Dozens of green business owners and employees stood on the steps of Babylon Town Hall Tuesday morning, as town officials announced plans to file a lawsuit against the Federal Housing Finance Agency (FHFA), the federal agency that oversees Fannie Mae and Freddie Mac.
It all started with a letter.
Last week, the FHFA sent an order to Fannie and Freddie to restrict mortgage lending opportunities and lower credit lines for homeowners who live in municipalities that offer home energy retrofit programs.
Bottom line, the Long Island Green Homes Program (LIGH)—which provides the upfront financing for energy-efficient home makeovers in the Town of Babylon paid back through homeowner savings—must be shut down or residents of the town will have a difficult time securing mortgages.
“This is an outrageous attack of open government by a federal bureaucracy that is completely out of touch,” said Babylon Town Supervisor Steve Bellone. “What is most appalling is that it comes from the federal agency that helped facilitate the economic crisis that we are in today, leaving millions of Americans in foreclosure and tens of millions more on the unemployment line: Frannie and Freddie.”
More than 500 homeowners in the town have participated in the program in less than two years, giving a substantial boost to the local economy through the creation of green jobs, especially for contractors who have 25 percent of their trades out of work, Bellone said. On the other end, officials say the program saves the average homeowner more than $1,000 in yearly energy bills, and keeps more than 1,200 tons of carbon dioxide out of the air per year.
“It’s working and it’s demonstratively successful,” said Dorian Dale, the Town of Babylon’s energy director and a pioneer in launching LIGH. “This is all coming from the administration that toots the horn for job creation. This isn’t a statistical concoction, these are real people. As one of the developers here I’d be out of a job too, so I take it personally, I really do.”
The letter from the FHFA comes nearly a year after the town contacted the agency inviting them to learn about the program—which has since become a national model for similar programs throughout the U.S.
“No response,” said Bellone. “We sent a letter to Fannie Mae—no response. We sent a letter to Freddie Mac asking for a compilation of their concerns. Again, no response. On July 6, we essentially received their response.”
Their response? Shut down the program. And at a time where one of Long Island’s biggest issues is keeping jobs—and young people living here—this comes as a major blow.
Powersmith Home Energy Solutions President Dan Kartzman founded his company six months ago after moving from San Francisco to New York. Kartzman, who spent four years on the executive team at Recurve—one of the largest home performance contractors in the country—decided to start his business on LI.
“This young entrepreneur said ‘I’m going to move across the country because I see an opportunity and I’m going to create jobs,’” said Bellone. “And that is exactly what he is doing—creating jobs.”
Powersmith has more than doubled in size since it took root on LI, and it was LIGH that brought it here.
“I realized without a doubt that Babylon was the best place to start,” said Kartzman. “In San Francisco, for every two energy audits we did, one of them would become an energy efficiency construction project. In Babylon, thanks to Long Island Green Homes, four out of five become a project. That is unbelievable.”
If the program is shut down, Kartzman estimates he would need to lay off at least three-quarters of his staff. And he isn’t alone.
“If this program is brought to a halt, I am dead in the water,” says Rich Manning, owner of Energy Master & Environmental Solutions. “And I have a good chance of being forced to dissolve my company and lay off all my workers.”
So, why is the FHFA doing this? In its statement, the FHFA said Property Assessed Clean Energy Programs (PACE), like Babylon’s Green Homes program, are “unlike routine tax assessments.” The FHFA considers benefit assessments applied to retrofit a home as a threat to the value of a mortgage.
“This program is helping strengthen mortgages,” said Bellone arguing that rather than undermining the value of the mortgage, the improvements enhance the mortgage value by making the house more affordable and increasing its overall value.
Ria Muriello, a homeowner in Wheatley Heights who was recently laid off and participates in LIGH, says the program is “simple” and saves her $925 in energy bills per year.
“I look at it as a win-win situation,” says Muriello. “So the fact that I may be inhibited from selling my home just doesn’t make sense to me.”
Babylon officials hope they can come to a compromise with the federal agency. Bellone said construction through the LIGH program has never exceeded 10 percent of the value of the property and in virtually all cases to date, the loan-to-value ratio is below 5 percent and all participating homeowners must have a history of timely property tax payment, among other guidelines LIGH follows and hopes will allay federal fears. But if not, he says he’s prepared for a fight.
“Fannie and Freddie have been clear, so let me be clear as well,” said Bellone. “We will not shut down the Long Island Green Homes program, and we will challenge this unwarranted and, in our view, unconstitutional intrusion.”
Rep. Steve Israel (D – Huntington) has called on the Acting Director of the FHFA Edward DeMarco to either work with stakeholders and communities on advancing PACE programs or step down.
“PACE programs have been expanding rapidly because they allow homeowners the chance to save money on their utility bills by making energy efficiency retrofits affordable,” said Israel. “The FHFA must come to the table and work with the communities, officials, and industry leaders that have implemented these successful programs and find a solution so that PACE programs can continue and move forward with Recovery Act funded pilot programs. Thus far the FHFA has been unwilling to work with us and if the Acting Director of the FHFA won’t help us seek solutions then he needs to resign.”