For senior living developers and owner-operators, the past few years have introduced a new reality: capital stacks are harder to assemble, traditional lenders are more conservative on ground-up development, and the margin for error on new development or repositioning deals has narrowed.
In that environment, one financing tool has quietly moved from the periphery to the center of the conversation: Commercial Property Assessed Clean Energy (“C-PACE”).
At a high level, C-PACE is a long-term, fixed-rate financing source designed to fund energy efficiency, water conservation, and resiliency improvements. In practice, C-PACE has become an effective tool available to close capital gaps, reduce overall cost of capital, and improve deal feasibility.
What makes C-PACE unique is its structure. Rather than a traditional mortgage, it is secured through a special property assessment and repaid along with the facility’s property taxes. It is typically non-recourse, carries a 20–30 year term, and remains with the property upon sale. These features allow it to behave differently than other forms of debt—and more importantly, to complement them.
That flexibility is exactly why adoption has accelerated. In 2025, C-PACE originations reached record levels, and the product has gained acceptance from some banks, debt funds, and institutional investors. What was once considered niche is now increasingly viewed as a standard component of sophisticated capital stacks.
Particularly in senior housing—where construction costs are high, lease-up risk is real, and operational complexity matters—traditional financing often provides around 60% loan-to-cost, and developers are increasingly turning to C-PACE to fill the capital stack and reduce the amount of equity required.
In many cases, it functions as a replacement for more expensive capital: where a developer might otherwise rely on mezzanine debt or preferred equity to increase leverage, C-PACE can fill that same position at a significantly lower, fixed cost. The result is a more efficient capital stack and improved projected returns, as lower equity requirements, all things equal, result in a better IRR for the project.
This dynamic is playing out across a range of use cases relevant to senior living. Ground-up developments are using C-PACE to bridge financing gaps created by tighter construction lending terms. Value-add and repositioning projects are using it to fund system upgrades—HVAC, building envelope, and water systems—that both qualify for C-PACE and improve operating efficiency. Some owners are even using C-PACE in recapitalizations, either to refinance existing assets or to generate liquidity through retroactive financing of previously completed improvements.
That last point is particularly important. Most states allow a 1-3 year lookback for C-PACE programs, meaning that recently completed projects may already be eligible. For owners facing loan maturities or seeking to recapitalize, C-PACE can be used to create liquidity after initial development has already occurred.
Importantly, the growth in C-PACE utilization has been accompanied by increased institutional acceptance. Lenders who were once cautious are now comfortable incorporating C-PACE into their structures, provided it is well underwritten and properly sized.
As with any capital solution, there are tradeoffs which owners must consider. C-PACE programs are enacted and enabled by state legislatures, and not every state has an active program. Specifics can also vary by state. Developers and owners should also be cognizant of longer-term capital planning. Permanent loan programs, like HUD, do not currently allow for C-PACE financing to remain in place upon permanent loan closing.
Looking ahead, C-PACE is poised to remain as an arrow in the quiver of commercial real estate finance. While debt markets continue to heat up for acquisitions and recapitalizations, underwriting discipline remains tight especially for new construction. That creates ongoing demand for capital that can sit alongside senior debt without forcing lenders to stretch beyond their comfort zone.
In a market where cost of capital, execution certainty, and capital stack creativity increasingly determine which projects move forward, C-PACE can offer a distinct advantage. It can reduce add leverage, reduce the blended cost of capital, and unlock deals that might otherwise stall.
And in today’s environment, that often makes all the difference between a deal that works on paper and one that actually gets built.