In 2016, Environment Hamilton successfully met with several City Councillors to advocate for Hamilton to adopt using low interest loans to provide home owners with the opportunity to make quality of life and energy conservation improvements to their homes that they otherwise would not be able to afford. Ward 3 Councillor Matthew Green presented a motion to Council requesting a staff report back on the feasibility of the program in Hamilton, much like others that operate in Toronto and Halifax. While we wait on the report, you can read on about the details of what these low interest loans are, and how they can benefit Hamiltonians!
What is a Local Improvement Charge loan, and what does it have to do with energy efficiency?
A Local Improvement Charge loan is a low interest loan that is provided to homeowners by the municipality. In the past this mechanism was primarily used for projects on public property, such as adding sidewalks, or residential projects such as replacing lead pipes. The province of Ontario amended the existing legislation on LICs in 2012 to allow local improvement charges to be used for voluntary energy efficient upgrades on private property. This mechanism became a way for municipalities to help finance energy efficient retrofits and upgrades that could include improving insulation, replacing windows and doors, rainwater harvesting, installing solar panels and more. Since then, municipalities in Ontario have started to implement energy efficiency LIC programs, including Toronto and Guelph. The City of Hamilton has an opportunity to show leadership and become one of the first municipalities to offer LIC programs. We are suggesting that Hamilton develop a Home Energy Retrofit Opportunity so that Hamiltonians can reap the benefits of the LIC mechanism.
Local Improvement Charge loans are attached to the property rather than the property owner, preventing participants’ personal debt from rising. In addition, if the property owner decides to sell the property prior to full loan repayment, the remaining balance would be transferred to the new homeowner. The local improvement charge is placed as a separate line on the property tax bill, which gives it priority status and secures the city’s investment. The municipality will have the same ability to recover the loan as it would to recover defaulted property taxes. This makes the loan secure and fully recoverable.
The city of Hamilton has the ability to borrow money at a lower interest rate than the typical homeowner. The acquired funds are then loaned to homeowners at a higher, yet relatively low, rate. This difference in interest is what pays for the cost of administering the program. This means that only the individuals taking part in the Home Energy Retrofit Opportunity are paying for it and the general taxpayer does not see any increase in costs. This aspect ensures that the program is either revenue neutral or revenue positive for the municipality.
The loan term could be anywhere from 5-25 years based on the repayment plan, the lifespan of the retrofit and the preference of the municipality. In all cases thus far, the municipality has provided the option of paying off the remaining loan in full at no penalty to the property owner.
A Home Energy Retrofit Opportunity would give homeowners a simple, convenient and streamlined way to make energy efficient upgrades. By using a program such as this, homeowners know that they are receiving a certain level of quality and that the process is tested and secure.
Making energy efficient retrofits will reduce energy bills for property owners, which in turn will reduce their vulnerability to the future of rising energy costs. In addition, homeowners will reduce their greenhouse gas emissions, likely qualifying them for further benefits through energy efficiency grants and certifications.
The 2016 Ontario Climate Change Plan mandates that all homes up for sale will need to have a home energy audit done and the results must be available to the homebuyer. This means that making home energy retrofits through this type of program will make a home more appealing on the housing market, as a result of the improved energy efficiency scores.
Benefits of a Home Energy Retrofit Opportunity
Benefits to Hamilton property owners:
Reduce the cost of energy bills
Reduce home greenhouse gas emissions
Financial assistance for making energy efficient retrofits
Step by step guidance through an established program
Loan is attached to property rather than the property owner
No increase in personal debt
New owner assumes loan when property is sold
Simple and convenient program
Benefits to the City of Hamilton:
Investment is secure
Neutral revenue program
Funds can be fully recovered
Participants cover all costs of administering the program
Create local jobs
Local jobs in the trades sector
Local jobs in the clean green energy sector
Increase in quality of building stock
Demonstration of municipal leadership
Potential for municipal awards
Benefits to business:
Contractors can upsell the LIC options to their existing clients
Contractors can upsell other options, such as bathroom renovations, to LIC participants
Steady, reliable stream of business for the contractors
Benefits to the environment:
Reduction in greenhouse gas emissions
Halifax Solar City program estimates a decrease in the municipality’s carbon footprint by 2000 tonnes of carbon dioxide per year.
Conservation of water
1265 homes in the Halifax Solar City program had water conservation measures implemented free of charge during their solar assessment.
The program estimated a savings of 30 million L of water.
Examples of Successful LIC programs
Halifax Solar City Program:
Pilot program launched in March 2013
Pilot program offered a single technology, solar thermal.
388 property owners participated in the pilot project.
Participants are seeing approximately 5% return on investment over 25 years.
The pilot is estimated to have reduced greenhouse gas emissions by 16.1 million kg of CO2.
Any home that had a solar assessment done was offered free water conserving measures, this alone is expected to reduce water use by 320 million litres over the next 20 years.
The Solar City program will be continued for three years, as a result of the successful pilot project
Homeowners are now able to choose from three solar options, Solar Photovoltaic, Solar Hot Air and Solar Hot Water
First municipality in Ontario to begin using LICs for energy efficiency retrofits on personal property.
Pilot program launched in March 2015.
Low interest loans that are used to make improvements to a property’s energy and water efficiency.
Payment term is 15 years but loan can be repaid in full at any time without penalty.
The HELP program won a 2016 Sustainable Cities Award from the Federation of Canadian Municipalities.
Statistics on the success of this program are expected in early 2017.
Guelph Energy Efficiency Retrofit Strategy:
City staff presented the GEERS project to council in September 2015
In May 2016 council approved a phased in GEERS program, forgoing a pilot project
Items that could potentially be offered through GEERS
Basic retrofit package
Triple glazed windows
Electric vehicle charger
Grey water recovery
Payment term is 5-25 years
Program in California launched in 2011 and uses a Third-Party model. Active in over 300 jurisdictions.
Vermont PACE launched in 2012 and is a partnership between the government and a Third Party. A unique feature of this program is the Loan Loss Reserve which is a fund that can be used to cover potential losses experienced by mortgage lenders.
Maine PACE launched in 2013 and is provided by the local government. This program is unique in the way that the loan is prioritized. In this case the loan is prioritized below the mortgage payment. This makes the program more appealing for mortgage lenders.
Open PACE in California launched in 2015 and is a competitive model. Competitive models allow multiple parties to operate as PACE providers, the goal of this is to lower interest rates and provide widespread access to the program.