JThis week, Oliver turned his attention to a government lending program called Pace, whose government-backed clean energy loans have left many vulnerable homeowners in exorbitant debt or risk of losing their homes. The program, which stands for Clean Energy with Property Valuation, “is a cautionary tale of how good intentions, if not combined with careful and thoughtful design, can lead to disaster,” the Last Week Tonight presenter explained.
Through Pace, local governments borrow money at low rates that are made available to low-income borrowers for energy-efficient home improvements, which are then paid back through higher property taxes.
Oliver addressed several problems with a program widely used in California, Missouri, and Florida, with extensions in works for Ohio and New York that left borrowers vulnerable to manipulation and foreclosures on their homes.
The average Pace loan is approximately US $ 25,000 with maturities ranging from five to 25 years. “But the repayment method is both unusual and very complex,” explained Oliver, as the home improvement loan, which theoretically pays off through long-term energy savings, is paid off by increasing property taxes.
Although it is a government program, Pace loans are managed by private companies hired by cities to manage logistics, such as providing financing and approving loans. These companies, in turn, hire private contractors to both install upgrades and sell complex and risky finance. This means that “the people responsible for promoting a very complex financial product – a pseudo-loan, which is technically a tax lien – are contractors whose training is not related to finance,” Oliver explained.
“There are no judgments here, just people are trained in different things. For the same reason, you do not ask the banker to re-wipe the tiles in the bathroom – they are going to make a mess. “
Oliver identified several issues in the program: Pace does not require an independent party to assess whether proposed energy upgrades, such as solar panels or a new air conditioning installation, actually offset their costs; contractors often prefer early registration rather than screening potential borrowers for their ability to recover payments; Many borrowers are unaware of how high their property taxes are in the case of a project provided by Pace. One woman’s taxes rose from $ 600 to $ 10,000 after installing solar panels.
“The only time the value of something should change so dramatically is if Elon Musk tweets about it,” Oliver joked.
Since the Pace loan is actually a tax lien with the house as collateral, this “doesn’t sound like agreeing to the iTunes update terms,” Oliver later added. “It’s like sitting at a table in front of a banker who can sign your house. The problem is that contractors don’t really have an incentive to make sure the people they sell to can actually pay off the loans they take.
“Every player here perpetuates the zero responsibility cycle,” he continued. “Pace administrators blame contractors, contractors blame administrators, and sometimes an accusatory finger points directly at the customers themselves.
“Companies will always insist that this is the problem of a few bad apple contractors and that they are always improving their processes, but I would say that the flaws in this program are in the way it works.
“No one in this country should lose their home to an air conditioner; they have to lose their home to unexpected medical bills — well, like an American, ”he said calmly.
Some reforms are possible, Oliver added, such as preventing the sale of Pace loans at home, but “the bigger question may be whether the reform is worth it or not,” especially since the Pace is just one of several paths for low-income homeowners. to finance clean energy modernization at both the state and federal levels. “If you live in a county that is thinking about implementing a Pace program with commercial administrators, do whatever you can to stop it,” concluded Oliver. “The point is, this business model is fundamentally flawed.
“I’m not saying that affordable clean energy is not something we should invest in – that’s absolutely certain,” he added.
“But we shouldn’t put vulnerable people in a position where they risk their home. Unfortunately, this is yet another example of how a well-meaning government program has been distorted by the presence of private companies. ”