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 11/29/2018

The HUD Consolidated Plan Identifies affordable housing needs. Discusses housing market. Identifies barriers to affordable housing. Identifies and ranks action steps. 11/29/2018

Recent Natural Gas Prices (New England): December 1999 through December 2005 11/29/2018

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 11/29/2018

Starting Point: Home Energy Burdens Shelter burdens affordable at 30% of income. Utility costs affordable at 6% of income (20% of shelter costs). 11/29/2018

Home Energy Unaffordability (RI): Energy Burdens by Federal Poverty Level 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) 11/29/2018

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 11/29/2018

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. 11/29/2018

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. 11/29/2018

Affordable Purchase Prices Adjusted for Utility Bills 11/29/2018

Reduced Affordable Purchase Price: Colorado Counties 11/29/2018

Reduced Number of Affordable Units: Colorado Counties 11/29/2018

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. 11/29/2018

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.” 11/29/2018

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. 11/29/2018

Improved Year 1 cash flow Net Present Value Svgs Quantifying the Impacts of Efficiency Investments: Reduced Energy Costs the Same Cost Savings As. . . 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 11/29/2018

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. 11/29/2018

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.” 11/29/2018

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.” 11/29/2018

For more information: http://www.fsconline.com (Library or News) 11/29/2018

For more information: roger@fsconline.com 11/29/2018