Today Town of Babylon Supervisor Steve Bellone was joined by over fifty local workers to announce that the Town is preparing a lawsuit against the Federal Housing Finance Agency (FHFA), the federal agency that oversees Fannie Mae and Freddie Mac. Last week, FHFA issued a letter directing Fannie and Freddie to restrict mortgage lending opportunities for homeowners who live in municipalities that offer home energy retrofit programs. The directive would effectively kill a number of innovative municipal energy retrofit financing programs nationwide, including Babylon’s own Long Island Green Homes program.
“Jobs Killer”
This edict is designed to cost dozens of jobs on Long Island and thousands more nationwide. Retrofitting America’s existing bulding stock through municipal energy retrofit financing programs could be the most effective source of jobs creation in the nation by putting contractors to work in a stricken economy that has 25% of the trades out of work. This single declaration from FHFA has derailed this entire burgeoning industry.
“With a stroke of the pen, some faceless bureaucrats at Fannie Mae and Freddie Mac are attempting to kill the most potent jobs creation programs we have in this country,” Supervisor Bellone said. “We refuse to go along with this arbitrary and capricious attack that is nothing more than a jobs killer.”
Long Island Green Homes
In the fall of 2008, the Long Island Green Homes program (LIGH) began making houses more energy efficient and saving homeowners over $1,000 per year on average in the process. From the outset, LIGH has insisted on installing the most cost effective energy efficiency measures, providing the upfront financing and having the homeowner repay the obligation through a monthly charge. The average obligation is $9,062.75 repaid over 8.78 years. In the vast majority of cases, the monthly energy savings resulting from the upgrades are more than the monthly charge. The average house retrofitted through the program receives a disciplined selection of upgrades that run a savings-to-investment ratio of close to 2.0, which means the upgrades pay for themselves in half the lifetime of the measures.
Over 500 homeowners in the Town of Babylon have participated in the LIGH program, with the typical retrofitted house reducing its annual CO2 emissions by close to 4 tons. The program creates a significant number of jobs in the community, reduces homeowners’ yearly energy bills on average over $1,000 and provides substantial environmental benefits all at no cost to taxpayers.
Ria Muriello, a homeowner who participates in the LIGH program saves her $925 in energy bills per year. After making the efficiency upgrades to her home, Ms. Muriello had the misfortune of losing her job. Savings on her energy bills each month help her make ends meet and pay her mortgage.
Potential Devastating Effects for Local Contractors
In less than two full years of operation, the Long Island Green Homes program has been directly responsible for creating dozens of jobs on Long Island. These jobs are now in jeopardy due to FHFA’s directive. Powersmith Home Energy Solutions president Dan Kartzman founded his company 6 months ago after moving from San Francisco to New York. Mr. Kartzman spent four years on the executive team at Recurve, helping to build it into one of the largest home performance contractors in the country. He came to New York to launch Powersmith based on the caliber of the LIGH program and the opportunity it provided.
Powersmith began with four employees and more than doubled in size to 10 employees in just six months. It is on pace to add 3-4 employees per quarter, based on the volume of work generated by the LIGH program. Mr. Kartzman estimates he would need to lay off at least three-quarters of his staff if the LIGH program ceased operating.
“The Long Island Green Homes program has created the opportunity for Powersmith Home Energy Solutions to help homeowners who need it and create local green jobs,” said Mr. Kartzman. “When we opened our doors six months ago there were four of us, now we’re a team of ten and on pace to be fifteen by the fall.”
Powersmith is not the only company that would be hit hard if Fannie and Freddie has its way in killing municipal energy retrofit programs.
“This is devastating! We have been struggling for two years to build a sustainable energy efficiency company and industry on Long Island and the Long Island Green Homes model has been our best hope. If this ruling kills the LIGH program, dozens of people associated with our company will be heading for unemployment lines.”
Pete Smith
Co-owner, Home Performance Technologies, Inc.
“Due to the increased demand for energy efficient homes on Long Island and the programs such as Babylon’s Long Island Green Homes, Energy Testing Services has put six people back to work that were previously laid off from its sister company, Delfino Insulation – due to the decline in the new home building market. Additionally, 6 new jobs were created to date and I strongly believe more will follow as long as energy savings programs are made available to the Long Island communities.”
Mike Delfino, Jr.
CEO, Delfino Insulation Co., Inc.. Picone Stone and Fireplace, LLC., Energy Testing Service, LLC.
“Murtha Insulation is extremely disappointed with the threatened withdrawal of PACE funding for Home Energy Retrofits. We currently employ dozens of people in the building energy retrofit market, and the disappearance of funding threatens both jobs and the social benefits of energy efficiency. Murtha Construction applauds the Town of Babylon for taking a stand on and fighting for this innovative and sound means of financing.”
Steve McKenna, Murtha Insulation
“For us Long Island Green Homes is the triple win: saving money for local residents while reducing carbon and putting people to work. Almost all of our employees were unemployed before we started this company. We're a small company, but that's 7 people working and paying taxes and contributing the local economy that might not be without the Long Island Green Homes program. What's more American than that?”
Jay Best, Green Audit USA
“Before this program, my company consisted of me and my son doing weatherization work because we would get work 2 out of every 10 audits we performed. Since the program started we are getting work from 8-9 out of every 10 audits performed. This has allowed us to expand and hire three new skilled workers, and I expect to hire at least another five to ten. If this program is brought to a halt, I am dead in the water and I have a good chance of being forced to dissolve my company and lay off all my workers.”
Rich Manning, Energy Master & Environmental Solutions
Redlining
The FHFA statement of July 6 directs Fannie Mae and Freddie Mac to effectively lower the line of credit available to homeowners in municipalities that offer home energy retrofit programs, making it more difficult to obtain mortgages.
Babylon’s Green Homes program is predicated on the principle of Benefit Assessed Clean Energy (BACE). The benefit assessment is a hundred-years-old authority of municipal governance providing the basis for infrastructure improvements such as new sewer lines, sidewalks or repaved streets. In its statement, the FHFA has unilaterally determined that Property
Assessed Clean Energy programs (PACE), and “PACE-like programs” are “unlike routine tax assessments.” This determination is an abrogation of municipalities’ sovereign right to determine what is in the public good and serves as an example of Big Government assault on the rule of local law.
Additionally, FHFA mischaracterizes benefit assessments applied to retrofit a home as a threat to the value of a mortgage. In fact, rather than undermining the value of the mortgage, the improvements enhance the mortgage value by making the house more affordable and increasing its overall value.
Finding a Middle Ground
FHFA’s statement contends that “FHFA remains committed to working with federal, state, and local government agencies to develop and implement energy retrofit lending programs with appropriate underwriting guidelines and consumer protection standards” and that “FHFA will also continue to encourage the establishment of energy efficiency standards to support such programs.” The Town of Babylon agrees that standards should be applied, and suggests that the Long Island Green Homes program be used as a model for these standards. Among the disciplined guidelines the LIGH program follows that could be implemented nationwide:
• Workscopes through the LIGH program have never exceeded 10% of the value of the property and in virtually all cases to date, the loan-to-value (LTV) ratio is below 5%
• All participating homeowners must have a history of timely property tax payment
• In the case of foreclosure, there is no acceleration of the obligation and only the delinquent portion of the assessment is due. The balance is assumed by the next property owner.
• If there is no delinquency, the Town is not required to levy a benefit assessment that would be senior to the mortgage.
The Town of Babylon would like to express its appreciation to those organizations that have provided support to the development of the Long Island Green Homes: Senator Charles Schumer, Congressman Steve Israel, the US Green Building Council, ICLEI organization of local governments, Carbon War Room , Natural Resources Defense Council, Sierra Club, Living Cities, US Department of Energy, Alliance to Save Energy, Renewable Energy & Energy Efficiency Partnership, American Council on Renewable Energy, The Council of State Governments, Center for American Progress, Green for All, Urban Sustainability Directors Network, Regional Planning Association, Rockefeller Brothers Foundation, World Economic Forum, Urban Land Institute, Apollo Alliance, Efficiency First, Building Performance Contractors Association, Long Island Builders Institute, IBEW, United Brotherhood of Carpenters, AFL-CIO, Change to Win, LIUNA, Plumbers UA, Nassau-Suffolk Building Trade Council, Emerald Cities Network, Center for Working Families, Workforce Development Institute, PACE Stakeholders, Neighborhood Network, CDC-LI, Rauch Foundation, Lawrence Berkeley Laboratory and Yale Center for Business and the Environment.
