Climate XChange’s Dashboard Digest is a deep dive on each of the policies that we track in the State Climate Policy Dashboard and an exploration of how these policies can interact with one another to form a robust policy landscape. The series is intended to serve as a resource to state policy actors who are seeking to increase their understanding of climate policies, learn from experts in each policy area, and view examples of states that have passed model policies.
Low-income households spend a disproportionately high share of their income on energy bills — more than twice the national average. This is in large part due to the fact that many of these families live in homes that have outdated heating systems, poor insulation, and other energy inefficiencies. Federal, state and local programs aimed at making these buildings more efficient can drive down energy costs while reducing emissions, advancing equity, and increasing the resilience of dwellings.
Weatherizing homes, which involves structurally upgrading existing buildings to conserve energy, accomplishes both of these objectives, but it can be expensive and cost-prohibitive for the families that need it the most. It’s important that states take advantage of federal weatherization funds, and leverage them with other funding streams, to create energy savings for vulnerable households.
In this article for the Dashboard Digest, we’ll dive deeper into why weatherization is important, what limitations exist for these programs, and how states can leverage federal funds to stretch weatherization dollars further.
What is Weatherization?
Weatherization is the process of upgrading existing residential buildings in order to save energy. There are many upgrades that can be addressed through weatherization, but the most common are improving the building’s insulation, ventilation, moisture control, and air sealing through measures like repairing heating systems, installing insulation, or replacing windows and doors. Some states have even begun integrating solar installations into their weatherization programs, with Colorado leading the way in 2016.
Before a household undergoes weatherization upgrades, state programs require that an energy audit is performed. This is an evaluation of the building’s condition and identifies the necessary measures for conserving energy and improving building performance. Energy audits assess the whole building as one system from its structure to the state of heating and cooling systems and other appliances.
Low-income households typically spend a higher portion of their income on energy, when compared to non-low income households (eight percent vs three percent). This can jeopardize the health and safety of residents who may have to forgo heating or cooling their homes in order to pay their bills. Households that experience this energy insecurity are also more likely to be stuck in poverty cycles, as high energy burdens may prevent investing in education or job training, and the negative health effects of living in unsafe conditions can result in missed days of work and school.
For these reasons, weatherization programs typically are designed to target low-income households, as their needs are generally the greatest. States use income eligibility levels in order to identify which homes qualify for weatherization assistance. Even if a household qualifies based on income, many states also have cost-effective requirements for weatherization work to be sure that the energy savings outweigh the costs of making the upgrades.
Weatherization Funding Sources
Federal Weatherization Funding
The two main federal programs that fund weatherization are the Weatherization Assistance Program (WAP) and the Low Income Home Energy Assistance Program (LIHEAP). WAP and LIHEAP emerged in the 1970’s when energy prices were skyrocketing and the U.S. began to push for energy conservation policies.
Weatherization Assistance Program (WAP)
Through WAP, the Department of Energy provides funding for all 50 states, Tribal governments, U.S. territories, and Washington D.C. to finance weatherization assistance. WAP has seen recent funding of $300 million from the Department of Energy, $800 million from other sources, and an additional $3.5 billion from the Infrastructure Investment and Jobs Act (IIJA). WAP provides services to around 35,000 homes each year, saving an average of $372/year on energy costs, according to the Department of Energy.
Low Income Home Energy Assistance Program (LIHEAP)
The Department of Health and Human Services manages a similar program, LIHEAP, which differs from WAP by providing direct financial assistance to low-income households to reduce costs of energy bills, weatherization, and energy-related home repairs. LIHEAP and WAP can accomplish similar goals, but LIHEAP’s primary goal is to reduce energy costs whereas WAP’s is energy efficiency. Congress appropriated a total of $6.1 billion in funding for LIHEAP for fiscal year 2023. Many state programs are funded by a combination of WAP and LIHEAP dollars.
Non-Federal Weatherization Funding
The federal funds from WAP and LIHEAP can stretch further when states have additional weatherization funding sources. In 2021, states leveraged more than $370 million in non-federal funding for weatherization programs. This amount is almost equivalent to the total amount of money available that year from the Department of Energy’s WAP funding.
Non-federal weatherization funding generally comes from two sources: utility funds and state funds.
Utility funds are ratepayer supported, meaning that the electric and gas companies collect money through an additional line item on energy bills. This money can either be transferred to a state weatherization office or the utility can implement its own weatherization program.
Utilities are often in a good position to fund and manage state weatherization programs. Gas and electric companies are already providing energy to households, and utilities have access to the energy-use data for each household — something that may not be accessible by local and state governments. Knowledge of energy-use is important when communicating the benefits of weatherization because it converts energy savings into real dollars for each household. Additionally, since utilities are already billing every household, they’re in a convenient position to raise money for weatherization.
Some states require utilities to implement a weatherization assistance program by adding a surcharge on ratepayer energy bills. This money can be used to pay for a utility weatherization program, or funneled into a state’s Public Benefits Fund, which can be distributed to a variety of state programs, including weatherization. Since the traditional utility business model disincentivizes anything that reduces energy use, allowing them to pass the cost onto customers through a surcharge or providing a reward can remove this disincentive.
States can also contribute separate funding towards weatherization assistance programs through taxes and fees. This funding may come from income and sales tax revenues, energy production royaltees, or other state appropriations. In 2021, just 12 states reported using state funds for weatherization assistance programs.
Current State of Weatherization Funding
Every U.S. state currently has a weatherization program, funded through a combination of WAP, LIHEAP, and other (state and utility) sources. The relative amounts of funding from each source varies widely between states, with some states contributing much more than others to weatherization programs.
Barriers to Weatherization Programs
Even though many weatherization programs are sufficiently funded, barriers exist with distributing funds to households. In 2021, only 0.17 percent of eligible households received weatherization assistance, according to an annual funding report. This is primarily due to complicated applications, audit procedures, and extended wait times.
Many households are rejected because the energy audit finds issues that may limit the effectiveness or reduce the lifetime of upgrades. Auditors may defer weatherization assistance until the homeowner can complete a major repair or address safety concerns including structural damage, mold, fire damage, or roof leaks. Deferral rates vary across the country, but they can be high. The Midwest Energy Efficiency Alliance reports that deferral rates are as high as 60 percent in some parts of the region. Low-income households may not be able to afford these repairs, preventing them from accessing the necessary weatherization improvements that they first applied for.
Income-eligible households are much more likely to live in multifamily or manufactured (structures built off-site from their final location) homes than ineligible households, who mostly live in detached single family homes.
Multifamily and manufactured households should be a high priority for state weatherization efforts, not only because they would be helping low-income families, but because they are also by far the most inefficient housing stock. While these homes may use less energy per unit than their detached counterparts, the energy intensity (energy use per square foot) is much higher in small multifamily homes.
Multifamily homes often include rental units, which present a major problem for weatherization efforts. Building owners often lack incentives to pay for weatherization upgrades for tenants who would be reaping the financial savings. This split incentive between landlords and tenants can leave many renters left out of weatherization programs.
Other Weatherization Program Limitations
The American Recovery and Reinvestment Act of 2009 (ARRA) allocated $5 billion to WAP, but the funding alone didn’t solve existing program limitations. The authors of a 2023 report from the Housing Crisis Research Collaborative identified five challenges that WAP was unable to overcome despite ARRA investments, which modern program administrators should take into account:
- Funding Variability— Historically, WAP agencies have been strained when there is major variation in annual funding. When these swings are drastic, it can result in agencies that are scrambling to hire additional staff or rely heavily on contractors, only to rapidly scale down when funding runs out.
- Monitoring and Reporting — Until very recently, documentation procedures for weatherization services through WAP combined single-family housing and small multifamily properties into one category based on similar energy characteristics. This has made it difficult for program administrators to clearly understand WAP services by housing type.
- Project Scopes — Weatherization programs typically have per unit caps on assistance or require upgrades to be cost-effective, which can make it difficult to adequately address a household’s energy needs. In some cases, it may be more cost-effective to upgrade an entire multifamily building’s systems, however the higher upfront cost is likely to be prohibitive for current programs.
- Outreach — Many WAP programs note that communication and education with rental property managers can be very difficult. Because renters require approval from property managers, it’s crucial that program administrators establish effective outreach practices and recruitment approaches.
- Capacity — All of the four previous challenges can result in reduced capacity of weatherization programs, from the federal level to local program implementation. This reduced capacity can limit the ability of weatherization programs to effectively achieve their targets.
What Can States Do?
Provide Funding to Repair Houses with Deferred Assistance
Legislation was introduced to Congress in 2022 that would establish a Weatherization Readiness Fund for homes requiring repairs to qualify for weatherization upgrades. If passed, Congress would allocate millions of dollars to states to prepare homes for weatherization assistance. Currently the bill is sitting in the Committee on Energy and Natural Resources, however Congress did allocate $15 million in funding for Weatherization Readiness in a 2022 budget bill.
In 2022, Pennsylvania lawmakers approved a Whole Home Repairs Program which provides grants to homeowners and landlords to address habitability and safety concerns, which are common causes of weatherization deferrals. The program is eligible to applicants under 80 percent of the area’s median income and can be awarded up to $50,000 per unit.
Conduct Housing and Demographic Analyses
Many states lack data on the number and spatial distribution of small multifamily households, as they were historically lumped together with single family homes. Getting a clear picture can help ensure that this type of housing stock is appropriately served by weatherization programs. State weatherization programs can partner with other agencies to conduct housing and demographic analyses to address energy needs in these homes, which comprise the largest share of multifamily WAP-eligible households.
Coordinate State Resources and Funding
States most often structure weatherization programs that are funded by WAP and LIHEAP, however they may be missing other opportunities. States may be able to combine health services and weatherization programs to accomplish similar goals with additional funding and resources. This can work because both types of programs attempt to address similar issues in homes including poor air quality and other unsafe conditions. States can set up programs that coordinate funding and resources between these programs to address the holistic health of households in a more efficient way.
Vermont’s One Touch Program has been doing this since 2014, and has received national recognition. The program revolves around including healthy home assessments into their weatherization audit process. The idea is that instead of having multiple assessments to inspect lead paint, air quality, and energy efficiency, there is just one audit and the information is shared with all appropriate agencies. This cuts down on overall program overhead and helps ensure that households are connected to agencies that can help them.