It Just Got Easier for Co-op Boards to Secure a PACE Loan

For co-op boards struggling to pay for retrofits that will reduce their buildings’ carbon emissions enough to comply with Local Law 97, it just got a little easier to secure Property Assessed Clean Energy (PACE) loans.

These loans allow a co-op board to pay for an energy-saving retrofit over the course of its useful life — about 20 years for solar panels, for instance. But instead of repaying the lender directly, the borrower amortizes the debt through a yearly charge on its property tax bill. There is no upfront cost to the co-op. (These loans are not available to condominiums.)

Under new guidance released by the New York State Energy Research and Development Authority, three types of projects are now “pre-qualified” for PACE loans, meaning they are deemed cost-effective without having to go through the rigorous Savings to Investment Ratio calculation. In effect, this will make PACE loans easier to obtain for these three types of projects: electric heating, ventilation and cooling systems; electric domestic hot water systems; and electric energy recovery ventilators. 

“This is a pretty big step for electrification measures,” says Kyle Madden-Peister, a senior legal associate with the New York City Energy Efficiency Corp. (NYCEEC), which is administering PACE loans. “Hopefully this will be the catalyst for electrification projects and for PACE to finance them. This will definitely make PACE loans more accessible for these types of projects.”

Electrification refers to the switch from fossil fuel-powered buildings systems to electrically powered ones — which will reduce building carbon emissions as the electric grid is fed increasingly by renewable energy sources, including solar, wind, hydroelectric and geothermal.

Madden-Peister explains NYCEEC’s role in the PACE lending process: “As the administrator, we work with qualified lenders to review loan applications. Then we work with the lender, the borrower and the city to close the loans. We help shepherd the project along. Ultimately, it’s always up to the lender to make the loan.”

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There are more than a dozen approved PACE lenders in New York City. Their minimum loan amounts range from $500,000 to $5 million. 

Another source of guidance for co-op and condo boards seeking ways to comply with Local Law 97 is the NYC Accelerator, a free city service. “Our mission is to help decarbonize the city’s built environment,” says Andrew Chintz, the financing specialist at the Accelerator. “We help boards assess their buildings and develop decarbonization projects. I help connect boards to sources of money, including PACE loans and other types of financing.”

You can contact the NYC Accelerator by email at info@accelerator.nyc or by phone at 212-656-9202.

Beginning in 2024, larger buildings, including co-ops and condos, will have to reduce their carbon emissions under prescribed caps, or pay stiff fines. In ensuing years, the caps become more stringent. Those facts are waking boards up to the need to get busy — right now.

“We’re still in the early stages,” Madden-Peister says, “but we anticipate an increase in PACE loans as Local Law 97 compliance periods approach.”

With the easing of the “pre-qualified” guidelines, that interest in PACE loans is sure to accelerate.