Last fall, California’s governor and treasury secretary came up with a plan to solve a longstanding conflict with federal housing authorities over residential property-assessed clean energy (PACE) programs.

The plan didn’t work. But does it even matter?

After years of a near standstill, residential PACE programs are back on the upswing in California and other states. And while federal support will be critical for the success of the program nationwide, experts say the promising clean energy financing model will still continue to grow.

By leveraging local bonding authority, PACE supports loans for energy efficiency, water conservation and solar projects. Those loans get paid back through incremental increases to property taxes over twenty years. California pioneered the concept, and state officials have been highly supportive its expansion.

But PACE hit a major snag in 2010, when the Federal Housing Finance Agency — the body that regulates the nation’s two biggest mortgage lenders — came out in opposition to the program. Because PACE loans take precedence over a mortgage in case of default or foreclosure, the agency argued that they are too risky for lenders to support. It instructed Fannie Mae and Freddie Mac to stop underwriting mortgages for customers taking advantage of PACE loans. Read more.