Making a C-PACE program work for borrowers and municipalities must balance oversight and flexibility
Access to a range of attractive financing options helps to scale retrofit activity. While Ontario’s market is well served by a range of retrofit financing options, there is one type of financing broadly available in the U.S. which is not available to most Ontario building owners: Property Assessed Clean Energy loans. That’s why it’s worth paying attention to Ontario’s proposal to expand permissions for Commercial Property Assessed Clean Energy (C-PACE) financing.
C-PACE lets property owners pay for eligible upgrades – e.g. energy efficiency and on-site renewables– using financing tied to the property rather than the owner. Building owners can invest in a major retrofit and repay the cost gradually through a charge on their property tax bill, often over 20 years or more.
Because the financing is tied to the property rather than the borrower, C-PACE can better align repayment terms with the long-lived upgrades like better building envelopes and heat pumps.
Property assessed financing has been allowed in Ontario for over a decade, however, the large majority of municipalities have decided not to offer C-PACE programs. Under the current regulations, cities are required to use their own capital to finance the energy upgrades, competing with other municipal spending priorities. Combined with the administrative burden of designing and operating a C-PACE program, this has made C-PACE a tough sell for Ontario municipalities.
In contrast, in the U.S., C-PACE is authorized in 36 states, with hundreds of municipalities participating, and over $9 billion in capital deployed. So why are U.S. cities so much keener on C-PACE? Mainly it’s because American states allow the loans to be made by private lenders, while still being secured and repaid via municipal property tax systems. This means C-PACE lending doesn’t compete with other municipal capital spending priorities. Additionally, most U.S. programs make use of third-party program administrators, lightening the load on municipal staff.
Ontario is proposing to amend the regulations governing C-PACE financing to enable the participation of private lenders. Under Ontario’s proposal, municipalities would opt in by passing a bylaw, then collect C-PACE payments on lenders’ behalf through their existing property tax systems.
Done well, C‑PACE could unlock long-term capital for projects that cut carbon, lower operating costs, improve building performance, and support jobs in the retrofit and green construction sector.
But there’s a catch: like any financing tool, C‑PACE will only deliver on its promise if the details of Ontario’s framework are designed with real-world retrofit needs in mind.
C‑PACE needs to work for real-world retrofits
Ontario’s proposed eligibility – energy efficiency, renewable energy, water conservation – is a solid starting point, but retrofits rarely happen in a vacuum. Building owners aren’t simply swapping one system for another; they’re navigating limited electrical capacity, aging equipment, and rising construction costs. Often, the real work starts before any emissions reduction is even possible. What happens when a major retrofit needs infrastructure in place before it can even begin?
If C-PACE is going to support the deeper retrofits Ontario needs, the eligible project list has to catch up to that reality. That means explicitly including:
- Energy storage systems
- Electric vehicle charging infrastructure
- Electrical capacity and service upgrades
- Climate resilience measures
The climate is already testing our buildings, and the risk is compounding fast. As extreme heat and flooding become bigger threats, C-PACE should be able to finance cooling systems that protect people during heat waves, and flood resilience upgrades that keep buildings running when the weather doesn’t cooperate. And the province should confirm C-PACE can be used for new construction, not just retrofits – building resilience and efficiency in from day one is almost always cheaper than adding it later.
Oversight that earns trust
A financing program is only as good as people’s confidence in it. Because C-PACE repayment is secured by a lien on the property, lenders get strong protection – which is good news for borrowers if it translates into better terms. But that security cuts both ways: Ontario needs clear safeguards to keep the system transparent and fair. Municipalities shouldn’t be left to vet lenders or build oversight systems from scratch. That creates duplicated effort province-wide, adds unnecessary administrative burden, and will likely discourage participation – especially among smaller municipalities with limited capacity. In TAF’s conversations with municipal staff, this concern comes up consistently. Many are already stretched thin, looking for ways to encourage greener construction and higher building standards, but lacking the financing tools and internal capacity to make those goals actionable.
We recommend the province should:
- Designate a single provincial administrator to run C-PACE programs across participating municipalities, or;
- Explicitly authorize municipalities to bring in qualified third-party administrators to do it for them.
Trust also depends on how repayment itself is structured. Ontario should lock two things down. First, unpaid charges should be treated the same way as property tax arrears for collection purposes. Second, financing obligations need to stay non-accelerable in default – meaning only the missed payments come due, not the entire remaining balance. These aren’t flashy details, but they’re the difference between a tool lenders and mortgage holders trust enough to actually price well, and one they hesitate to touch.
Give municipalities a clear, workable role
Municipalities will be central to whether this actually works. They know their building stock, local market conditions, housing pressures, and climate priorities better than anyone. Ontario should provide a consistent provincial framework while giving municipalities the flexibility to shape local program requirements through their enabling bylaws. That means giving them the ability to:
- Set local participation criteria
- Prioritize the project types that matter most in their community
- Attach outcome-based requirements, like minimum energy savings or emissions reductions
- Factor in affordability for multi-unit residential buildings, so retrofit financing supports housing stability instead of undercutting it
Getting the balance right is important. Ask too much of municipalities administratively, and many will simply opt out. Give them too little flexibility, and financing won’t match what their communities actually need. Standard templates, provincial guidance, and shared administrative services would turn “participation” from a nice idea into something municipalities can realistically do.
Ontario’s opportunity to drive the retrofit market
The province has a real opportunity here. With broader project eligibility, stronger oversight, a practical municipal administration model, and clear repayment rules, C-PACE could become more than a climate tool – it could help drive skilled local job creation, keep buildings more affordable to run, and make Ontario’s communities more resilient to what’s already changing around them.
The potential is there. Getting the details right is what will make the difference.
For more detailed recommendations, read TAF’s full submission to the Environmental Registry of Ontario here.
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