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PACE (Property Assessed Clean Energy) lets you finance solar panels through your property tax bill with no credit check. But the program has drawn serious criticism from consumer advocates, the FTC, and state regulators. Here's what you need to know before signing.
Important 2026 Context
The federal residential solar tax credit (Section 25D) expired on December 31, 2025. Homeowners who purchase solar with cash or a loan — including PACE — receive no federal tax credit. However, third-party financing companies (lease, PPA, or Propel-style models) can still claim the commercial ITC under Section 48/48E because they own the system. This fundamentally changes the math for PACE vs. other financing options.
PACE — Property Assessed Clean Energy — is a financing mechanism that allows property owners to fund energy efficiency upgrades, renewable energy installations, and water conservation improvements through an assessment on their property tax bill. First introduced in Berkeley, California in 2008, PACE was designed to remove upfront cost barriers and make clean energy accessible to more homeowners.
Unlike a traditional loan, PACE is tied to the property — not the person. This means:
The PACE assessment is a lien on the property, not a personal debt. If you sell, the remaining balance transfers to the new owner.
Traditional PACE programs do not check your credit score or verify income. Approval is based on property equity and tax payment history.
Payments appear as an additional line item on your property tax bill, typically over 10-30 years with interest rates of 6-9%.
PACE liens take priority over your mortgage — a critical distinction that has caused significant controversy and opposition from mortgage lenders.
2008: Berkeley, CA launches first PACE program. The concept spreads quickly as a novel way to finance clean energy without traditional lending barriers.
2010: The Federal Housing Finance Agency (FHFA) issues a directive stating that Fannie Mae and Freddie Mac will not purchase mortgages on properties with PACE liens, citing the priority lien position as a risk. This effectively kills residential PACE in most states.
2013-2016: California and Florida revive residential PACE through new legislation that works around the FHFA directive. Programs like HERO and Ygrene grow rapidly.
2017-2020: Consumer complaints surge. Reports of predatory contractor practices, homeowners unable to refinance, and seniors pressured into assessments they cannot afford.
2022: California passes AB 2693, requiring PACE providers to verify a homeowner's ability to pay — the first major consumer protection reform for residential PACE.
2024-2026: Residential PACE remains active in only four states. Most states have either banned it, restricted it to commercial properties, or never enabled it. C-PACE (commercial) continues to grow.
The PACE process differs significantly from getting a traditional solar loan. Here is what the journey looks like from start to finish:
Verify your property is in a jurisdiction with an active residential PACE program. Your property taxes must be current with no outstanding liens or delinquencies.
PACE programs require you to work with a contractor registered in their network. The contractor prepares a scope of work and cost estimate for your solar installation or energy improvements.
Submit your application to the PACE administrator (e.g., Ygrene, Renew Financial). There is no credit check, but you must own the property and have sufficient equity. California now requires an ability-to-pay assessment.
Once approved, a voluntary assessment is placed on your property. This creates a tax lien that takes priority over your mortgage — a critical detail many homeowners overlook.
The contractor installs the solar panels or completes the energy improvements. Work must pass local inspection before the PACE provider releases funds to the contractor.
You repay the PACE assessment as an additional line item on your property tax bill over 10-30 years. Payments include principal, interest (typically 6-9%), and administrative fees.
Not just any solar installer can participate in PACE. Contractors must:
The most critical thing to understand about PACE is the priority tax lien. When a PACE assessment is placed on your property, it takes first position — ahead of your mortgage. This means if you default on PACE payments, the PACE lien gets paid before your mortgage lender. This is why Fannie Mae and Freddie Mac refuse to purchase mortgages on PACE-encumbered properties, and why many homeowners have had difficulty refinancing or selling their homes after getting PACE financing.
To make an informed decision, you need to see how PACE stacks up against the other ways to finance solar in 2026. Here is a side-by-side comparison:
| Feature | PACE | Solar Loan | Lease / PPA |
|---|---|---|---|
| Typical Interest Rate | 6–9% | 4–8% | 0% (built into payments) |
| Credit Check Required | No | Yes (640+ typical) | Yes (usually 650+) |
| Down Payment | $0 | $0 typical | $0 |
| System Ownership | Homeowner | Homeowner | Third-party company |
| Term Length | 10–30 years | 5–25 years | 20–25 years |
| Transferable on Sale | Yes (stays with property) | No (must pay off) | Yes (lease transfers) |
| Lien on Property | Yes — PRIORITY over mortgage | No (or junior UCC lien) | No lien |
| Impact on Mortgage | Can trigger mortgage default | Increases DTI ratio | Minimal impact |
| Fannie Mae / Freddie Mac | Will not purchase with PACE lien | No restrictions | No restrictions |
| Consumer Protections | Limited (varies by state) | Standard lending protections | Standard contract protections |
| Appears on Credit Report | No | Yes | No (usually) |
PACE availability varies dramatically by state. Most states either restrict PACE to commercial properties or have banned residential PACE entirely. Only four states have active residential programs as of 2026.
Note: States not listed below either have no PACE legislation or have not implemented programs. Over 35 states have enacted PACE-enabling legislation, but most have only activated C-PACE (commercial).
| State | Status | Programs | Notes |
|---|---|---|---|
| California | Active (Residential) | HERO, Ygrene, Renew Financial | Largest market. AB 2693 (2022) added ability-to-pay requirements |
| Florida | Active (Residential) | Ygrene, Renew Financial | Second largest market. Active in most counties |
| Missouri | Active (Residential) | Missouri Clean Energy District | Statewide program, moderate adoption |
| Ohio | Active (Residential) | Ohio PACE (via special energy districts) | Limited adoption, mostly in metro areas |
| Connecticut | C-PACE Only | C-PACE (via CT Green Bank) | Strong C-PACE program. No residential PACE |
| Massachusetts | C-PACE Only | Mass C-PACE (via MassDevelopment) | C-PACE only. Residential never enabled |
| Rhode Island | C-PACE Only | RI C-PACE (via Rhode Island Infrastructure Bank) | C-PACE for commercial and municipal buildings |
| New Jersey | C-PACE Only | NJ C-PACE | Enabled 2021. Commercial and multifamily only |
| New York | C-PACE Only | Energize NY, NYC PACE | Active C-PACE. Residential PACE never launched |
| Texas | C-PACE Only | TX-PACE (via PACE in a Box) | Commercial only. Growing adoption in metro areas |
| Maine | C-PACE Only | Maine C-PACE (via Efficiency Maine) | Municipal opt-in program for commercial properties |
| New Hampshire | C-PACE Only | NH C-PACE | Enacted 2020. Very limited adoption so far |
| Virginia | Limited | Virginia PACE Authority | Enabled but very few active programs |
| Colorado | Limited | Colorado C-PACE / New Energy Improvement District | Primarily commercial. Residential extremely limited |
| Georgia | Banned / None | N/A | No enabling legislation |
| Arizona | Banned / None | N/A | PACE legislation repealed due to consumer complaints |
| Nevada | Banned / None | N/A | Residential PACE suspended after consumer protection issues |
NuWatt Energy serves the Northeast (MA, NH, CT, RI, ME) plus TX and NJ. None of these states offer residential PACE financing. CT, MA, RI, NJ, NH, and ME have C-PACE programs for commercial properties only. TX has commercial PACE in certain jurisdictions. For residential solar in these states, we recommend solar loans, leases, PPAs, or Propel financing.
Residential PACE is one of the most controversial financing mechanisms in the clean energy industry. While the concept was well-intentioned — making solar accessible to homeowners who might not qualify for traditional loans — the implementation has caused real harm to some consumers. Here are the documented issues:
Because PACE programs historically had no credit check and no income verification, some contractors and PACE providers approved homeowners for assessments they clearly could not afford. Reports surfaced of:
The Federal Trade Commission (FTC) and multiple state attorneys general have taken action against PACE providers:
The PACE priority lien creates a cascade of problems for homeowners:
When you factor in all costs, PACE often ends up being more expensive than alternatives:
Typical PACE Total Cost
$38,000 - $52,000
For a $25,000 system over 20 years at 7% + fees
Typical Solar Loan Total Cost
$32,000 - $42,000
For a $25,000 system over 15 years at 6% APR
The combination of higher interest rates (6-9% vs. 4-8%), longer terms (up to 30 years), and origination fees (3-5%) means homeowners can pay $6,000-$15,000 more over the life of a PACE assessment compared to a traditional solar loan.
PACE supporters make valid points as well:
While residential PACE has been mired in controversy, Commercial PACE (C-PACE) has grown steadily and is widely regarded as a legitimate financing tool for commercial, industrial, and multifamily properties. The key difference: commercial property owners are treated as sophisticated borrowers who understand lien positions and financial risk.
For commercial property owners, combining C-PACE with the commercial Investment Tax Credit (Section 48/48E) can be highly effective. The property owner claims the ITC directly (30% base, potentially up to 70% with bonus adders for domestic content, energy community, and low-income designations), while using C-PACE to finance the upfront cost with no out-of-pocket expense.
Important: The commercial ITC is available for projects beginning construction before July 4, 2026. If you are a commercial property owner considering C-PACE + solar, time is limited. Learn more about commercial solar options.
For most homeowners, especially in 2026 without the residential tax credit, there are better financing options than PACE. Here is how the main alternatives compare:
If you have the funds, buying solar outright gives you the lowest total cost. With no interest, no lien, and full ownership from day one, cash delivers the best long-term ROI. However, without the federal tax credit, payback periods are now 8-15+ years depending on your state and utility rates.
Traditional solar loans offer lower rates than PACE, standard consumer protections (TILA, RESPA), and do not create a priority lien on your property. You own the system and build equity. The tradeoff: you need a credit score of 640+ and the payments appear on your credit report.
In 2026 without the residential tax credit, leases and PPAs have a major structural advantage: the financing company owns the system and captures the 30% commercial ITC under Section 48/48E. They pass savings to you through lower monthly rates. No lien on your property, professional maintenance included, and typically lower monthly costs than PACE.
Available in ME and TX through NuWatt, Propel is a third-party ownership model where the financing company uses FEOC-compliant panels to maximize the commercial ITC. You get solar at a lower effective cost than PACE with no property lien, no credit-score gatekeeper (though income is verified), and a path to ownership after the ITC period.
Best overall value (if you can qualify): Solar loan at 4-8% APR with a 10-15 year term. Lower total cost than PACE, standard consumer protections, no priority lien.
Best for $0-down and no hassle: Lease or PPA. The financing company captures the commercial ITC, passes savings to you, handles maintenance, and there is no lien on your property.
Best for poor credit with no alternatives: PACE — but only if you fully understand the risks, live in an active PACE state (CA, FL, MO, OH), and will not need to refinance or sell in the near term.
Before pursuing PACE financing, work through this decision framework honestly. PACE is appropriate for a narrow set of circumstances — and genuinely harmful in others.
Not sure which financing option is right for your situation? Compare all available options for your state — including cash, loans, leases, PPAs, and third-party ownership models.
This guide is written by NuWatt Energy's editorial team with the goal of providing honest, balanced information about PACE financing. We do not offer PACE financing and have no financial relationship with any PACE provider. Our analysis draws on:
Last updated: March 2026. PACE program availability and terms change frequently. Always verify current program status with your local PACE administrator before making financing decisions.