Renovate America completed its third securitization of property-assessed clean energy (PACE) bonds with $240 million available for clean energy and water efficiency projects.

The first two rounds from Renovate America’s Home Energy Renovation Opportunity (HERO) program funded more than $600 million in residential projects in California. 

PACE programs allow investments in water- and energy-efficiency retrofits and distributed renewable generation to be paid back through property taxes, which lowers the risk for both lenders and owners and can potentially open up a far larger swath of the energy-efficiency market. 

With the recent imposition of a mandatory 25 percent cut in urban water use in California, the latest round of financing is an incredible opportunity for water efficiency projects. PACE can cover such upgrades as drip irrigation, water capture systems, high-efficiency faucets, showerheads and toilets, and some drought-tolerant landscaping.

PACE financing for homes expanded rapidly in 2014, with residential loans eclipsing commercial projects in California.

Another area of expansion is in the types of residential buildings that are allowed to take advantage of PACE. Ygrene Energy Fund, another PACE leader, announced on Wednesday that it completed 25 multifamily PACE projects, with more to come.

Earlier this year, California Governor Jerry Brown established a multifamily PACE pilot in partnership with the MacArthur Foundation and the U.S. Department of Housing and Urban Development. Stacey Lawson, CEO of Ygrene Energy Fund, said now that HUD has given its backing to PACE loans for multifamily properties, it should open up the opportunity in the low-income multifamily housing market. In particular, it should help with mortgage lenders giving their consent to projects with PACE financing. There are more than 3 million multifamily housing units in California alone.

In some ways, government-owned low-income housing may be easier to tackle than commercially owned properties. Lawson noted that there are often complicated ownership factors in commercial multifamily housing, which make it more difficult to execute loans. The buildings Ygrene has worked with so far were market-rate rental buildings.

The Ygrene multifamily projects, which mostly ranged from about $200,000 to $500,000, were for common areas or assets such as boilers that serve the entire building. Future PACE investments in the multifamily space will likely continue to go to building-wide capital improvements, rather than upgrades inside individual units, said Lawson.

In many cases, renters pay their own electricity bills, but it is the building owners that would pay back the PACE loan, a split incentive that has dogged energy-efficiency upgrades in leased properties. One area where the split incentive could be solved using PACE loans is for water projects. With the new water restrictions in California, Lawson said that PACE financing can be used for individual water meters for buildings that currently do not have submeters, so tenants can be held responsible for their specific water use. 

While California could be leveraging more PACE dollars for water efficiency in 2015, Florida continues to mostly make investments around efficiency and roof and window upgrades for wind hardening against hurricanes. In Oregon, state lawmakers recently approved a bill that will allow cities and counties to leverage PACE for seismic upgrades. But despite the different flavors of applications for PACE financing that are emerging across the country, no single state has come close to rivaling California’s robust residential PACE market.