America’s housing stock is old. The median age of homes in 2023 was 44. While that’s barely middle aged in human terms these days, homes built more than four decades ago typically need work. Often, that work is related to upgrading the building envelope and improving energy efficiency.
While housing affordability discussions often focus on monthly rent or mortgage payments, rapidly rising energy costs create a burden on homeowners and renters, too.
Researchers at the Joint Center for Housing Studies at Harvard University (JCHS) recently reported that nearly one-fourth of homeowners (24%) spent more than 6% of their income on energy costs in 2023, according to The Retrofit Gap: Disparities in Energy Insecurity and Homeowner Investment.
That 6% is the baseline for homeowners and renters to be “cost-burdened” by their energy bills, according to the JCHS definition. Energy costs have risen in the last three years, with electricity bills alone increasing an average of 15% to 18% - and by more in some locations. Approximately 75% of Americans report that their energy costs have increased in recent years, with 42% reporting that their bills went up “by a lot.”
At the same time, the aging housing stock means that money spent on higher utility costs may as well be tossed out the window since so much of the heating and air conditioning disappears from leaky inefficient homes. More than one-third of homes need at least one repair, according to the report.
Harvard’s research also uncovered the dangerous disparity between homes that need serious energy efficiency upgrades and homeowners who can afford to make upgrades. Homeowners of color and people living in older homes are the most exposed to energy hardship, according to the report.
The problem: public support is limited and falls short of the need for energy bill assistance. In addition, the focus is on bill paying – not addressing the problem at its root, which is the need for energy-related repairs and upgrades. Funds available for home improvements such as insulation, structural deterioration and failing heating and air conditioning systems for low and moderate income households are modest at best.
Repairing homes and improving their efficiency can permanently reduce energy bills and improve health, safety and comfort for residents.
Energy Insecurity Impacts
Energy insecurity isn’t just about paying an electric bill. The report explains that there are multiple dimensions of energy insecurity, including:
Economic: high energy costs relative to income, unpaid bills and the threat of utility disconnection
Physical: structurally deficient homes with poor air sealing, and/or inadequate or broken heating and cooling systems
Behavioral: trade-offs such as forgoing food or medicine to pay a utility bill or keeping the home at an unhealthy temperature
All forms of energy insecurity have risen in recent years, but the biggest increase between 2020 and 2024 was in the percentage of homeowners who opted to forgo food or medicine to pay their bill.
JCHS researchers found that energy insecurity remained high but relatively stable among low-income households earning less than $30,000 annually, but it rose to 41% of households earning $30,000 to $59,999 and doubled among households earning $100,000 to $149,999 during that four-year period.
Low income households were the most likely to be unable to pay their utility bill, and the most likely to have an exterior defect on their home, broken or boarded up windows and interior cracks or holes.
Homeowners at all income levels face some of these issues simultaneously with higher energy costs and other bills. Approximately 10% of homeowners keep their home at unhealthy temperatures to reduce energy costs, according to JCHS research.
When researching the tradeoffs people make to afford to pay their utility bills, the researchers found that at every income level, Black and Hispanic homeowners were the most likely to make tradeoffs.
Race, Income and Retrofits
The Harvard researchers found that lower and middle income homeowners were less likely than higher income households to make energy-related repairs, and when they did, they spent less on those repairs. While that’s not surprising, given the need to budget limited funds, there were also disparities related to race.
According to the report, Black and Hispanic households were less likely to make energy-related repairs than Asian and White and mixed-race households. When Black and Hispanic households made repairs, they spent less on average than other households. That outcome held true across every income level.
The highest income households spend the most on energy retrofits, yet they are the ones most able to afford higher energy costs.
Policy Implications for the Retrofit Gap
Homeowners who can’t afford to make repairs and improvements that reduce their energy costs and make their home healthier and more comfortable face two challenges. First, they have no way of reducing their utility bills without sacrificing their comfort at home or forgoing essential needs such as food or medicine. Second, the long-term consequence is that their home becomes more unaffordable over time as energy costs rise.
In addition, these homeowners are less likely to benefit from the wealth-building impact of owning a home. They may lose their home if it becomes impossible to live in or their costs rise beyond their means. They can’t pass the home on to future generations in their family, and they can’t sell it for a profit that can be used to buy another home.
The Retrofit Gap report demonstrates that remodeling for energy efficiency is not just an affordability issue for low-income households. It impacts working class and middle class families. However, current public programs focus on subsidizing energy costs for lower-income households rather than improving energy efficiency for their homes.
According to the report, “the Low-Income Home Energy Assistance Program (LIHEAP), for instance, primarily funds bill assistance, with less than 15% spent on repairs and improvements to energy systems. The Weatherization Assistance Program, which does support home repairs, is funded at less than 10% of the amount given to LIHEAP. The Bipartisan Infrastructure Law and the Inflation Reduction Act, meanwhile, represented an unprecedented investment of nearly $48 billion in climate and clean energy, including home energy upgrade programs targeted to low- and moderate-income households, though many of these programs have been interrupted, discontinued, or frozen, leaving the underlying drivers of energy insecurity unaddressed.”
Some potential solutions discussed by the report authors during a webinar include funds from states and municipalities to make energy efficient improvements, and the possibility of utility companies offering on-bill financing options. As Diana Hernandez, a co-author of the research, pointed out, the 1970s energy crisis led to the introduction of utility bill assistance programs. She is hopeful that the current energy shock will lead to new investment into retrofitting people’s homes.
Publisher’s Note: This content is made possible by our Today’s Homeowner Campaign Sponsor: ProVia.
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