I'm not sure why you would call it an educational tool). It came about because financing was and is a huge issue for contractors. I'm not sure what time zone you're in (pre-2008 or post?) but over-financing is definitely not the problem. We all know the economics of retrofits will work, but it's just a question of getting the homeowner to pony up the cash for mundane but critical items like caulk and fill. Some will open a home equity line to finance, but many will not. They've just been too chastened in the recent housing bust. PACE requires 15% equity in a home and gets capped at 10% of the home value; 68% of all U.S. homes have at least 15% existing equity. PACE is an additional arrow in the quiver. The presentation here is short and very informative.
Thanks for the kind reply, my pointed views often attract stones. And yes it is fine to disagree, it gives me a challenge over time to swing you my way?? I did say PACE was an education opportunity, but meant to say SCORE, my bad.
As for our government pushing too hard it is the old push a chain or pull a chain across your yard, one works and the other doesn't. Here is an example of pushing:
You have to have an audit, you have to use a certified contractor, and you have to meet minimum improvement levels that are fully documented, ie someone needs to take credit for those improvements.
Now, here is an example of leading. You advertise energy efficiency and you educate the public. You subsidize the cost of insulation and energy related products and you don't tie those to tax rebates, simply lower those prices at the store. People buy what they want and use it for whatever they want. CFL bulbs are a good example, they have no idea as to where I installed 50 of those buggers and I bought them with a discount at the register, but the savings on my electric bill is adding to everyone else's savings and they know it is working.
Our Gov has plenty of places where their attention needs to be acutely focused. Top of that list is a domestic source of energy and we already know where it is. Conservation is high on the list, but the residential work we do will pay for itself. Transportation and industrial use need intervention, ie why is the number one selling vehicle in America A TRUCK? Why have speed limits gone back up to 70 -80 mph? Why are the lights back on in every parking lot in America? Why does it take 20-30 years to build a new nuclear power station? Why haven't we adopted some of the known safer technology for nuclear. If we fear nuclear, then we need to be replacing the old with more reliable technology AND THEM planning a long term end to using it. Where are the transmission lines to move power around our country. Why is our infrastructure in so much trouble? In short, the government needs to get out of my house and get their own house in order.
Ask yourself why we are handing money out to people who can well afford the suggested improvements and can easily understand they will recover their investment in just a few short years. Because it buys votes and if you stand on a corner handing out money, I'm sorry to say, the people in America will grab all they can. In fact they will run to the next corner to see if there is more to be had. And if that weren't bad enough, they become addicted to the handouts and now roam the city looking for the next giveaway instead of simply going to work and getting something done.
Low income wx should continue, but every other incentive program should be banned for 20 years, then home owners would know that waiting on the street corners would be useless and you know what, they would go ahead and make their improvements and maybe even add some new granite counter tops to make it look like they did something.
In April I helped a Rockland ME couple obtain the first PACE loan in Maine. A slightly modified version PACE is now in place & working well in Maine on a statewide basis. We obtained a ruling from FHFA allowing the PACE loan to be secondary and treated like a 2nd mortgage or home equity loan. Each municipality must "opt in" but all the admin. is handled through Efficiency Maine, our state wide PUC spun off efficiency program.
IMHO hoping that municipalities will have the resources & energy to finance / admin. PACE loans is wishful thinking.
My community was one of the original towns selected by the now defunct MGEA and the committee formed as a requirement of the PACE program has dwindled to only a couple and the towns support, even though it is a requirement, has been eliminated for now. I could get involved and push the program, but I lack the confidence that it is offering enough. Money is not really the issue IMO, it's education and a supporting group for ANYONE who wishes to make improvements. When I tried to suggest we guide and advise anyone in the town that came through the door, I was told the project was for PACE only and they didn't have time to help others. Unfortunately they held 4 public meetings after their first to help people with PACE and had a total audience of 2 over those 4 meetings. That's with fliers and mailings to everyone in town.
When I spoke to one of our local real estate brokers, she wanted nothing to do with promoting PACE. In her opinion, it just complicated the sale. In fact, she didn't even want to hear about energy efficiency as it has not as yet been recognized in their evaluation process, ie, try to find a comparable sale for which to base the value of the energy efficient home going up for sale. You and I could easily work around that problem, but a real estate office has no way to calculate the benefits of the savings.
People have to understand energy use before they will understand energy efficiency.
Sorry to hear that your town was involved in the MGEA debacle.
Check out this article re: appraisal values http://www.txses.org/NTREG/dnld/AppJour99.pdf.
In my town the sharpest Realtors are on board and they actually encourage their customers to have clients get a pre-purchase energy appraisal before buying. They believe that an energy efficient home is a better value and worth more than an energy pig. Remind them that a homeowner can afford to purchase a more expensive home if it has lower energy costs than a comparable non-efficient home so long as the average monthly costs are lower for the former (taxes, energy, mortgage) than the latter.
As for PACE, it is GREAT to have another arrow in the quiver clearly yet not wise to count on using the same arrow for every shot. You must be able to clearly articulate to your customers the value of having you make the improvements - just provide a credible answer to the question "what's in it for me?"
Thanks for the condolences, you are supposed to put a :( after that. When we have coffee sometime I will share the rest of the story :O, can't put it in writing. (Bangor area)
Bookmarked and printing now for reading later, thanks.
For a home purchaser I think a solid argument can be made to have a full energy audit (not a DOE SCORE) prior to buying. Unfortunately, an energy audit is a somewhat intrusive process and doing one without the full co-operation of the current home owner can be difficult. I was once asked to do so and decided not to get involved, a lose/lose situation for me. Yes, lacking such, the buyer can simply pass and move on, but that is one of the reasons the brokers don't like including energy in the mix.
My town uses TRIO as their appraisal software and there is only a slight adjustment for anything related to efficiency. The irony is, if TRIO recognizes the improvements, their taxes go up, ouch. I have tried to discuss an energy offset where improvements could be included in the appraised value but adjusted out for say a 10 year period. Unfortunately that option is beyond a municipality's control and would have to be implemented at the state level, I might not be around for that.
I have some other ideas about how we can attach an after the fact energy value to any home, but need to give it some more thought before I attempt to suggest it. The benefit would be two identical homes (comparable homes) where one has energy improvements and the other does not could be valued differently with this separate calculation. But as we know, $10,000 worth of improvements doesn't transfer to a $10,000 increase in home value, so the added value will need some math. The math isn't difficult, but it is based upon energy costs and those vary, thus I'm looking for a more stable way to represent the improved value. Suggestions welcome.
Agreed that more arrows are better, but it needs a professional handling the PACE part, ie a loan officer or equivalent, not a volunteer on a committee.
It's been disappointing to me that what seems so obvious as the value of energy improvements runs into so much resistance. The blame for that I believe has to fall on our leadership in that they have failed to educate the masses on the need and benefits of what we do, like Biden telling the public that an energy audit is overpriced, ARGHH! IMO, people should be knocking our doors down, not waiting for the next better government giveaway.
I would have to agree with Brian and Stephen. There are allot of government programs for our industry that I have issue with for a variety of reasons. PACE is not one of them. Primarily because it is not a government program. It attaches a value to the property that gets transferred on sale and that has a definite payoff period.
There are many hurdles in our industry. Pace eliminates two major hurdles for a deep energy retrofit and or roof solar is a fantastic market through government solution my opinion.
1) Often the payback is not justified in equity.
2)Value of investment is not guaranteed on exit.
Not all folks who want or can afford such improvement are willing to risk taking a bath on exit. PACE covers a what if which is huge.
With PACE transferring the burden on sale and providing homeowner that are not upside down the ability invest in a technology that at the end of the day benefits all of society. Governed by rules that for what ever reason actually makes financial sense which is a rare bit of legislation indeed. Provides real money and real jobs to a floundering and flat economy. Does not create public debt and is paid for in its entirety by the individual owner of the property that is improved.
My goodness whats not to like?
I am angry it was killed by a banking system that got us into this mess and burdened my children's children with their greed. It was and is the best of the best programs being proposed in my opinion. I am hopeful it walks back in to applause. I support PACE 100 percent.
I'm confused on a couple of points.
"It attaches a value to the property that gets transferred on sale and that has a definite payoff period." Agreed, an added value and a necessary increase in the selling price of the home.
"Not all folks who want or can afford such improvement are willing to risk taking a bath on exit. PACE covers a what if which is huge." Taking a bath on exit?? If there is any risk, ie they spent a ton on their improvements, there is no protection from a PACE loan. The new purchasers will have to accept that debt as part of their purchase whether it added value to the home or not, thus they will factor in the additional payments as part of their cost. Same as a second mortgage that must be satisfied at closing."With PACE transferring the burden on sale" Ditto again, as the new owners and the purchase and sale will have to qualify just like the current owners. A PACE loan is still a loan and must be included in the sale of the home and satisfied at closing. If the PACE improvements didn't add sufficient value to the home, then the home owner is going to take a loss to cover the PACE loan.
Thank you for reading. I do not think you are confused you simply disagree and have a different opinion than my own.
I think that we can agree to disagree. I find that in life as well as this business disagreement leads to reflection and thought. I do not find it necessary for my friends to agree with all my opinions and while we have huge common ground the most interesting conversations are the ones we do not agree on.
I think that the Property Assessed Clean Energy success hinges on it being what is proposed an individual assessment not a second loan. Just as a bond issue that goes before the city to fix sidewalks called proposition S it is attached to the tax assessment of the property. There is an intrinsic public good that is paid for by the citizens and spread out over time and taxable properties.
The sale of the home cannot have the buyer say I don't walk on sidewalks so I refuse to pay for Prop S fees. Prop S fees come with the property take it or leave it.
PACE takes this idea and brings it to the property and Clean Energy to be transferred on sale. As the current home owner your burden is reduced not by the number of citizens in the town as a normal assessment but a guarantee by the government that the cost of this investment can be spread over time.
If PACE is going to be a second then it is not viable and I will not support it. When it was killed it was because they viewed as a second and not an assessment. An assessment cannot be forgiven and is transferred on sale just as all taxes are. This takes risk from the individual owner on the investment. Which make the program attractive in my view.
While one could argue then why not granite counter tops? I would contend that there is little long term public good associated with that improvement while grid reduction helps everybody.
I think that the educated consumer will look at these properties and not shy from them as the market awareness increases. Over time home like the ones retrofitted or built correctly from the start will most likely be at a premium and sell faster for more money with no government involvement. I hope so as I have invested time and money with that goal in mind. We are not there yet and of all the programs out there to push this idea along. I like this one best.
The next owner will need to qualify with the assessment in place. While the sellers risk is reduced it is not invisible as the overall sale price might be equal or more becuase the increased cost of the assessment. That is what happens in a free market as price is not fixed. The hope is that the property can sell at equal value of its peers and the cost is past on through the assessment of the clean energy and spread over more than one owner. Furthermore once it becomes part of the tax assessment bill itself the write off is shared for more than one owner as well.
Does it encumber the property? yes
Is it perfect? no
Can I find faults with it? yes
Am I in favor of it? yes
Your mileage might vary