Win, win, win, win: Major new study shows PACE program helps … well, everything

It’s not often that you find a state program that enjoys bipartisan support and helps homeowners, private sector lenders, local governments, and the environment.

But a major new independent study finds that Florida’s PACE program is good for virtually all the stakeholder groups it touches. The study — the first of its kind on the PACE program — was conducted by researchers at Yale University, the University of North Carolina at Chapel Hill, and two international higher educational partners.

The report is particularly impactful as Florida sits in the heart of hurricane season with a potential storm looming.

Florida’s PACE program was started in 2010 and has helped thousands of Floridians finance hurricane-hardening home improvements without resorting to credit card debt.

The Yale/UNC study finds that PACE also accomplishes the following:

— Increases the home values of homeowners who utilize it

— Helps lenders, as higher house prices increase collateral recovery values

— Brings more revenue to local governments by expanding the property tax base

A bill updating PACE was passed overwhelmingly by both houses of the Legislature in the last Session, signed by the Governor, and the program has been affirmed multiple times by a circuit court judge.

The Yale/UNC study is the first micro-level research into estimating how housing and mortgage markets respond to PACE programs.

“We show that PACE loans reduce homeowners’ financial constraints without crowding out for-purchase or refinancing mortgages while providing net fiscal benefits to local governments,” the study said.

Dr. Cameron LaPoint, assistant professor of finance at the Yale School of Management and co-author of the study, said PACE “democratizes access to credit” without forcing homeowners to rely on high-rate credit cards.

The study was completely independent and funded by the Yale International Center for Finance and the Yale Tobin Center for Economic Policy. Researchers analyzed 16,000 Florida PACE loans and then created a database of detailed microdata examining housing transactions, loans, building permits, tax delinquency, and other liens.

While the Yale/UNC study didn’t research other variables, the environmental benefits of PACE are clear and were expanded in the latest legislation, which allows homeowners to use PACE for septic-to-sewer conversions. This is important because, according to a bill analysis by legislative staff, an estimated 2.3 million septic systems are in operation in Florida, many of which are at risk of leaching into the state’s water table and estuaries.

And if that’s not enough, PACE also plays a huge role in lowering insurance premiums. A University of South Florida study estimated that PACE home improvements have amounted to well over $1 billion in insurance premium savings. Finally, the PACE program is also vital to local tradespeople, such as roofers, who perform these essential home improvements and help maintain employment for many Floridians.

Last year’s new legislation included key new provisions that protect consumers, including reducing the maximum term of financing from 30 to 20 years, adding an income test, requiring that only 20% or less of the home’s value can be financed, and requiring applicants to have a phone call to discuss financing terms and program details.