Homeowners in LA still dealing with PACE program issues

LOS ANGELES — In 2015, Los Angeles County launched a home improvement loan program called PACE, or property assessed clean energy, that would allow homeowners to use the equity in their home to finance energy-efficient home improvements. 

Long Beach resident Roci Yanez is one of the many homeowners who were part of the PACE program. However, she says she was not aware of how the program worked. 

Yanez explained that contractors visited her home and said they could remodel her windows, kitchen and HVAC, and turn her garage into an ADU — all under the PACE program. She said she later learned that half the repairs she was promised were not eligible. 

The contractors started a couple of the repairs but stopped showing up and never finished the job. However, the contractors still got paid by the finance company that was working with the county to process the loans. 

Meanwhile, homeowners like Yanez were still on the hook for paying those loans off through their property taxes. Yanez said she had to pay $1,000 more than before the PACE assessment. When she wasn’t able to keep up with those payments, she said she became at risk of losing her home. 

Since then, Yanez said the family has dealt with crippling stress. It’s a story many other homeowners with a PACE assessment face.

In 2018, some homeowners reached out to the nonprofit Public Counsel, which launched a civil lawsuit against the county and two of the program’s administrators. 

Since then, one administrator filed for bankrupcy and is no longer involved in the case. 

Nisha Kashyap, staff attorney at Public Counsel, noted that the business model for the program was one of the issues they identified. 

“The program and the financing was marketed, sold and brokered by home improvement contractors who were the very people that stood to benefit the most financially from signing a homeowner up for PACE financing,” she said.

Kathyap added that lead to misrepresentation from the contractors who were highly incentivized to sign up as many people as possible. 

In Yanez’s case, she claims they did not ask for any pay stubs or ask to run her credit. Kashyap said that seemed like a common practice.

“Contractors were not checking to see whether homeowners had enough income to pay the assessment,” said Kashyap. “The main thing they were checking for was whether or not there was enough value in the home to cover the PACE assessment, so that if the homeowner fell behind on the assessment, the home could be sold.”

She also added that they noticed many of the homeowners were either elderly or did not speak English, and often believed the contractors without being able to read the contracts they were being presented. 

Due to these issues, in 2020, LA County shut down its PACE program. County Supervisor Hilda Solis had previously advocated for allowing PACE borrowers to defer payments.

In a statement she said, “The County of Los Angeles launched its Property Assessed Clean Energy (PACE) Program in 2015. The program allowed thousands of residents to use the equity in their homes to finance energy efficiency and water saving improvements. While successful, the program, and others like it throughout the State, were subject to increasing criticism and concern. The State passed legislation to enhance oversight to address these concerns and the County went even further — enhancing its own PACE consumer protection protocols and establishing a call center to confirm consumer’s acceptance of the terms. Despite these efforts and the implementation of stronger consumer protection practices, the County could not be certain these measures will provide sufficient protection for all consumers. In addition, the volume of financing requests had decreased significantly over the last few years of the program and future volume appeared uncertain given the COVID-19 crisis. Therefore, the County discontinued new originations under its PACE program in 2020. The County remains committed to servicing existing PACE program participants and working with other PACE administrators for continued consumer protection.”

“The County continues to receive a number of claims for cancellation of PACE assessments. While some property owners have been provided relief, each case is unique and complex and the County continues to review each homeowner’s claims.”

PACE programs continue to be offered across the state through joint powers authorities and regulated by the California Department of Financial Protection and Innovation. The state agency also takes complaint forms from anyone who thinks they may have been impacted. 

Homeowners can also report contractors to the California Contractors State Licensing Board.

In the meantime, the civil lawsuit that Public Counsel filed has reached a settlement. 

Kashyap explained that those who have LA County PACE assessments through the HERO or Cal First program from March 2015 through March 2018 are expected to be eligible for financial compensation.

For Yanez, she hopes she will be eligible for the settlement and make up money she has lost.