PACE Alive and Well // Part 1: Contractors Grow Their Businesses with HERO Home Efficiency Financing
[Editor's Note: This is part 1 of a series that describes how PACE financing is revolutionizing the home performance contracting industry.]
Home improvement and clean-energy contractors are embracing Property Assessed Clean Energy (PACE) financing and reaping the rewards. This novel form of financing is helping contractors to expand their customer base, increase the scope of their jobs and the ticket price on projects, and enhance their reputation in their communities. PACE brings clean-energy and energy-efficiency financing to homeowners in participating municipalities. The program spurs local job growth in the contracting sector, increases the value of the community’s housing stock, and reduces demand for energy. See Table 1.
A recent article in this magazine described the PACE model and the success of the leading residential PACE provider, the HERO program (see “HERO Program Adds Value for Homeowners, Communities, and Contractors,” HE online Winter ’16). HERO PACE financing enables homeowners to make energy-efficiency improvements and install clean-energy systems, and to pay for the work over time—from 5 to 25 years—through their property tax bill. Payments may have tax benefits, and homeowners see immediate savings on utility bills. Approval is based on home equity, not on consumer credit rating, making this form of financing available to most homeowners. Contractors can apply to receive training and certification from HERO and then offer this financing option to their customers.
Figure 1. Growth of HERO-Financed Projects by Year
PACE has been in the spotlight this past year, gaining a significant endorsement from the White House and the Federal Housing Authority. California, Missouri, and Florida have active residential PACE programs, and 22 other states are in the process of approving PACE legislation.
Each year, one in six homeowners replaces a product or system in his or her home that affects energy consumption. Often, the project is precipitated when something breaks or fails—a water heater dies or a roof springs a leak. By funding 100% of the project cost up front, HERO financing allows a contractor to step in at this pivotal decision point and guide the homeowner to opt for the more energy-efficient solution. Energy-efficient products can cost more initially, but they save homeowners money over the useful life of the product. Many customers end up adding other efficiency-related work to the original job when they see the long-term savings available to them through HERO financing.
With more homeowners able to afford efficiency-oriented renovations, and with customers choosing more-extensive projects with higher-end products, contractors see their profits increase when PACE is in the picture. They get more jobs, and the work scope of many of jobs expands as customers bundle multiple projects. And contractors find that being a HERO-vetted business increases their credibility with their customers.
Take Mauzy Heating, Air & Solar, for example. The Mauzy family has been in the heating-and-cooling business for almost 50 years, with three generations now integrally involved in their San Diego-based company, These days, HERO represents a significant portion of their business. The company has hired 60 new employees in the last two years to meet the demand generated when HERO financing became available in their community.
Burgeson’s Heating & Air Conditioning, headquartered in Redlands, California, and serving the Inland Empire, is also a family business. President and CEO Dianne Burgeson has been with the company her father started for 50 years. Burgeson’s has completed over 900 HERO-funded home improvement projects in the four years since it became a HERO-certified company, totaling $14.2 million in financing, and it has hired more than 120 new employees to meet the demand.
HERO offers the highest level of consumer protections in the home improvement industry, and it holds its registered contractors to this same high level of performance. Contractors wanting to become registered HERO partners receive training in how the financing model works and must be willing to abide by strict consumer protection standards. In return, HERO provides contractors with the tools and the reputation they need to succeed and grow their business. At the end of the day, it’s all about contractors helping people, making homes more livable and energy efficient one project at a time.
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