A competitive market is emerging in the San Diego region for home-improvement loans devoted to energy and water conservation that are repaid through property taxes, with three companies now vying for clients.

Property-assessed loans from CaliforniaFIRST are available to homeowners across San Diego city, unincorporated parts of the county and nearly all other local cities. The city of San Diego authorized the program last week for homeowners within its boundaries.

CaliforniaFIRST loans, administered by the Oakland-based company Renewable Funding, will compete with HERO loans offered by Renovate America and Figtree OnDemandPACE from Figtree Financing, both based in San Diego.

So-called PACE financing — short for property assessed clean energy — can be spent on a broad range of energy and water projects, from rooftop solar energy systems to insulated windows, low-flow toilets and desert-friendly landscaping to replaces grass lawns.

Unlike personal home equity loans, PACE obligations are linked to the property and designed to be passed along to the next owner when homes are sold.

PACE interest rates are typically higher than those for the average home equity loan, but significantly lower than credit card debt.

Renewable Funding spokesman Ray Delgado said CaliforniaFIRST fixed-rate loans currently run from 6.75 percent for a five-year payoff to 8.75 percent for a 20-year term.

CaliforniaFIRST was launched in August and now operates in 17 counties and more than 150 municipalities.

Besides San Diego, the following local cities have approved participation in the CaliforniaFIRST program: Carlsbad, Chula Vista, Coronado, El Cajon, Encinitas, Escondido, La Mesa, Lemon Grove, National City, Oceanside, Poway, Santee and Solana Beach.

CaliforniaFIRST has received $5 million in loan applications, Delgado said. Capital for the loans is raised from private investors, with bonds issued through the California Statewide Communities Development Authority.

PACE financing is well-established in commercial real estate markets. Residential programs were delayed for years by concerns about their effects on home mortgages — as voiced by the Federal Home Finance Authority. PACE liens take priority over the mortgage lender in the event of foreclosure, the reasoning goes, increasing risks to real estate lenders and investors.

In response, California has created a reserve fund that can be used to cover PACE payments during the foreclosure period.

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By Morgan Lee, San Diego Union-Tribune