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Home Energy Affordability: Its Importance to Producers and Residents of Affordable Housing

Home Energy Affordability: Its Importance to Producers and Residents of Affordable Housing. Roger D. Colton Fisher, Sheehan & Colton, Public Finance and General Economics 34 Warwick Road, Belmont, MA 02478 (voice) 617-484-0597 * * * (e-mail) roger@fsconline.com June 2006.

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Home Energy Affordability: Its Importance to Producers and Residents of Affordable Housing

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  1. Home Energy Affordability:Its Importance to Producers and Residents of Affordable Housing Roger D. Colton Fisher, Sheehan & Colton, Public Finance and General Economics 34 Warwick Road, Belmont, MA 02478 (voice) 617-484-0597 * * * (e-mail) roger@fsconline.com June 2006

  2. The HUD Consolidated Plan • Identifies affordable housing needs. • Discusses housing market. • Identifies barriers to affordable housing. • Identifies and ranks action steps.

  3. Recent Natural Gas Prices (New England):December 1999 through December 2005 • December 1999: $86.743 • December 2000: $105.346 • December 2001: $98.480 • December 2002: $103.160 • December 2003: $120.045 • December 2004: $133.249 • December 2005: $171.343

  4. Winter Heating Bills (Northeast):1999/2000 - 2005/2006 • 1999/2000: $ 685 • 2000/2001: $ 874 • 2001/2002: $ 637 • 2002/2003: $ 851 • 2003/2004: $ 917 • 2004/2005: $1,029 • 2005/2006: $1,276

  5. Starting Point: Home Energy Burdens • Shelter burdens affordable at 30% of income. • Utility costs affordable at 6% of income (20% of shelter costs).

  6. 0 - 50% FPL 51 - 75% FPL 76 - 100% FPL 101 - 125% FPL 126 - 150% FPL 151 - 185% FPL 53.5% (21,981 HHs) 21.4% (11,545 HHs) 15.3% (15,198 HHs) 11.9% (14,584 HHs) 9.7% (15,792 HHs) 8.0% (22,015 HHs) Home Energy Unaffordability (RI):Energy Burdens by Federal Poverty Level

  7. Home Energy Affordability Gap Home energy is a crippling financial burden for low-income Rhode Island households. • 2004 Home Energy Affordability Gap: $104,586,852 • 2006 Home Energy Affordability Gap: $150,763,949 • Growth in Affordability Gap (2004 - 2006): $46,177,097

  8. Non-energy impacts of energy unaffordability:Housing • Nearly one-in-six frequent mover households cited an energy-related reason as the primary reason for their most recent move. Most frequent mover households citing energy reasons indicated that the primary reason for their move was to find lower energy bills. • Energy insecurity affects the housing of low-income Missouri households by forcing those households to abandon their home for all or part of a day due to their inability to heat or cool it. • A substantial proportion of low-income households overall, as well as in every demographic category, closed off one or more rooms of their homes because they could not afford to heat or cool that space.

  9. Impact on affordable housing development • Tenants can pay less rent; OR • Developer pays more of the energy costs. Either way, development supports less debt financing.

  10. Affordable Purchase PricesAdjusted for Utility Bills

  11. Reduced Affordable Purchase Price:Colorado Counties

  12. Reduced Number of Affordable Units:Colorado Counties

  13. Recommended Action Homeownership and rental units developed as either new construction or substantial rehabilitation by grantees or participating jurisdictions should be developed to Energy Star standards.

  14. HUD Recommendation Include following in any Request for Proposals or procurement process: “All new buildings and gut rehab shall be designed to meet the National Energy Five Star efficiency performance standard of 86. All procedures used for this rating (86) shall comply with National Home Energy Rating System guidelines.”

  15. Energy Star: Does it cost more ongoing? • Efficient Home Monthly Annual • Utility Savings* $40 $480 • Additional • Mortgage Costs** -$15 -$180 • Cost Savings $25 $300 * Likely to increase while mortgage remains fixed * * Based on $2,000 additional house price/value NET SAVINGS: It is always cost effective.

  16. Improved Year 1 cash flow Net Present Value Svgs Effective interest rate reduction Effective sales price reduction $160 - $270 $2800 - $4300 0.31% - 0.45% $3700 - $5500 Quantifying the Impacts of Efficiency Investments:Reduced Energy Costs the Same Cost Savings As. . .

  17. Things that just don’t fit • 2.5% of HUD-insured mortgages failed because of high energy prices. /a/ • Value of home increases $20 for each $1 of energy efficiency investment. /b/ /a/ Metrostudy Corp. (1976). An Analysis of the Contribution of Energy Price Changes to HUD-Insured Mortgage Failures, Federal Energy Administration: Washington D.C. /b/ 1999 Appraiser Journal.

  18. Where do you work on it? • Consolidated Plan (5-year Action Plan) • LIHTC Qualified Allocation Plan (QAP) • Energy education as part of HUD counseling “When your only tool is a hammer, you tend to see every problem as a nail.”

  19. What else do you do about it? • EITC promotion • Food Stamp SUAs • Weatherization funding • Public Housing Authority utility allowances “When your only tool is a hammer, you tend to see every problem as a nail.”

  20. For more information: http://www.fsconline.com (Library or News)

  21. For more information: roger@fsconline.com

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