Municipal Energy Efficiency Lending: Can New CMHC and FCM Funding Co-Exist?

The Government of Canada recently announced two initiatives to support energy efficiency upgrades in Canadian homes via the Canada Greener Homes Grant and an associated interest-free loan offer (yet to be released) through the Canada Mortgage and Housing Corporation (CMHC).

These programs arrive alongside a range of other established efficiency support programs offered by municipalities, utilities, and other players across the country, leaving some to wonder how these offers relate, and how they can help homeowners choose between the available options. In particular, municipalities are asking how best to leverage these new opportunities while they are rolling out their own low-interest financing offers using the support of the Federation of Canadian Municipalities (FCM) Community Efficiency Fund (CEF).

Municipalities are on the front lines of two of the biggest challenges we currently face: supporting a post-pandemic economic recovery and leading local action in the fight against climate change. With over 400 Canadian municipalities declaring climate emergencies, municipalities are tackling this challenge head on.  Efficiency retrofit financing can play a key role in supporting both of these local objectives, and as leaders in the design of Efficiency Financing programs across Canada, we believe there are three areas that municipalities must take into account when designing strategies to encourage home efficiency upgrades.

1. Home retrofit needs are vast, and support is needed on all fronts.

Efficiency upgrade projects address indoor air quality (mitigating health issues), increase energy efficiency (saving money) and enhance the ability of the home to withstand extreme weather.  The new Federal grant program is targeting up to 700,000 homes, which is a small portion of the nearly 9.9 million single family homes across Canada.  With only up to 200,000 0% loans available for homeowners from the CMHC, it is clear that improving the energy performance in the majority of homes across Canada will require many actors.

Municipalities can leverage the funds from the CEF program to build a fertile local market for home retrofits; one that benefits from the new Federal Government offers, as well local municipal financing or utility rebate programs.  Municipalities can apply CEF funds to lay the needed groundwork by ensuring there are sufficient EnerGuide assessors who can perform the home energy evaluations needed for the Greener Homes program and CEF-funded initiatives, as well as for many utility rebate programs. Municipalities can also structure CEF program offers to attract private capital, thereby transforming local retrofit markets, and offering solutions that are not limited by the CMHC program’s budget caps.

2. Different financing and granting programs can meet different homeowner needs.

While the terms of the new $40,000, no interest loans from the CMHC have not been determined, municipal programs that lever the very low risk PACE or utility on-bill repayment models should be well-placed to differentiate their offers to local homeowners.  This can be done by offering financing that is tailored and streamlined for equipment-only upgrades (such as heat pumps or solar panels as Halifax Solar City has demonstrated over the past decade) or to cover broader upgrades that address other municipal priorities such as seismic and water infrastructure upgrades, which are often eligible for PACE financing.  Alternatively, municipal financing programs can offer a single source for large comprehensive home upgrades that include associated non—energy upgrades, such as replacing a roof and adding insulation in one project, thereby enabling more homeowners to pursue energy upgrades.  Overall, while there is a risk that the new offers could compete for some municipal financing volumes in the near term, overall they will generate new interest and demand from homeowners and contractors that municipalities can leverage to complement local programs. However, municipalities need to be aware of the potential confusion in the market if their financing programs are not sufficiently differentiated from the other government sponsored financing from the CMHC.  If successful, there does appear to be sufficient room in the market for multiple home retrofit offers, provided the value they offer is clearly articulated.

3. Municipalities can lead the way by creating a seamless process to help homeowners optimize the support available to them.

Municipal governments are perfectly placed to help local homeowners navigate their options when considering an efficiency upgrade. Using CEF support, municipalities can engage in education campaigns and establish central information sites or a “one-stop-shop” that reduces confusion and complexity and helps homeowners identify and access the right program(s) to support their home upgrades.  On the supply side, municipalities can use their existing relationships to support contractors by educating them on how to work with the program and encourage high standards for the work performed. Ultimately, municipalities may even want to leverage these opportunities to support retrofit energy codes that require homeowners to improve their home performance, knowing that the financing is broadly available to make this possible.  For smaller municipalities, this may seem daunting, but CEF support can help them to form regional programs to accomplish this cooperatively with their municipal neighbours.

Developing an Efficiency Financing Program

As the principal designers of many efficiency financing programs across Canada (including FCM’s CEF initiative), we believe that the upcoming CMHC loans represent an opportunity for municipalities to launch complementary financing offers and deliver associated support in their local markets. While there is a need to differentiate, the benefits to communities – more jobs, more greenhouse gas (GHG) reductions and healthier residents – are too important to wait. To learn more about how to navigate these various financing options or to discuss a strategic partnership to make your financing plans a reality, we encourage you to contact us at info@dunsky.com.