Local Option - Commercial PACE Financing

Note: In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activity subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA's concerns. The Federal Housing Administration (FHA), a branch of the U.S. Department of Housing and Urban Development (HUD), has released initial guidelines for using PACE with FHA-secured single or multifamily properties. This guidance is independent of FHFA policy. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENation for more information about PACE financing and a comprehensive list of all PACE programs across the country.

Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money to pay for energy improvements. The amount borrowed is typically repaid via a special assessment on the property over a period of years. Massachusetts has authorized local governments to establish such programs, as described below. 

In August 2016, Massachusetts Governor Baker signed H. 4568 into law, which allows local governments to establish commercial PACE financing programs. Municipalities may opt into the program by a majority vote of the city or town council, or board of selectmen. The Massachusetts Development Finance Authority, in consultation with the Department of Energy Resources, is administering the program.

Participation is open to commercial and  industrial buildings, as well as multi-family residential buildings with five or more units. Improvements eligible for financing include energy efficiency upgrades, renewable energy systems, and extending natural gas distribution to a property. Payback period for investments under this program is equal to the useful life of the longest-lived improvement financed, up to 20 years.