PACE Loans—Does Sale Value Reflect Improvements?, a recent report by Laurie Goodman and Jun Zhu, finds that homes with Property Assessed Clean Energy (PACE) upgrades net higher resale values compared to homes without PACE upgrades.
PACE loans offer homeowners a way to finance energy efficiency and renewable energy improvements, such as a new air conditioning system, new windows, insulation or solar panels. PACE loans fund the up-front cost of improvements and are repaid annually as an addition to the owners' property tax bills, typically over a 10- to 20-year assessment term.
In addition, PACE financing requires state authorization through legislation, usually followed by state actions to initiate the program directly or by facilitating lender offerings to local governments. So far, about 11 states authorize residential PACE, and of these, California, Florida, and New York have significant programs. Find out if your state allows PACE and what programs may be available.
Goodman and Zhu examined 773 California homes with PACE improvements sold between 2012 and 2015. Using three separate methodologies, the study concluded that PACE projects recovered at least 100 percent of their costs, equating to higher net resale values, ranging from $199–$8,882 compared to homes without PACE upgrades. In that same time frame, typical home renovations such as bathroom and kitchen remodels or roof replacement recovered only 58–66 percent of their full costs at the time of sale.
This study is the first of its kind. Although it has been widely understood that energy renovations add value to a property, this study confirms the added value of these projects often exceeds their total financing costs. As many in the green building industry have been proselytizing for years, going green delivers as many economic benefits as it does environmental.