Low-Income Households Pay More for Energy, but Efficiency Can Help

With bans on utility shutoffs during the COVID-19 pandemic expiring, action is needed to ease the energy burdens of at-risk communities.

Pay the electric bill or the mortgage? Run the air conditioner or refill that prescription? Turn up the heat – or eat?

For too many Americans, these are critical dilemmas. Our research shows that even before the coronavirus pandemic, 1 in 4 households struggled with high energy burdens, spending more than 6% of their income on electricity and heat. For more than 1 in 10, that burden was severe, with energy costs consuming more than a tenth of their household budget.

These costs fall heaviest on those with lower incomes, older adults and communities of color. Fully two-thirds of low-income households experience a high energy burden. And compared with non-Hispanic white households, Black households spend 43% more of their income on energy costs, Hispanic households spend 20% more and Native American households spend 45% more.

Part of the problem is that many low-income families live in underinsulated housing with older appliances and heating and cooling equipment that waste a lot of energy. This is due in part to a history of racist policies – such as segregation, redlining and employment discrimination – that have limited wealth accumulation in Black and other communities of color and confined many people to substandard housing. In addition, both low-income families and people of color often face barriers to obtaining the upfront capital or credit needed to invest in energy-efficiency improvements.

The pandemic and recession have made these problems worse. Now, communities that were struggling to pay bills before the global pandemic have been hit hardest by job losses.

Many states have lifted or are poised to lift moratoriums that prevent utility shutoffs, all while record-breaking heat has gripped parts of the nation and colder seasons approach. Countless households are at risk of having their electricity and gas shut off during this public health crisis.

The good news is that there is much that can be done – at the local, state and federal levels – to ease energy burdens.

Simply improving home energy efficiency can make a huge difference. For example, weatherization – through steps such as caulking leaky windows or insulating attics – can cut household energy use by about 25%, in turn reducing the greenhouse gas emissions that cause climate change. These upgrades also provide long-term energy affordability for families who no longer need to use as much energy to live in a safe and comfortable home.

Energy-efficiency programs can also help support the local workforce. For example, The Energy Conservation Corps in North Charleston, South Carolina, provides free efficiency upgrades to low-income families while training disadvantaged and at-risk young adults to become certified weatherization professionals. The program saves homeowners significantly on utility bills, while providing a path out of poverty for its trainees.

Policymakers and utilities also can boost funding for energy efficiency for low-income households, while tracking outcomes to make sure these investments reach those most in need.

At the federal level, lawmakers can increase funding for programs that help families pay energy bills and weatherize their homes. These programs are woefully underfunded: While some 36 million U.S. households are currently eligible for weatherization, the federal Weatherization Assistance Program has served only around 7 million households over the past 40 years.

Families living paycheck to paycheck can’t spare the cash to weatherize their homes or buy new, efficient appliances, but there are other ways to finance energy efficiency. For example, utilities can offer “on-bill” financing, in which upgrades are paid for with savings on energy costs from those upgrades. Meanwhile, states can follow the example of New York, where officials have recognized the health benefits of energy-efficient homes and launched a $10 million pilot program in part to provide residential weatherization upgrades for Medicaid members.

Energy efficiency has always been a win-win proposition: It saves money and conserves resources. At this moment, efficiency can help ease the burdens of millions of struggling families – but only if we ensure access for those who need it most. Because no one should have to choose whether to eat or have heat.