Fannie Mae and Freddie Mac Create a Blip

Energy Retrofits Hit a Roadblock: 
Another Federal Government Policy Setback 

In an earlier Blog Post I wrote about the financing innovations -- that would spur more energy retrofits -- in Sonoma County, California and Boulder, Colorado.

The Government, through its quasi-free-market entities Fannie Mae and Freddie Mac, have shut down those financing schemes that would, if they could get going, have helped move us away from fossil fuels to alternatives.  And, helped us conserve on what we're already using.

The method of Property Assessed Clean Energy (PACE)  financing was a small revolution in the field: homeowners get to upgrade their home -- solar, new furnace, water heater, efficient lighting, etc. -- and have the investment stick with the house.  Sell the house in five years?  If you move, you don't have to keep paying for it: the new owners have the expense.  And, the benefits, too: lower energy bills; a home (supposedly) with a higher market value, etc.

The story first broke in the New York Times on July 3 and has had a cascading effect on the entities that actually do the financing and, more importantly, on the Contractors who ramped up for this market.  They thought it was a safe bet.

Congressmen Henry Waxman and Barney Frank spoke out strongly against the ruling.  (I think they have some idea of the implications to the "market.")

Now, major companies like Recurve, who has an "arrangement" with Big Box Lowe's, had to lay off a good portion of its workforce.  And, put projects on hold.

Sheila Horton, Executive Director of Boulder Area Rental Housing Association, reports that the financing entity there has halted loans/liens on residential housing after the announcement.

Sonoma County Building Performance Contractor John Sutter has written to the loan giants and expressed his mystification in a letter and made the following concrete recommendation:

 "Reach out to the proponent’s of PACE and attempt to achieve some compromise arrangements, and do it with a sense or urgency.  The “green shoots” of this program will be dead within weeks or months, not years."  -- John Sutter, President, Applied Building Sciences, Santa Rosa, Ca.

What it will take to start things up again is not clear.  I think Sutter is right, though: the green shoots will die off quickly.

What are the implications of this situation?  Do the 22 states who've authorized PACE financing have egg on their face?  I don't know.  But while all the entities were messing around with the creation of regulations -- EPA, Municipal Consultants, State Agencies --  it would appear that someone(s) could have given a little more attention to the housing financing agencies.

Yes, this is armchair quarterbacking, but I did publish my concerns with an attempt to "over-regulate" this market before it ever got started.  Where we go from here is...up.  I guess.

For a view of how Sonoma County's financing agency has dealt with this setback, read their letter:
SCEIP Letter to Applicants / Participants.