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Report: Low-Income Households, Communities of Color Face High “Energy Burden” Entering Recession

September 10, 2020
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Washington, DC—Low-income households, as well as Black, Hispanic, and Native American households, pay a much larger share of their income on energy bills, straining budgets and putting them at heightened risk of utility shutoffs during the COVID-19 pandemic and recession, according to a new analysis from the American Council for an Energy-Efficient Economy (ACEEE).

The report, arriving as some states end moratoriums on utility shutoffs instituted earlier this year, finds that one-fourth of all U.S. households and two-thirds of low-income ones have high energy burdens, meaning they spend more than 6% of their income on utility bills. Two of every five low-income households have severe burdens, spending more than 10% of their income on energy costs.

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In its analysis of energy burdens—the portion of income paid toward energy bills—the report finds stark demographic and regional disparities nationally and in 25 major metropolitan areas. Compared to white (non-Hispanic) households, Black households spend 43% more of their income on energy costs, Hispanic households spend 20% more, and Native American households spend 45% more. Low-income households (those with incomes below 200% of the federal poverty level) spend three times more of their income on energy costs than non-low-income households.

“Even before the recession, many people with high energy burdens had to cut back on other necessities like food and medicine to afford utility bills. Now, many of the same communities that were struggling to pay bills before the global pandemic are being hit the hardest by job losses and could be at particular risk for shutoffs ahead,” said Ariel Drehobl, senior research associate at ACEEE and lead author of the report. “From bad insulation to outdated heating or air conditioning equipment, there’s a lot of energy that’s just going to waste in many homes. If we focus on supporting those most in need to make their homes more efficient, those investments can go a long way to reduce their bills.”

Home weatherization can reduce the energy burdens of low-income households by about 25%, the report estimates. Yet too few of these households are receiving such upgrades. In fact, only 17% of households that said they completed an energy efficiency improvement in the previous two years were low-income, according to federal data—even as low-income individuals make up about 30% of the U.S. population.

The study, based on the most recent available federal data, reflects conditions in 2017; energy burdens are almost certainly higher now as millions have lost income. The report looks at household-level income data and modeled energy cost data from the Census Bureau’s American Housing Survey.

Findings include:

  • Low-income households face disproportionally high energy burdens. Low-income households spent 8.1% of their income on energy costs, on average, compared to 2.3% for non-low-income households.
  • Older adults also face disproportional burdens. The median energy burden of older adults (65+) is 4.2%, 36% higher than the energy burden for the median household overall, which is 3.1%.
  • Housing type affects these burdens. Residents of manufactured homes have 71% higher energy burdens than average households. Households in multifamily (5+ unit) buildings have 23% lower burdens than average households, but low-income households in these same buildings have burdens 81% higher than average.
  • Energy burdens trends are similar across cities. Though energy burden values differ across the 25 cities, the same groups experienced disproportionate energy burdens in each city. All cities have work to do to address high energy burdens for their most affected residents.
  • Some cities have more highly burdened residents. Six cities have a greater percentage of households with a high energy burden than the national average (25%): Birmingham, Alabama (34%); Detroit (30%); Riverside, California (29%); Rochester, New York (29%); Atlanta (28%); and Philadelphia (26%).
  • These burdens also vary by region. Residents of the East South Central region (Alabama, Kentucky, Mississippi, and Tennessee) have the greatest percentage of highly burdened households (38%).

To address high energy burdens through energy efficiency improvements, the report recommends:

  • Federal lawmakers should increase funding for the Weatherization Assistance Program and for the Low-Income Home Energy Assistance Program (LIHEAP).
  • State and local governments should fund and implement energy efficiency and weatherization programs, separately or in conjunction with the federal program.
  • State public utility commissions should require utility-sponsored programs for home energy efficiency improvements to serve low-income households at specified levels.
  • Energy efficiency program administrators should seek to integrate home energy efficiency improvements with other health interventions, leveraging health-related funding streams.
  • Governments, utilities, private lenders, and organizations should seek to enable accessible and fair financing options for efficiency upgrades, such as “on-bill” financing, where upgrades are paid for with energy cost savings.
  • Energy efficiency program implementers should conduct collaborative and effective community engagement to create programs that fit the needs of specific communities and target highly burdened households.

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Energy Affordability Low-Income

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