Study Highlights Energy Burden for Households and How Energy Efficiency Can Help

A new study out today confirms that low-income, households of color, multifamily and renting households spend a much larger percentage of their income on energy bills than the average family, providing new evidence of the urgent need to expand energy efficiency programs to vulnerable communities.

The report, Lifting the High Energy Burdens in America’s Largest Cities: How Energy Efficiency Can Improve Low-Income and Underserved Communities, offers new insight into the hardships faced by urban low-income households—including African-American and Latino households and renters in multifamily buildings—all of whom pay a disproportionate amount of their income for energy.

However, the study by the Energy Efficiency for All project (a coalition which includes NRDC) and the American Council for an Energy-Efficiency Economy of the energy burdens in 48 large U.S. cities also casts a spotlight on the opportunities to use efficiency to reduce them, while cutting power plant pollution that drives dangerous climate change. 

The big picture findings from today’s report: The overwhelming majority of single-family and multifamily low-income households (those with income at or below 80 percent of area median income), households of color, and renting households experienced higher energy burdens than the average household in the same metropolitan area.

For example, low-income households—many of whom live in older housing with poor ventilation and aging, inefficient appliances and heating systems—spend, on average, 7.2 percent of their income on utility bills, which amounts to about $1,700 annually out of $25,000 in median household income. That is more than triple the 2.3 percent spent by higher-income households for electricity, heating and cooling. 

African-American households experienced a median energy burden 64 percent greater than white households (5.4 percent and 3.3 percent, respectively), and Latino households had a median burden 24 percent greater than white households (4.1 percent and 3.3 percent, respectively).

Meanwhile, Memphis had the highest energy burden for low-income households, with residents spending, on average, 13.2 percent of their income for energy. The median annual income for low-income residents of Memphis is $19,157, meaning that a family would be paying a whopping $200 a month ($2,400 a year) for energy to keep the lights on and their homes comfortable. 

In fact, in 17 of the cities in the report, a fourth of low-income households experienced an energy burden greater than 14 percent.

Low-income households in the Southeast and Midwest, while having among the lowest average energy prices, had the highest average metropolitan energy burdens. While this report did not establish a causative relationship, we do know that Southeastern utilities have the lowest investment in energy efficiency programs when compared to other regions.  

Why this report matters

Poverty and discrimination in rental and housing markets drive low-income households and people of color into older, less efficient buildings leading to higher energy costs. (Property owners may not install best energy-saving measures and appliances because they are not paying the utility bills.)

High energy burdens and poor housing quality then contribute to health problems: poorly heated or cooled homes contribute to asthma, respiratory problems, heart disease, arthritis, and rheumatism. Families struggling to pay energy bills may sacrifice nutrition, medicine and other necessities, which compound the effects of inequality.

These issues are particularly acute for low income multifamily households. Because they are largely underserved by existing energy efficiency programs, the average low-income multifamily household has an energy burden more than three times higher than that of the average non-low-income multifamily household (5.0% and 1.5%, respectively) and had higher utility cost per square foot. In these homes “energy expenditures run 37% higher per square foot than in owner‐occupied multifamily units (i.e. condos or cooperatives), 41% higher than in renter‐occupied single family detached units, and 76% higher than in owner‐occupied single family detached units. Further, from 2001 to 2009, while average rents in multifamily housing increased by 7.5 percent, energy cost for these renters increased by nearly 23 percent.

The picture is also shown regionally where findings from the study show that low income multifamily housing represented the 2^nd highest energy burden (2^nd to low income in aggregate) in every region of the nation except California and the Midwest.

This is important because Multifamily buildings represent approximately 25 percent of the housing units in the U.S. and comprise 20 percent of energy consumed by all housing, and more than half of all low income families live in multifamily housing.

Despite these facts the low income multifamily is largely underinvested by energy efficiency programs and represents a large untapped resource potential.

Energy efficiency can ease hardships and benefit everyone

While the energy burden numbers are alarming, opportunities abound to ease the hardship on groups that have long been underserved by efficiency programs.

While many utilities operate energy efficiency programs, as the report notes, much more can be done to reduce the energy burden on low-income households, including targeting efficiency initiatives to the long-overlooked low-income multi-family sector. One earlier study by Energy Efficiency for All found that increasing energy efficiency in multifamily affordable housing could cut electricity usage by as much as 26 percent.

Utilities can step up efforts to reach out to low-income households, such as offering financing for energy efficiency projects. Another opportunity is EPA’s Clean Energy Incentive Program, an element of the Clean Power Plan to limit carbon pollution from power plants. It rewards states for early investments in energy efficiency in low-income communities.

Bringing low-income housing to the efficiency level of the average U.S. home would eliminate 35 percent of their energy burden, the study’s authors found. The potential is even higher for African-American (42 percent), Latino (68 percent), and renting households (97 percent).

The 56-page report, coming at a critical time in the debate over climate change, is a valuable tool in guiding policy makers on where to target energy-efficiency investment. Those are real—and critical—dollars. The average family could save as much as $300 annually on utility bills.

Energy efficiency has long been an NRDC priority because it is the cheapest and fastest way to reduce power plant pollution that harms our health and contributes to climate change.

Cutting energy waste benefits all of us—in cleaner air, a more reliable transmission grid and a stronger economy (efficiency initiatives not only generate jobs, such as work installing insulation, but also save utility customers money they can spend for other goods). In addition, when low-income households can’t pay their utility bills, it can lead to higher costs for all utility customers.

Today’s report should be on the reading list of utilities, energy regulators, and anyone else looking to make the electric grid cleaner, more affordable, and more reliable.

It won’t be just underserved households that benefit from greater investment in energy efficiency. It will be all of us.