Nearly a decade ago, Massachusetts joined many other states in authorizing a Commercial Property Assessed Clean Energy (CPACE) program called PACE Massachusetts to support energy efficiency and renewable energy investments in commercial real estate. While the program has seen relatively limited uptake since its inception, legislative changes proposed in Governor Healey’s FY27 budget are poised to significantly broaden the program’s appeal and utility by removing the statutory savings-to-investment (“SIR”) requirement for CPACE funded improvements. In this post we provide a comprehensive overview of the program’s structure, eligibility requirements, financing mechanics, and how the Governor’s proposal may open the flood gates for a significant uptick in CPACE market activity.
What is CPACE?
CPACE is a financing mechanism authorized by M.G.L. c. 23M (the “PACE Act”) that enables owners of eligible commercial and industrial properties to finance energy efficiency retrofits, renewable energy installations, and certain new construction improvements.
The program is administered by the Massachusetts Development Finance Agency (“MassDevelopment”) in consultation with the Massachusetts Department of Energy Resources (“DOER”). MassDevelopment and DOER jointly review applications to ensure compliance with program requirements, including a determination that projected energy savings and costs are substantiated and satisfy the program’s SIR requirement — meaning the anticipated savings outweigh the costs of the improvements over their useful life.
DOER and MassDevelopment issued revised program guidelines in March 2025 pursuant to M.G.L. c. 23M.
Key Benefits for Property Owners and Lenders
The program’s financing structure offers distinct advantages for property owners and lenders alike. For property owners, CPACE financing does not result in new balance sheet debt or mortgage liens, but rather the CPACE financing is repaid through a voluntary betterment assessment on the owner’s municipal property tax bill over a term of up to 20 years. The betterment assessment cannot be accelerated and does not require a payoff upon sale — assessments transfer to the new owner. For lenders, the program can improve property cash flow through lower operating costs, reduce credit risk because the financing cannot be accelerated, and increase collateral value through capital improvements. Importantly, a CPACE lien is senior to all private mortgage liens (with the required consent of existing mortgage holders) and remains junior to municipal tax liens, providing a unique security structure that balances the interests of property owners, lenders, and capital providers.
Eligibility Requirements
Eligible properties include commercial or industrial properties, as well as multifamily residential buildings with five or more units, owned by any non-governmental person or entity. Critically, the municipality where the property is located must have opted into the program through the appropriate municipal process (typically a vote by the City Council or Select Board). Once a municipality opts in, a municipality is permitted to levy, collect, remit and assign betterment assessments in return for commercial energy improvements for the property to be benefitted by the program and for the municipality’s associated, reasonable costs. Eligible improvements include energy efficiency retrofits, renewable energy installations (such as solar, geothermal, and energy storage systems), lighting and HVAC upgrades, insulation, and certain new construction projects.
How the Application and Financing Process Works
A property owner applies by submitting to MassDevelopment a completed application, prepared by a qualified energy project developer (e.g., a Massachusetts registered architect or professional engineer, an Investor Confidence Project-credentialed project developer, or a certified energy manager). If the application is determined to be eligible, MassDevelopment will charge a $250 application fee. In practice, property owners may have identified a CPACE capital provider prior to submitting the application. In such cases, the CPACE capital provider can guide the property owner through the application process. If the property owner needs assistance identifying a CPACE capital provider, MassDevelopment can provide a list of registered capital providers.
MassDevelopment reviews the application for financial compliance while DOER evaluates the technical aspects; upon approval, DOER issues an approval letter valid for 12 months (with up to two six-month extensions). Applications that do not meet requirements may be subject to remedial steps or formal rejection, though rejected applications can be revised and resubmitted.
A critical prerequisite to closing a CPACE financing is obtaining written consent from all existing mortgage holders on the property. Mortgage holders must agree to the levying of the PACE betterment assessment and the placement of the CPACE lien, which will be senior to their mortgage liens.
The program can fund up to the entire cost of eligible retrofits and renewable energy improvements, and up to certain percentages of Total Eligible Project Costs for new construction.
Completed Projects in Massachusetts
PACE Massachusetts has seen limited uptake to date, though several projects have successfully accessed CPACE financing, including:
- Marder Seafood Property, Port of New Bedford (2025): FASTPACE and Amalgamated Bank funded a 205kW DC solar PV installation and associated roofing upgrades at an industrial building owned and operated by Marder Seafood.
- East Boston Warehouse (2021): Cargo Ventures LLC received $787,523 in financing from capital provider Greenworks Lending (Nuveen) for energy improvements at 440 William M. McClellan Highway in East Boston, including a new roof, LED lighting, and HVAC system upgrades.
- Greenfield Bank Row (2021): Abercrombie Greenfield, LLC received $450,000 — the first project financed under PACE Massachusetts — for improvements at 56 Bank Row in Greenfield, including efficient electrification of space heating, energy recovery ventilation, LED lighting and controls, window and insulation improvements, and a rooftop solar photovoltaic system.
CPACE financing has had significantly greater adoption in Connecticut, Missouri, Ohio, Texas,
and other states.
Forthcoming Legislative Changes: The FY27 Budget Proposal
The most significant development on the horizon for PACE Massachusetts is a proposed change included in Governor Healey’s FY27 budget that, if adopted, would remove the statutory SIR requirement for CPACE funded improvements. As of the date of this publication, the Commonwealth’s House and Senate have not yet released their budget proposals.
The SIR requirement has been a gatekeeping feature of the program since its authorization, and its removal could meaningfully expand the universe of projects eligible for CPACE financing by allowing improvements that deliver environmental or operational benefits without requiring applicants to prepare a cumbersome and prospective technical analysis to demonstrate a certain level of future net-positive financial return. Many other state CPACE programs — including in California, Tennessee, and Rhode Island — do not require applicants to make an SIR demonstration and deem certain pre-qualified energy efficiency, renewable energy, water conservation, and resilience-related improvements as generally providing a public benefit and therefore eligible for CPACE financing.
Property owners, lenders, municipalities, and developers should closely monitor the progress of the Healey FY27 budget, as it could substantially reshape the practical viability and attractiveness of the PACE Massachusetts program. If the statutory change contemplated in the Healey FY27 budget is ultimately enacted, MassDevelopment will need to issue revised program guidelines to reflect the updated requirements.
Conclusion
PACE Massachusetts remains an underutilized but potentially powerful tool for financing energy efficiency and renewable energy improvements in commercial and industrial properties across the Commonwealth. Understanding the program’s mechanics, eligibility requirements, and evolving legislative landscape is essential. The proposed removal of the SIR requirement in the FY27 budget could mark a turning point for the program, potentially unlocking a broader range of projects and drawing increased interest from property owners and capital providers alike. The team here at Foley Hoag stands ready to assist market participants as they consider the opportunities presented by this market development.
