Report: Efficiency could provide big benefits to low-income renters

Low-income households spend up to three times as much of their income on energy costs as higher-income households do, and would benefit significantly from efficiency upgrades, according to a new report.

Since their total income is lower, it’s not surprising that such households would see a higher proportion of it spent on energy. But these households are often paying more than they should be for energy because they are more likely to live in inefficient buildings, often where they don’t have control over heating and cooling or the power to make efficiency upgrades.

On average, the report found, low-income households spend 7.2 percent of their income on energy while higher-income households spend only 2.3 percent. But the study found that increased efficiency measures could close this energy burden gap by about one-third.

Researchers also found that minorities pay a larger portion of their income for energy.

The report, released Wednesday by the American Council for an Energy Efficient Economy and the coalition Energy Efficiency for All, examined data from 48 U.S. cities.

Southern cities – Memphis, Birmingham, Atlanta and New Orleans – ranked the highest in terms of energy burden on low-income people, with Kansas City and Cleveland also in the highest 10.

When cities were ranked by energy burden on African American households, more Midwestern cities were among the 10 highest: Kansas City, Milwaukee, St. Louis, Cleveland and Cincinnati. For Latino households, Kansas City and Detroit were in the top 10.

The report found that efficiency measures could reduce energy costs even more for African American and Latino households than for low-income households as a whole. Latino households could see their burden cut by a full 68 percent with efficiency measures, the report found.

African American and white households paid similar amounts for energy but that made up a greater portion of income for African Americans. Latinos actually paid lower bills but still carried a greater energy burden as a portion of their income.

Energy and affordable housing

Most tenants of multi-family buildings make less than $50,000 per year per household. Yet state and local efficiency programs tend to be focused on single-family, owner-occupied homes, the report notes.

“Nearly half of very low-income renters live in multifamily buildings,” said Julia Friedman, senior policy manager for the Midwest Energy Efficiency Alliance, a member of the Energy Efficiency for All coalition. “And delivering energy efficiency to multifamily buildings is difficult when the energy savings accrue to the renters who may not have the legal or financial ability to make improvements to their units or the incentive due the fact that the payback for the improvements may be longer than the terms of their lease.”

Stacie Young is director of a collaborative based at the Community Investment Corporation in Chicago that aims to preserve quality affordable rental housing in multi-family buildings. She noted that energy efficiency plays a direct role in determining rent costs, especially in a city like Chicago where the utilities are included in rent in many multi-unit buildings.

If an owner invests in energy efficiency and sees energy bills decrease, they are less likely to have to raise the rent, she said, and they also have more money to invest in maintaining the building.

“We have a lot of great old rental stock in the city of Chicago,” Young said. “Doing a retrofit is a super easy, low-cost way to get savings between 25 to 30 percent for an investment of about $3,000 per unit. It’s a really cost-effective way to save money in the long term, it means not increasing rents and keeping the building in good condition,” said Young.

The Community Investment Corporation makes loans for acquisitions and rehabs of affordable multi-family rental buildings. They partner with the non-profit organization Elevate Energy in the Energy Savers program, doing energy audits and facilitating efficiency overhauls in affordable buildings. The CIC has made about 7,000 loans for energy retrofits through this partnership, Young said.

“The owners in the low- and moderate-income neighborhoods operate on pretty narrow margins, there’s a good chance the buildings in those markets have not been retrofitted, whereas rentals in stronger markets where the owner has earned more profit have probably done that already,” Young said.

“With retrofits the owners can also save money on maintenance, and the tenants are less likely to leave because they are uncomfortable,” she added, noting that uneven heating from old boilers may leave some tenants too cold in the winter while others resort to opening windows.

The report authors and advocates also note that an inability to maintain a comfortable temperature can exacerbate health problems and stress levels. And when people can’t afford their bills and have their utilities shut off, they face serious risks from fires caused by space heaters to heat stroke in sweltering rooms.

“There are direct health impacts if you live in a drafty home in the winter and sauna in the summer,” said Jim Chilsen, spokesman for the Citizens Utility Board (CUB), which hosts about 500 outreach events per year educating people about energy efficiency. “It’s just not good for you. However, I think the indirect health impacts can be just as devastating.

“An electric bill can devour a lot of resources for a family, and suddenly you might be forced to skip quality of life investments, like healthy meals and prescriptions, to keep the lights on.”

Focus on large buildings

In general, people in multi-family buildings and renters experienced higher energy burdens. Larger buildings and rentals are often more likely to be poorly maintained and inefficient. Residents are often unlikely to have the ability to weatherize or otherwise improve the efficiency of their unit, and as Young noted they often cannot even control the thermostat. Renters pay almost 20 percent more for energy per square foot, compared to homeowners, the report found.

Public housing and senior housing buildings are often multi-unit, older buildings that are inefficient and where residents have little control of their surroundings. Cities including Chicago are taking measures to increase efficiency and educate residents about energy specifically in such structures. The Energy Efficiency for All was involved in the Chicago efforts and members are also working on bench-marking energy use in public housing in Cincinnati and Kansas City, Mo.

The coalition also released a program design guide for promoting efficiency in affordable multi-family buildings.

The authors also urge greater investments in efficiency and particular attention to efficiency in low-income communities. They advise states to emphasize efficiency in their Clean Power Plan compliance plans, and encourage opting in to the Clean Energy Incentive component of the plan, which offers early credit for efficiency investments in low-income households in the two years prior to the compliance period of the Clean Power Plan.

“Cutting energy waste by improving energy efficiency leads to more comfortable homes; healthier, more prosperous communities; and is the quickest and most cost-effective way to reduce the dangerous carbon pollution fueling climate change,” said Khalil Shahyd, a representative of the Energy Efficiency for All coalition and project manager of the Urban Solutions program of the Natural Resources Defense Council, in a statement.

“Energy efficiency works best when everyone has access to it,” said Chilsen. “Robust efficiency opportunities lead to lower market prices for everyone. It just drives home the point that we need better programs for everyone, across society.”

One thought on “Report: Efficiency could provide big benefits to low-income renters

  1. I don’t see you addressing the historically low realization rates for low income programs, particularly the stimulus-funded programs, and particularly in multifamily buildings.

    Do you have any suggestions for how one can achieve the kinds of savings you talk about, which would be meaningful and measurable?