ABAG Releases Report on BPER Consumer Market

Research Tells Us...What We, Kind of, Already Knew

Several months ago, the Association of Bay Area Governments, in an effort to comply with Greenhouse Gas (GHG) Emissions Reductions, undertook some market research to better understand how consumers / homeowners feel about this area of interest.  

Here's a small picture of what they learned and reported in their Study.

About Consumers / Homeowners:

• they think their house is already energy efficient
• they don't want to spend money because the payback is not fast enough
• the rebates are not big enough to motivate them to buy
• they don't trust contractors
• they don't want liens on their homes (PACE financing)

Pretty challenging set of circumstances for the Energy Retrofit market.  I would be likely to call this a "tough sell."

Are there any of these items that would be easy to fix?  Even if we got some Rhodes Scholars into the contracting business, it's unlikely the consumer perception would significantly change in any short window of time.  

This sobering news comes on the heels of the announcement from Fannie Mae and Freddie Mac about not subordinating (moving into "second" position) their mortgages behind the PACE financing / property tax lien.  This ruling by the Federal Home Finance Administration (FHFA) , appealed by a lawsuit from California AG Jerry Brown and Sonoma County, has all but shut down project financing in places like Boulder, Colorado and New Jersey.

Click here to download your own personal copy of this well done Report (I'm serious; they did a nice job!)

ABAG Market Research Report

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.

Big Assumptions Affect BPER Market

How Will These Assumptions Play Out?

Lots of assumptions -- that have already been made but not tested -- will affect the BPER market rollout.

The Big Picture: What Are We All After?

Click on the picture to see the whole thing.

A Few Pictures of the Current Situation