Will McDermott is editor of Scotsman Guide Residential Edition.
Reach him at (800) 297-6061 or firstname.lastname@example.org.
Executive director, PACENation
By Will McDermott
David Gabrielson is executive
director of PACENation, a national
advocate for Property Assessed Clean
Energy (PACE) financing. Gabrielson
was introduced to PACE in 2009
while helping to develop Energize Bedford, an energy-efficiency
financing program and precursor
to New York’s Energize New York
commercial PACE program. Gabrielson also has spent more than 20 years
as an investment banker for state
and local governments, financing a
wide range of capital facilities and
programs at Credit Suisse, First Boston
and J.P. Morgan. Gabrielson earned a
bachelor’s degree in economics from
the University of California at Berkeley
and holds a master’s degree in public
and private management from Yale
PACE financing is experiencing growing pains
Property Assessed Clean Energy, or PACE, financing has been in the news a lot lately. This innovative financing
tool allows homeowners to make energy-efficiency improvements as well as health- and safety-related upgrades to their homes without taking out a second mortgage. Examples of the latter include seismic-strength-ening improvements in California or wind-hardening improvements in Florida.
PACE improvements are paid for through an assessment on the homeowner’s property taxes. This has been a
point of contention between PACE advocates and some in the mortgage industry because the PACE tax assessment typically takes a first-lien position ahead of any mortgage liens. We talked with David Gabrielson, executive director of national advocacy group, PACENation, about recent efforts to regulate PACE.
FHA recently stopped insuring home loans with PACE financing attached. What impact will that have?
In 2016, after a year of exhaustive analysis of PACE and its impact on mortgages for which the Federal Housing
Administration [FHA] had some involvement, the FHA came to the conclusion that PACE was a legitimate use of
the assessment power and that it didn’t constitute an issue or a problem for them. That position was reversed
earlier this year, which of course was disappointing to the PACE world. I think in the broad scheme of things, it’s
not that impactful. You don’t want to give up ground but, on the other hand, after the FHA’s embrace of PACE in
2016, it’s not as though that, in and of itself, resulted in a big surge in residential PACE projects.
How about the new PACE regulations enacted in California last year?
Assembly Bill 1284, Senate Bill 242, signed into law by Governor Brown, were largely shaped by PACE market
participants because providers of PACE financing embrace the need for strong consumer protections and those
bills create in California a regulatory framework that the PACE industry favors. … PACE is a very powerful financing tool. It can be a very good thing for homeowners, but it has to be used appropriately and homeowners need to
know what they’re getting and what they’re getting into, and that they can repay it.
We think, and the industry thinks, that these are very positive steps. All of those things that PACE providers need
to do take time, and I think the industry is adjusting to these requirements and that has had an impact and will
continue to. But we [PACENation] think this is necessary and very positive.
Would those California laws be a good framework for federal PACE regulation?
The core of PACE — the foundation of PACE — is that states authorize the use of PACE, and then local governments make decisions about whether they think that PACE is something they want to offer in their local communities. Every state is different. Every state has a different constitution and different laws, and PACE has really been
a state and local government initiative. … I think that regulation could be done at the federal level — and we’ll
see where that goes — but we think we’re going to be seeing more legislation addressing the kinds of things
that the California legislation addressed in other states around the U.S.
Is PACENation working with other states on such legislation?
In terms of what is happening in other states, we tend to be responsive. We work with groups like NASEO, the
National Association of State Energy Offices, for example, who have had a number of webinars on PACE for their
members that we have participated in. … People know we’re available, and if they ask for our thoughts and
advice, we’re happy to share. … We’re in the mix. I wouldn’t say that we’re leading those efforts.
What would you like mortgage originators and lenders to know about PACE financing?
A study done a few years ago by an independent third-party housing expert — Laurie Goodman — showed that
PACE homes, taking into account the assessment payment, sold for higher prices than similar homes without
PACE. … So, the optimist in me thinks that with experience, with data, with better understanding, the mortgage
industry could well come around to saying, “This isn’t a bad thing for our portfolio of assets. It’s a good thing.”
Look, nobody likes to find themselves in a lower position on the repayment stack, but the PACE assessment
that comes before them is only the payment in arrears, so we’re not talking about the entire PACE obligation
being paid off if there’s a problem on the house. We haven’t seen any evidence of this particularly harming the
mortgage industry in any way, and so I hope that over time, the industry and the mortgage lenders will come to
common ground and we’ll be able to move forward without lenders in opposition. n