Renovate America CEO JP McNeill offers his perspective on lessons learned in the process of reaching a key milestone.
This month, Renovate America marks an important milestone: 100,000 American homes have now used our innovative financing option, HERO, to make energy and efficiency improvements. It’s a cause for celebration, and an opportunity to reflect on what we’ve learned.
The idea behind HERO is simple: to help homeowners invest in their homes to save energy or water, or to make their most valuable investment — their home — safer and more resilient to extreme weather. It’s a form of financing called PACE, or Property Assessed Clean Energy, and it gives homeowners access to private capital to make improvements that advance public-policy objectives, like expanding access to clean-energy technologies, improving neighborhoods and stimulating growth.
HERO is offered in partnership with local governments, and homeowners who use it pay back their financing through an additional line item on their property taxes. Eligibility is primarily based on equity in the home and the homeowner’s tax and mortgage payment history.
Home improvement needed improving. The first thing we learned when we launched HERO just over five years ago is that people needed more than financing. They needed peace of mind, and better control of the process as they made an investment in their homes to save energy or water.
Our first step to empower homeowners was to guarantee contractors wouldn’t be paid until the homeowner signed off that the project was done to their satisfaction. Next, we set up a daily check on contractor licenses and offered investigative and dispute resolution support. And eventually, we required all customers to speak by phone with our staff to make sure they understood the terms of their financing before they signed their documents. Seniors 65 and older get extra care.
We learned that the homeowner must be at the center of everything we do. That’s why earlier this year, we launched an innovative, data-driven Contractor Quality Rating system to track customer satisfaction, how quickly contractors resolve complaints, and how serious any quality issues are. Excellent contractors get referrals from us. Those who can’t meet our standards get kicked out. Since the system launched, we’ve stopped doing business with more than 80 contractors, or 10 percent of our active contractor base.
As the leader in PACE financing, we engaged our government partners to help develop industry-wide consumer safeguard policies for PACE programs as set forth in California law and the U.S. Department of Energy best practices. We supported legislation approved last year in California, the biggest state for PACE financing, that required mortgage-level written disclosures for PACE. And we’re supporting new legislation this session that would build on last year’s success by strengthening underwriting criteria and contractor marketing standards.
HERO meets an unmet need. We’ve learned that around 60% of our homeowners choose HERO in emergency situations: to replace a system or product in their home that’s broken or about to break. Let’s say it’s July and your air-conditioner quits in the 110-degree heat. Or maybe it’s September and you’re confronting the bitter truth that your 20-year-old asphalt roof won’t survive another winter. Too often in situations like these, homeowners don’t choose the replacement product most likely to save energy or water or reduce carbon emissions – a product that can often help pay for itself over time. HERO empowers homeowners to make a smart choice for the long-term. From efficient air conditioners and windows, to insulation and solar panels, with HERO homeowners know they’re getting a high-performance product.
Replacing a roof or an air-conditioner can represent a strain on the ordinary household budget – especially in emergency situations. If it weren’t for HERO, how would homeowners pay for these products? Independent surveys and those we conduct with our customers show that in the absence of HERO financing, homeowners would turn most often to unsecured forms of credit, like credit cards. But these tend to carry interest rates upward of 15 percent – around twice the average HERO interest rate – and their consumer protections fall short of HERO’s. Home equity lines of credit are often seen as less attractive options, in part because of the higher credit-score requirement and the lengthy approval process.
Homeowners value efficiency. Of the $2.4 billion in HERO financing we’ve done, over three-fifths has gone toward energy-efficiency improvements. More than a quarter went toward installing 150 MW in solar panels – more than all the solar capacity installed in over 20 states, combined. Taken together, these improvements are on track to save over 15 billion kilowatt hours of energy over the expected useful lifetime of the products installed. That’s enough to power more than a million American homes for an entire year. HERO-financed improvements are also saving 9.5 billion gallons of water. That’s enough drinking water for every person on Earth for one day – with enough left over to fill over 4,000 Olympic-size swimming pools.
Efficiency pays: homeowners who have used HERO are saving billions on their utility bills, and many report feeling more comfortable in their homes.
HERO’s benefits go beyond saving energy and water. A peer-reviewed study published in the Journal of Structured Finance in 2016 found homeowners who used PACE financing like HERO recovered at least 100% of the cost of their PACE improvement when they sold their home. The study compares that to other popular home improvements, such as kitchen and bathrooms, and cites prior studies showing they recover only 58% to 66% of their cost when the home is sold.
HERO is also creating local jobs. By spurring demand for contractor services, HERO puts people to work and helps small businesses grow. It’s estimated that over the past five years HERO has created more than 20,000 local jobs, many of which can’t be offshored or automated. And because HERO involves private capital, this economic boost is being accomplished at no cost to public budgets.
In the business of sustainability, sustainable business practices are vital. For us, putting the homeowner at the center of everything we do is key to building a business that can grow responsibly. And scaling up this business is important, given the environmental challenges we face.
Buildings account for around two-fifths of our greenhouse-gas emissions, and there are over 135 million houses in the United States. So while we celebrate our milestone, we’re also applying what we’ve learned to the significant task ahead. With your help, we’ll learn more, and make our home-improvement platform even better. Let’s Renovate America, together.