Study: Low-Income Households Spend More on Energy Than Others in the Same City

California’s low-income households spend more of their income on energy than other households.

But their energy burden is not as great as it is in other regions of the country, providing evidence of the power of energy efficiency to ease their hardship while reducing the pollution that harms our health and drives dangerous climate change.

Those are among the findings of a new study, prepared with NRDC support. It shows that low-income households in 48 of the largest U.S. metropolitan areas spend, on average, 7.2 percent of their income for energy—more than double the national median of 3.5 percent. These low-income households also paid three times more, on average, than non-low income residents.

The report also shows the opportunities available to use energy efficiency to reduce the energy burden of low-income households, including long-underserved residents of multifamily buildings and renters.

Residents of the six largest California cities fared better than other regions of the country, demonstrating that the state’s long-time commitment to energy efficiency is saving households money while cleaning our air.

Even so, low-income households in the Los Angeles, Riverside, Sacramento, San Diego, San Francisco and San Jose areas paid more, on average, than median households in the same city, according to the study, "Lifting the High Energy Burdens in America’s Largest Cities: How Energy Efficiency Can Improve Low-Income and Underserved Communities."

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In the Los Angeles area, low-income households paid, on average, 4.6 percent of their income for energy, while all households in the same area paid, on average, about 2.8 percent, according to the report by the American Council for an Energy-Efficient Economy and the Energy Efficiency for All coalition.

In the Riverside area, low-income households paid, on average, 5.7 percent of their income for energy, compared to a median energy burden in the area of 3.5 percent.

In Sacramento, low-income households experienced an energy burden of 5.3 percent, compared to 2.9 percent for all households in the area. In San Diego, low-income households paid, on average, 3.9 percent of their income for energy, while all households paid, on average 2.3 percent.

And in San Jose, the energy burden for low-income households was 3.8 percent, more than double the less than 1.8 percent median household energy burden in the area.

Low-income minority households and renters generally experience higher energy burdens

African-American and Latino households in California and nationally generally experienced higher energy burdens when compared to the median household in the same city. Low-income households are those with income at or below 80 percent of area median income.

In the Sacramento area, low-income African-American households, on average, paid 4.5 percent of their income for energy while all households in the same area paid, on average, less than 3 percent. Latino households, on average, paid about 3.5 percent.

In Los Angeles, African-American households experienced an energy burden of 3.7 percent, more than the median of 2.7 percent for the area. Latino households experienced an energy burden of 3.3 percent.

Low-income households residing in multifamily buildings and renters—long under-served by energy efficiency programs—also face disproportionate energy cost burdens.

In Riverside low-income households residing in multifamily buildings and renters paid, on average, about 4.2 percent of their income for energy, while all households in the same area paid, on average, 3.5 percent. In Sacramento, low-income households living in multifamily housing experienced an energy burden of 3.6 percent, and renters experienced an energy burden of 3.4 percent, both above the 3 percent median for households in the same area. 

Low-income households spend a disproportionate amount of their income for energy—often paying more per square foot for energy—because they often live in older housing with poor insulation and aging, inefficient appliances and heating and cooling systems

A high energy burden can lead to health problems and increased stress. Poorly heated or cooled homes increase cases of asthma, respiratory problems, heart disease, arthritis, and rheumatism. Families struggling to pay utility bills also may cut back on other necessities, such as food and medicine.

The hardship faced by low-income California households is evidenced by the fact that 5.5 percent of low-income customers in the state experienced disconnections for nonpayment in 2011 compared with 2.9 percent for non-low-income customers.

The report confirms California’s energy efficiency efforts are working, but more can be done, especially for low-income tenants in multifamily housing

Energy efficiency programs in California have since the 1970s saved electricity customers nearly $90 billion and cut electricity demand enough to avoid 30 large power plants (with 11 more expected to be avoided over the next decade).

California’s low-income households have benefitted from the state’s commitment to efficiency, including programs that provide free insulation and more efficient appliances. However, much more can be done, especially for tenants in affordable multifamily buildings.

Smarter energy use, the fastest and cheapest way to reduce carbon pollution, has become more urgent with climate change, which threatens to bring us stronger storms, harsher droughts and rising temperatures, health problems, and damage to our communities and economy.

Increased investment in energy efficiency also generates jobs, such as employment installing insulation, and makes available the energy cost savings for spending in the local economy. 

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Despite the Golden State’s leadership on energy efficiency, low-income households in five of the six California cities studied pay, on average, a higher percentage of their income for energy than the national median of 3.5 percent.

San Francisco, with the lowest median energy burden (1.4 percent) of any of the 48 U.S. cities studied, was among the cities with the most energy efficiency investment in 2005.

But even in communities with energy efficiency programs, there is no guarantee that low income households will benefit.

The report points to the need for a more aggressive push of energy efficiency investment, including designing programs to meet the needs of the diverse low-income communities.

Efficiency programs should be stepped up for long-underserved low-income households living in multiple-family housing and renters. Programs administered by states and utilities have historically focused on single-family, owner-occupied housing

Bringing low-income housing up to the efficiency of the median household would eliminate 35 percent of the excess energy burden, reducing energy burden nationally from 7.2 percent to 5.9 percent, according to the report.  

A recent study issued by Energy Efficiency for All estimates that energy efficiency in multifamily affordable housing could realistically cut the sector’s electricity use by as much as 26 percent.

Among the opportunities available is California’s new large multifamily Low Income Weatherization Program, funded through cap-and-trade auction revenues. Enhancing the Energy Savings Assistance Program to more holistically serve multifamily residents could also substantially level the field. Local governments play a key role as well.

California has a great record on cutting energy waste.

Let’s make it even better for the most vulnerable among us and at the same time reduce the power plant pollution that harms everyone’s health and fuels climate change.