Housing developers will have a new green financing tool in New Hampshire

A bill on its way to the governor’s desk in New Hampshire could spur new, energy-efficient housing development in the state as soon as this summer, supporters say.

New Hampshire legislators on Thursday voted to adopt a loan program that will create a new way to finance clean energy and energy efficiency while making it easier to build residential developments in a state facing an acute housing shortage. The measure passed unanimously in the House and has broad support from Democrats, Republicans, environmental advocates, and the business community.

Gov. Kelly Ayotte (R) is expected to sign the bill into law shortly. Individual cities and towns will then need to vote to authorize the program in their communities, which could happen as soon as their annual spring town meetings in March and April. New construction projects could start taking advantage of the loans as soon as July or August, said developer Stephen Duprey, a supporter of the program.

“It’s a win-win story,” said Sam Evans-Brown, executive director of advocacy organization Clean Energy New Hampshire. ​“It is going to result in more housing being built, but it also means the housing that gets built will use less energy and cost less money for the owners and inhabitants.”

Commercial property-assessed clean energy — or C-PACE — loans let commercial building developers and owners borrow money for clean energy and energy efficiency projects from a private lender but pay the money back through an added line item on their property tax bills. When the property is sold, the buyer takes on the loan as well, getting a higher tax bill but a building with lower operating costs. At the same time, the loans have longer terms than conventional financing, leading to lower payments.

C-PACE has been nominally on the books in New Hampshire since 2010, but flaws in the way the law was written prevented it from ever being used. Lawmakers have made at least five attempts to tweak and improve the statute since then, but none have succeeded in getting the loan program up and running.

“The law was just fundamentally broken,” Evans-Brown said.

Then, last year, Duprey had a conversation with a lender who asked why New Hampshire didn’t have a C-PACE program. Duprey had a vague memory of the term but asked for more information about the program.

After listening to the lender’s explanation, he realized the model had potential to spur development of multifamily residential buildings — homes the state direly needs. If a developer uses C-PACE to finance the energy components of a new build — heat pumps, solar panels, insulation, efficient windows — they can take out a smaller mortgage for the construction and need less equity to fund the development, he said. That frees up money for building more units.

For Duprey, any benefits for energy efficiency or clean energy are secondary. ​“It’s a let’s-help-get-more-housing-built loan,” he said. ​“It’s great if it does extra things for energy.”

So Duprey asked the staff at the New Hampshire Business Finance Authority, of which he is vice chair, to investigate the existing C-PACE legislation and find out why it didn’t work. He discovered that the original version of the law put too many restrictions on the program to make it appealing. Municipalities were asked to carry too much of the administrative burden, he said. Banks were wary of a new kind of loan coming in and competing with their conventional products, Evans-Brown said.

Duprey, a former chair of the state Republican committee, began reaching out to his contacts in the legislature and the business community to work on a C-PACE overhaul that would eliminate these barriers.

The resulting bill has garnered widespread approval. Municipalities like that it places the responsibility of administering C-PACE on the state business finance authority, rather than individual cities and towns. To address banks’ concerns, the program will operate on a consent model that requires the approval of the lender that holds the first mortgage. Banks have also gained a lot of experience with these loans in the 15 years since the original law passed and are more comfortable with the model now.

Nationally, 36 states have active C-PACE programs, according to numbers from nonprofit PaceNation. Last year, these programs saw $2.42 billion in investment, the biggest year on record, the organization reports. In Connecticut, which in 2012 was the first state to adopt C-PACE, more than $380 million in financing has supported 415 projects, said Mackey Dykes, executive vice president of financing programs for the Connecticut Green Bank, which administers the state’s program.

“It’s just benefit after benefit,” he said. ​“For no taxpayer cost, we’re able to drive these outcomes by taking these public tools and bringing in private lenders.”

The passage of the New Hampshire bill is a rare and very welcome example of bipartisan cooperation, in a particularly fractious moment for any climate action, said Evans-Brown. 

“Isn’t it great that we get to kick off the legislative session with something good?” he said.