Why Do Low-Income Households Face Higher Energy Burdens?

It's easy to assume that high energy bills are the result of the choices people make at home. Maybe they haven't switched to LED lightbulbs, keep their thermostat too low in the summer, or forget to turn off their lights when they leave a room.

But household behavior is only one part of the story. In I-CARE's last blog post, we explored the energy burden: the share of a household's income that is spent on energy. If a household makes $1,000 per month but spends $100 per month on energy costs, it has a 10% energy burden. The average U.S. household's energy burden is about 2%, but one in four low-income households in the U.S. spends more than 15% of its income on energy.

There are two sides to this disparity. First, the same energy bill represents a much larger share of a low-income household's income. A $100 monthly bill, for example, represents 10% of a $1,000 monthly income but only 2% of a $5,000 monthly income. The other side is that low-income households often face circumstances that make their homes more expensive to heat and cool in the first place.

Below, we'll explore some of the reasons low-income households can face particularly high energy burdens, and why simply asking people to use less energy isn't enough to solve the problem.

The Homes People Live In: Why Do Some Homes Require More Energy Than Others?

Low-income households are more likely to live in older, less energy-efficient homes. Older apartment buildings and single-family homes, for example, tend to be less energy-efficient than newer homes because they often have drafty windows and doors, poor insulation, older or inefficient HVAC systems and appliances, and deferred maintenance. This means cooled air can quickly escape the home, leaving residents paying more to maintain a comfortable temperature. So, two households of the same size can set their thermostats to the same temperature and still require very different amounts of energy depending on the efficiency of their homes.

Sometimes, it is difficult or impossible for residents to make their homes more efficient. Renters, for example, are typically unable to replace HVAC equipment, add insulation, replace windows, or take other big steps toward energy efficiency. This problem is further complicated when tenants pay their own energy bills. The property owner is disincentivized to make efficiency upgrades because of something called the "split incentive", where the property owner pays for an efficiency improvement while the tenant receives much of the financial benefit through lower utility bills.

Even in homes where residents can purchase new appliances or efficiency upgrades, doing so can be costly. The upfront cost of these improvements can be especially challenging for low-income households, who may be unable to afford investments that could lower their energy bills over time. Although some utility efficiency programs exist for low-income households, there is an equity gap where these programs only reach about half of such households: these programs are often directed to owner-occupied single-family homes instead of renters, and ask participants to financially contribute to part of the costs.

The Role of Geography: Why Does a Home's Location Matter?

Where a household lives can also contribute to higher energy costs, particularly for low-income households. Extreme temperatures increase the amount of energy needed to keep a home at a safe and comfortable temperature, while climate-related events can also increase energy prices. For example, some utilities have increased rates to pay for recovery from extreme weather events or investments intended to reduce future damage. Although these changes can affect households across income levels, they can be especially difficult for low-income households, which have fewer financial resources available to absorb higher utility bills. The effects can be compounded when households live in inefficient homes that require more energy to heat or cool.

Within cities, some neighborhoods face greater cooling needs because of the urban heat island effect. This phenomenon occurs when certain areas within a city experience hotter temperatures due to environmental factors like having fewer natural features (like trees), more roads and buildings that absorb and retain heat, and buildings that can reduce airflow. In fact, some neighborhoods within the same city can even have different cooling needs, with temperature differences up to 20°F. Solutions for the urban heat island effect, like providing neighborhoods with additional urban tree cover, can be inequitably distributed between low- and high-income areas. In a study across 5,723 U.S. municipalities, researchers found that low-income blocks have 15-30% less tree cover and are nearly 3°-7°F hotter than high-income blocks on average.

Next Steps

So, does individual behavior matter in reducing energy bills? Yes. The choices households make can affect how much energy they use. But high energy burdens aren't simply the result of those choices. Low-income households have fewer financial resources to put toward energy costs in the first place, and they can also face housing and environmental conditions that make reducing those costs more difficult.

There are already programs working to address some of these challenges. At the federal level, the Low Income Home Energy Assistance Program (LIHEAP) helps eligible households pay their home energy bills, while the Department of Energy's Weatherization Assistance Program funds improvements that can reduce household energy use and costs over the longer term. These programs are administered through states, Tribes, and territories, and local organizations also offer their own energy assistance and efficiency programs. Together, these efforts illustrate two important approaches to reducing energy burden: helping households afford their immediate energy costs, and addressing some of the underlying housing conditions that contribute to those costs. However, as discussed above, existing programs do not reach every household that could benefit from them, leaving room to better understand what barriers remain and how existing approaches could be improved.

Through I-CARE's 2027 study, we hope to better understand how these factors shape the experiences of low-income households and what residents themselves identify as barriers to reducing their energy burden. We will provide 200 low-income residents with energy efficiency kits to immediately reduce their energy costs and measure the effectiveness of those kits using energy bills from the three months before and after. By combining their experiences with data on household energy use, we hope to identify practical recommendations for households, community organizations, and local policymakers.

Addressing the energy burden requires action at multiple levels. Households struggling with energy costs can explore the Department of Energy's Tax Credits, Rebates, and Savings resources to find programs that may help lower their energy costs or learn how to apply for the Weatherization Assistance Program and find a local provider. Community members can help connect neighbors with these resources and get involved in local conversations about housing, energy efficiency, and neighborhood investments. And community organizations, utilities, and policymakers can look closely at who existing programs are, and aren't, reaching, listen to the barriers residents experience, and use that information to design more accessible and effective solutions.