John Oliver turned his attention this week to a public loan program called Pace, whose state-backed clean energy loans have locked many vulnerable homeowners in crushing debt or at risk of losing their homes. The program, which stands for Property Assessed Clean Energy, “is a warning about how good intentions, when not paired with careful and intelligent design, can end in disaster,” explained the host of Last Week Tonight.
Through Pace, local governments borrow money at low rates made available to low-income borrowers for energy-efficient home improvements, which are then repaid through increased property taxes.
Oliver has dug several problems with the program, widely used in California, Missouri and Florida, with expansions underway for Ohio and New York, which have left borrowers vulnerable to manipulation and foreclosure on their homes. .
The average Pace loan is around $ 25,000, with repayment periods ranging from five to 25 years. “But the way you pay it back is both unusual and very complicated,” Oliver explained, because the home improvement loan that theoretically pays for long-term energy savings is paid for by the increases. property tax.
Although a government program, Pace loans are administered by private companies hired by cities to handle logistics, such as providing finance and approving loans. These companies in turn hire private contractors to both install the upgrades and market the complex and risky financing behind it. This means that “the people charged with delivering a very complicated financial product – a pseudo-loan that is technically a tax lien – are entrepreneurs who are not trained in finance,” Oliver explained.
“No judgment here, it’s just that people are trained for different things. It’s the same reason you don’t ask a banker to re-grout your bathroom tiles – they’re going to make a mess.
Oliver described several potholes in the program: Pace does not require an independent party to assess whether proposed energy upgrades, such as solar panels or a new air conditioning unit, would actually offset their costs; entrepreneurs often prioritize early registrations over screening potential borrowers for their ability to repay; many borrowers don’t know how much their property taxes will go up with a project loaned by Pace. A woman’s taxes went from $ 600 to $ 10,000 after installing solar panels.
“The only time the value of something should change so drastically is if Elon Musk talks about it in a tweet,” Oliver joked.
Because a Pace loan is actually a tax lien with his house as collateral, it’s “not like accepting the terms and conditions of an iTunes update,” Oliver added later. “It’s like sitting across from a banker who might sign your house. The problem is, the incentives aren’t really there for entrepreneurs to make sure that the people they’re selling to can actually repay the loans they’re taking.
“Every player here perpetuates a cycle of zero accountability,” he continued. “Pace admins blame subcontractors, subcontractors blame administrators, and sometimes the finger of blame is pointed directly at the customers themselves.
“Companies are always going to insist that this is just a problem of a few bad apple entrepreneurs and that they are always improving their processes, but I would say that the flaws in this program are inherent in how it works. .
“No one in this country should lose their home because of an air conditioner; they should lose their homes to unexpected medical bills – you know, like an American, ”he said unmoved.
Some reforms are possible, Oliver added, such as preventing door-to-door sales of Pace loans, but “the more difficult question might be whether the reform is worth it”, especially since Pace is only the one of the many avenues for low income homeowners. to fund clean energy upgrades at both state and federal levels. “If you live in a county that is considering implementing a Pace program with for-profit administrators, do all you can to stop it,” Oliver concluded. “Fundamentally flawed
“I’m not saying clean, affordable energy isn’t something we should invest in – it absolutely is,” he added.
“But we shouldn’t put vulnerable people in a position where they risk their homes. Unfortunately, this is yet another example where a well-meaning public program has been corrupted by the presence of private companies. “