JJohn Oliver turned his attention this week to a public loan program called Pace, whose state-backed clean energy loans have stranded many vulnerable homeowners in overwhelming debt or at risk of losing their homes. The program, which stands for Property-Rated Clean Energy, “is a warning about how good intentions, when not combined with thoughtful and intelligent design, can end in disaster,” explained the Last Week Tonight host.
Through Pace, local governments borrow money at low rates that is made available to low-income borrowers for energy-efficient home improvements, which are then repaid through property tax increases.
Oliver delved into various problems 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.
Pace’s average loan is approximately $ 25,000, with repayment periods lasting between five and 25 years. “But the way you pay it back is unusual and very complicated,” Oliver explained, as the home improvement loan that theoretically pays for itself with long-term energy savings is paid off with property tax increases. .
Although it is a government program, Pace loans are administered by private companies contracted by cities to handle logistics, such as providing financing and approving loans. Those companies, in turn, hire private contractors to install the upgrades and market the complex and risky financing that supports them. Which means that “the people with the responsibility of launching a very complicated financial product, a pseudo-loan that is technically a tax cut, are contractors whose training is not in finance,” Oliver explained.
“There is 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 loopholes in the program: Pace does not require an independent party to evaluate whether proposed energy upgrades, such as solar panels or a new air conditioning unit, would actually outweigh its costs; Contractors often prioritize expedited registrations over screening potential borrowers for their ability to repay; Many borrowers are not evaluated on how high their property taxes will increase with a Pace loan 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 so dramatically is if Elon Musk shits a tweet about it,” Oliver joked.
Because a Pace loan is actually a tax break with one’s home as collateral, “it’s not like agreeing to the terms and conditions of an iTunes update,” Oliver added later. “This is like sitting across the table from a banker who could sign you out of your house. The problem is that the incentives just don’t exist for contractors to make sure that the people they are selling to can actually pay back the loans they are accepting. “
“All the players here are perpetuating a cycle of zero responsibility,” he continued. “Pace managers blame contractors, contractors blame managers, and sometimes the guilty finger goes squarely at the customers themselves.”
“Companies are always going to insist that this is just a problem for a few bad apple contractors and that they are always improving their processes, but I would say the flaws are that this program is built into how it works.”
“No one in this country should lose their home due to air conditioning; They should be losing their home due to unexpected medical bills, you know, like an American, ”he said deadpan.
Some reforms are possible, Oliver added, such as avoiding door-to-door sales of Pace loans, but “the harder question might be whether the reform is worth it or not,” especially since Pace is just one of several avenues for companies. low-income housing. homeowners to fund clean energy improvements at both the state and federal levels. “If you live in a county that is thinking about implementing a Pace program with for-profit administrators, do everything you can to stop it,” Oliver concluded. “Because the fact is that this business model is fundamentally flawed.
“I’m not saying that affordable clean energy is not something we should invest in, it absolutely is,” he added.
“But we shouldn’t put vulnerable people in a position where they are putting their homes at risk. Unfortunately, this is another example where a well-intentioned public program has been corrupted by the presence of private companies. “
George is Digismak’s reported cum editor with 13 years of experience in Journalism