Michigan Local PACE Program

December 12, 2023

Summary

Note: In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activity subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA's concerns. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENation for more information about PACE financing and a comprehensive list of all PACE programs across the country.

Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money to pay for energy improvements. The amount borrowed is repaid via a special assessment on the property over a period of years. With the passage of HB 5640, Michigan has authorized local governments to establish such programs, as described below. (Not all local governments in Michigan will choose to offer PACE financing; contact your local government to find out if it has or intends to establish a PACE financing program.)

The State of Michigan signed PACE legislation into law on December 14th of 2010, authorizing municipalities to establish a loan program to provide financing for clean energy (energy efficiency and renewable energy project) improvements to commercial and industrial property owners via local ordinance. S.B 303 of 2023 extended this authorization to include agricultural property. The bill extended financing opportunities to cover various environmental hazard mitigation projects. S.B 302 of 2023 provides the option to waive the energy savings guarantee for retrofit and rehab projects. The energy savings guarantee is not required for new construction or projects.

The legislation authorizes municipalities to enter into PACE agreements with commercial, industrial, and agricultural property owners, provide financing, and collect PACE assessments to repay the loans. Municipalities may choose to use federal grants, such as Energy Efficiency and Conservation Block Grants (EECBG), or other "funds available for this purpose" to establish PACE programs.

Michigan counties have commercial PACE funding under the Lean and Green Michigan Program. Refer to their website to see which counties qualify and for contact forms.

Michigan's legislation stipulates that PACE assessments for property owners with outstanding mortgages must receive written consent from mortgage holders. In addition, qualifying energy efficiency technologies may include electric vehicle charging and water reduction infrastructure costs.

Program Overview

Implementing Sector:	State
Category:	Financial Incentive
State:	Michigan
Incentive Type:	PACE Financing
Web Site:
Administrator:
Start Date:
Eligible Renewable/Other Technologies:	Solar Water Heat Solar Space Heat Solar Photovoltaics Wind (All) Biomass Geothermal Heat Pumps Combined Heat & Power Landfill Gas Lighting Chillers Furnaces Boilers Heat pumps Air conditioners Heat recovery Energy Mgmt. Systems/Building Controls Caulking/Weather-stripping Duct/Air sealing Building Insulation Windows Roofs Other EE Wind (Small) Geothermal Direct-Use
Terms:	Lender consent is required. Minimum project size is $10,000.

Authorities

Name:	MCL 460.931 et seq.
Date Enacted:	12/14/2010
Effective Date:	12/14/2010

Name:	S.B. 303
Date Enacted:	07/26/2023

Name:	S.B. 302
Date Enacted:	07/26/2023

This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.