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PACE Loans: Good Idea, Bad Results

— April 26, 2021

PACE loans were meant to help people of little means save money and help the environment, but ended up helping the rich get richer and the poor, poorer.

It started out as a pretty good idea. The government would help homeowners increase their property value and heal the environment at the same time by providing loans to cover the cost of renewable energy upgrades and making homes energy efficient. Homeowners would recoup savings that would equal or surpass the value of the loan, while recovering from the housing market crash that spawned the Great Recession. Payments would be spread over several years. Contractors could find good jobs making the world a better place. The U.S. would be that much closer to our climate goals. “Property Assessed Clean Energy,” or PACE loans, would make it all possible.

And then it went predictably, horribly awry.

There’s a sizable demographic which claims that the government can’t do anything right. Lacking the profit motive, and therefore economic efficiency, they say, government will be forever inept, and the best thing it can do is to privatize everything. However, what if the profit motive is the purest incentive to cut corners and turn a blind eye to suffering if there’s a dollar to be made from it? The yawning gap between the good intentions of PACE loans and their eventual execution among some of the poorest households in the country is a case in point. Once the government outsourced the program to the private sector, the rules that held everything together got thrown out the window.

A recent ProPublica investigation turned up real-world horror stories from Missourians who took out PACE loans, hoping to turn their situations around. “Property Assessed” meant that homeowners would only be able to borrow an affordable amount, based upon their home’s value, but private lenders often assessed homes at a much higher value than government auditors did, meaning that some people ended up owing far more than their homes were worth. Moreover, private lenders often skipped the audits that would have ensured homeowners saved at least as much money in energy costs as they borrowed. When their property taxes jumped far higher than they were able to pay, local governments were left to enforce the tax lien and sell the foreclosed homes at auction, paying off the loan and leaving vulnerable people, often impoverished seniors who did not understand what they were getting into, with nothing.

A broken incandescent lightbulb glows dimly against a grey background, emitting a wisp of smoke.
Photo by Comfreak, courtesy of

Perhaps if local governments had run the program exclusively for the benefit of homeowners and the environment, PACE loans would have worked as intended. If the government couldn’t do this right, it’s because they passed the baton to private lenders who were more excited about reaping a profit by loading people up with more loans than they could ever reasonably pay.

There’s one more perversity here, though. PACE loans were meant to help people of little means save money and improve their situation, a worthy goal for governments to pursue in the absence of the profit motive. In practice, for-profit lenders enticed people to fix up their homes, which would then be taken and sold at auction to people with the money to snap them up, a classic way that the rich get richer and the poor, poorer. Is this a broken program, or is it capitalist America working exactly as intended? It doesn’t have to be this way. However, in order to fix the problem and create a government that works for us instead of against us, we have to stop electing people who think that government can do nothing right and then go on to prove it.

Related: Innovation in Banking Could Help or Hurt


State-Supported “Clean Energy” Loans Are Putting Borrowers At Risk of Losing Their Homes
Property Assessed Clean Energy Programs
PACE Energy Efficiency Loans: Good Intentions, Big Risks for Consumers

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