It’s been over a decade since 10 million people in the United States lost their homes in the 2008 subprime mortgage crisis. Over a decade since the financial devastation set in motion by the housing crash caused a recession which destroyed over $30 trillion of the world’s wealth and 5,000 suicides in Europe and North America alone. Over a decade since the banks, bankers, and Wall Street CEOs who caused the housing bubble to fill and then burst from the whiplash momentum of their own greed got government bailouts and walked away virtually scot-free. And apparently, that’s more than enough time for us to forget any lessons learned and dangerously toy with housing markets all over again.
The next housing crisis could be caused by a predatory and poorly planned government-funded scheme that encourages United States residents with low incomes to participate in a clean energy loan program that uses their houses as collateral. On the surface, this clean energy infrastructure program, called the Property Assessed Clean Energy program, (PACE for short), seems like a great deal built on even greater ideals. The idea is to allow people who could otherwise not afford to install solar panels or otherwise retrofit their homes to be more environmentally friendly to do so by participating in a government loan program that is paid back in property taxes.
While this sounds like a worthy endeavor, there is a fundamental problem with this model: in a frightening callback to the 2008 subprime mortgage crisis, the crux of the issue is providing loans to people who, quite simply, cannot afford them. And, like in 2008, a lot of people are at risk of losing their homes while those who sold them a bill of goods walk away with a paycheck.
PACE has now been the subject of hard-hitting takedowns by the investigative journalism nonprofit ProPublica and Last Week Tonight with John Oliver. The exposés tell the stories of dozens of low-income home owners who were talked into signing up for the government program without being fully made aware of the significant risk of losing their house at auction if they were to default on loan payments. These payments take the form of increased property taxes, which in some cases ballooned astronomically as a product of PACE compliance.
One Missouri woman, Diana Thomas, in exchange for a new furnace and four small basement windows, saw her taxes go from $247 to $1,465 and total loan payments, after interest, of $18,200 — more than the cost of her entire two-story home at the time that she took the loan, which was appraised at $16,226 by the county. Thomas is now years behind on those payments, which the professional setting her up for the loan would have been more than aware she could not pay, and at risk of losing her home.
Thomas is far from alone. Through PACE, homeowners in already marginalized or vulnerable communities across the nation were told, by door-to-door PACE salesmen, that they could make their homes more eco-friendly (a win-win for them and the government) without putting up any money up front, only to be hit by taxes higher than they could possibly pay — again, the whole point of this program is that it targets low-income individuals and families — and then putting those people at risk of losing their homes, even if those homeowners had never even been late on a mortgage payment.
“By marketing their programs to people who need urgent repairs but have few options for credit, critics contend they have disproportionately burdened some of the state’s most vulnerable homeowners,” the Missouri Independent reported this week. The negative impacts of PACE have furthermore disproportionately impacted “borrowers in predominantly Black neighborhoods.”
After these predatory practices gained attention in the media, especially in the state of Missouri where Thomas lives and about 3,000 other homeowners participated in PACE, we’re finally starting to see some signs of reform. Just this Tuesday, Missouri Governor Mike Parson signed new legislation imposing much-needed consumer protections within PACE, which would set requirements for giving signees full information of the risks of the program as well as capping the loan amount based on the house’s appraisal value.
While this is positive news, it’s still too little too late for those who have already lost or are in the process of losing their homes, and those who are still vulnerable to predatory PACE practices in other states. John Oliver, in his searing segment, questioned whether PACE was worth reforming at all, considering that there are plenty of other options for low-income homeowners to secure affordable green energy upgrades from organizations and programs with decidedly less slimy track records.
But the most worrying aspect of PACE isn’t that it’s uniquely sinister or predatory — it’s that these traits aren’t unique at all. In 2008 we saw exactly how far, wide, and deep these kinds of problems can extend. PACE won’t cause the kind of widespread damage that we saw 13 years ago, but it shows that another such crisis is uncomfortably within the realm of possibility.