Residential PACE Improvements Found to Increase Sale Value of Homes

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Independent study finds homes with PACE improvements sell for higher prices than homes without clean energy upgrades.

PACE Loans: Does Sale Value Reflect Improvements?

PACE Loans: Does Sale Value Reflect Improvements?

This study gives empirical evidence that PACE-financed improvements increase home values on net, even after taking into account the costs of financing the improvements

In the first economic study of homes with PACE upgrades, three different methodologies and three home price indices were examined and all turned up the same results; PACE is good for the resale value of homes, even after taking into account the financing costs.

The study, conducted by Laurie Goodman, a well-known housing market and industry expert in Washington, D.C., compared data on PACE (Property Assessed Clean Energy) assessed homes that sold with prices predicted by housing price indices, and a random sample of comparable homes. Houses with PACE assessments surpassed projected appreciation rates and increased the sale value of foreclosed homes as well. It was determined that homes with PACE upgrades have higher net resale values ranging from $199-$8,882 compared to homes without PACE upgrades.

“PACE loans give homeowners a new way to finance loans for energy efficient improvements such as a new air conditioning system, new windows, insulation, solar panels or a water conservation system,” says the study. PACE loans become part of a building’s property tax bill, and are repaid annually or semi-annually when taxes are due. PACE financing has been in practice since 2008, and there are currently 30 states with PACE enabling legislation. More about PACE at http://www.PACENation.us.

“This study gives empirical evidence that PACE-financed improvements increase home values on net, even after taking into account the costs of financing the improvements,” said Renovate America CEO and Founder J.P. McNeill. Renovate America administers the HERO program, a residential PACE provider, based in California.

The authors note that other studies have found that typical home renovations such as bathroom and kitchen remodeling and roof and siding replacements recovered 58-66% of their full costs at the time of sale. In general, PACE projects recovered at least 100% of their full costs, usually more. This result is especially substantial in properties purchased from foreclosure, as the study suggests that PACE improvements increase the projected sale value of foreclosed homes by an average of $6,824.

The study concludes that PACE projects on average, “are able to recover at least their full costs at resale, whereas most other home improvers are only able to recover about 60%”

“These findings are very important because they’re based on actual data from nearly 800 HERO Program PACE improved homes and directly address concerns expressed by mortgage providers,” said David Gabrielson, Executive Director of PACENation, the national advocacy organization for PACE financing.

The study was conducted by nationally recognized housing economist, Laurie Goodman, and Jun Zhu, and is published in the Journal of Structured Finance. The study can be found in its entirety at: http://www.iinews.com/site/pdfs/JSF_Winter_2016_PACENation.pdf.

About PACENation:

PACENation is a non-profit foundation funded advocate for Property Assessed Clean Energy (PACE) financing. PACENation’s mission is to promote improved energy efficiency in buildings and use of PACE. Our strategy is to be a trusted source for information and resources to a growing coalition of PACE stakeholders that includes local governments, businesses, industry service providers, labor and trade organizations, environmental groups and private individuals nationwide. For more information, please visit pacenation.us or info(at)pacenow(dot)org.

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Kristina Klimovich
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