John Oliver turned his attention this week to a public lending program called Pace, whose state-supported clean energy loans have stranded many vulnerable homeowners in overwhelming debt or at risk of losing their homes. The program, which stands for Property Assessed Clean Energy, “is a cautionary tale about how good intentions when not paired with careful, smart design, can end in disaster”, the Last Week Tonight host explained.
Through Pace, local governments borrow money at low rates made available to low-income borrowers for energy-saving home improvements, which are then paid back through increases to property taxes.
Oliver dug into several issues with the program, widely used in California, Missouri and Florida, with expansions in the works for Ohio and New York, which has left borrowers vulnerable to manipulation and foreclosure on their homes.
The average Pace loan is about $25,000, with repayment periods between five and 25 years. “But the way you pay it back is both unusual and very complicated,” Oliver explained, as the loan for home improvements which theoretically pay for themselves in long-term energy savings is paid by property tax increases.
Though a government program, Pace loans are administered by private companies hired by cities to handle logistics such as providing financing and approving loans. Those companies in turn hire private contractors to both install the upgrades and market the complex, risky financing behind it. Which means “the people with the responsibility of pitching a very complicated financial product – a pseudo-loan that’s technically a tax lien – are contractors whose training is not 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 tile – they’re going to make a mess.”
Oliver outlined several potholes to the program: Pace does not require an independent party to assess if proposed energy upgrades, such as solar panels or a new air conditioning unit, would actually offset their costs; contractors often prioritize speedy sign-ups over vetting potential borrowers for their ability to pay back; many borrowers are not appraised of just how high their property taxes will spike with a Pace-loaned project. One woman’s taxes went from $600 to $10,000 after the installation of solar panels.
“The only time the value of something should change that dramatically is if Elon Musk shits out a tweet about it,” Oliver joked.
Because a Pace loan is actually a tax lien with one’s home as collateral, it “isn’t like agreeing to the terms and conditions of an iTunes update”, Oliver later added. “This is like sitting across the table from a banker potentially signing your house away. The problem is, the incentives just aren’t really there for contractors to make sure that the people that they’re selling to can actually pay back the loans they’re taking on.
“Every player here is perpetuating a cycle of zero accountability,” he continued. “The Pace administrators blame the contractors, the contractors blame the administrators, and sometimes the finger of blame gets pointed directly at the customers themselves.
“Companies are always going to insist that this is just a problem of a few bad apple contractors and that they are always improving their processes, but I would argue the flaws in this program are baked into how this operates.
“Nobody in this country should be losing their home because of an air conditioner; they should be losing their home because of unexpected medical bills – you know, like an American,” he deadpanned.
Some reforms possible, Oliver added, like preventing door-to-door sales of Pace loans, but “the tougher question might be whether or not reform is even worth it,” especially as Pace is only one of several avenues for low-income homeowners to finance clean energy upgrades on both the state and federal levels. “If you live in a county that is thinking of implementing a Pace program with for-profit administrators, do whatever you can to stop it,” Oliver concluded. “Because the fact is, this business model is fundamentally flawed.
“I’m not saying that affordable clean energy isn’t something that we should be investing in – it absolutely is,” he added.
“But we shouldn’t be putting vulnerable people in a position where they’re risking their homes. Sadly, this is yet another example where a well-meaning public program has been corrupted by the presence of private companies.”