Like a lot of homeowners this summer, my wife and I are looking to put new windows into our home.  We moved last October, leaving our downtown condo when the impending arrival of our second daughter promised to make things a little too tight.  A drafty winter and a number of windows that, well, just couldn’t be opened this spring demonstrated a need – and President Obama’s Energy Tax Credit cemented the deal. As I’ve learned, like almost everything associated with a new-old house, windows ain’t cheap – and the windows that qualify for the tax credit really ain’t cheap.  The increased cost takes 20 years (on average) to recoup based on the marginal energy savings (something to do with U-factors and Solar Heat Gain Coefficients according to Home Depot). But the government wouldn’t have to pay you to do it if it made good economic sense.

Which leads me to Jerry Brown filing a lawsuit against Fannie Mae and Freddie Mac last month for refusing to refi mortgages that carry liens relating to PACE bonds.  Mr. Brown, in the midst of a bid for the Governator’s seat, claims the GSEs’ actions are wrecking his State’s ability to grow a green economy and is pushing for the President to step in.  PACE bond programs give grants to homeowners for energy-efficient home improvements, for which the homeowner pays a tax-like assessment.  The economic benefits of the energy improvements – nebulous cost savings over the long term – are questionable at best. And as you’d expect, the liens associated with the assessments prime a lender’s mortgage.  This makes the bonds salable for the municipalities – but places the burden of paying for those improvements on the mortgage lender in a default scenario, causing Fannie and Freddie to balk.  So now, and without any visible sign of irony, Candidate Brown wants the Obama Administration to bully Fannie and Freddie into lowering their underwriting standards.

Now, I might suggest that there are better places to put your money than any debt issued by the State of California.  And I also might say that, at least here in the Commonwealth of Massachusetts, it’s considered rather rude to campaign against a Kennedy relative.  But let me instead end with this: the really interesting story that will develop around green improvements in coming years is the retro-fit of existing commercial real estate – most significantly, office buildings – and who will pay for it.  All industry constituents – banks, developers, government agencies and lawyers – are trying to figure out a viable way to finance energy-efficient improvements to existing buildings.  The biggest obstacle facing lenders is how to translate the cache of LEED certification, the promise of marketing “green” space to politically-conscious tenants and the possibility of reduced operating costs over the long term into cash flow that can service the lender’s debt.  Not so different than figuring out the right windows to buy, really.  One thing is for sure – the first to figure it out will make a good deal of money on the estimated $520 billion expected to be spent on green retro-fits over the next 8 years.