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EU-US green recoveries to focus on energy poverty

image credit: Kim Van Sparrentak, Member of the European Parliament
Clare Taylor's picture
Journalist Falconry Press

Communicator specialised in energy and environment. Only connect.

  • Member since 2021
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  • Sep 14, 2021 3:50 pm GMT
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On both sides of the Atlantic, basic household energy needs (like heating and cooling) are unaffordable for tens of millions of households. In 2019, 6.9 % of the EU population were unable to keep their home adequately warm; this share reached 18.2 % among people at risk of poverty. These averages mask wide disparities: depending on the definition used, up to 35% of some Member States’ populations are considered energy poor[1], with Baltic, Eastern European and Mediterranean countries most affected. In the USA, according to the US Energy Information Administration, in 2015, nearly one-third of households struggled to pay their energy bills.[2]

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Kim Van Sparrentak, Member of the European Parliament (Dutch Greens) and rapporteur of a report on decent and affordable housing sees this as an opportunity to merge social and climate policy. “Policymakers have many choices here. To take one example, we can choose to offer subsidies for homeowners to retrofit, or we can decide to help the people who need it the most. If we decide to tackle energy poverty by providing affordable, efficient housing then we can help people and take climate action at the same time,” says Van Sparrentak.

To some degree, a similar political intention is evident in the United States. “Energy poverty is an issue at the intersection of housing, emissions, jobs, and environmental justice,” says Ted Toon, Director for Housing Efficiency at the White House’s Council on Environmental Quality. “As such, it ranks alongside other clean energy topics and lies at the heart of what this administration wants to address.” Toon cites the recent Justice40 Initiative as a significant driver, as it directs at least 40% of the overall benefits from federal investments in climate and clean energy solutions to disadvantaged communities. Existing U.S. initiatives tackling energy poverty, the Low Income Home Energy Assistance Program (LIHEAP) and the Department of Energy’s longstanding Weatherization Assistance Program, are likely to expand as designated Justice 40 pilot programs.

Toon also highlights the Low-Income Housing Tax Credit (LIHTC) as an example of effective and longstanding government support for alleviating energy poverty. The program authorises $8 billion annually in tax credits for buying, retrofitting or new construction of affordable rental housing.  “It’s the largest source of capital for the construction of low-income housing in the U.S. – it has been for decades,” says Toon. The LIHTC is a competitive fund implemented via State-level agencies, and beneficiaries are required to meet stringent energy-efficiency standards. From 1995-2018, the LIHTC has yielded an annual average of 1,400 projects and 106,400 housing units. Lack of access to housing however remains the bigger issue; the National Low Income Housing Coalition estimates a current shortage of 7.2 million affordable housing units.

 

In Europe, the European Commission’s Renovation Wave, intended to ‘actively support renovation of worst-performing buildings and tackle energy poverty’, has been favourably received by Member States, notes Van Sparrentak. However, this is not enough to offset the effects of the currently dominant political approach to housing as “a profit-making activity, rather than as a basic human right,” she says.

Pandemic pricing

Both Toon and Van Sparrentak cite as yet anecdotal evidence that the pandemic has compounded the problem of energy poverty, with stay-at-home orders necessitating higher domestic energy consumption. Soaring house prices and unemployment are also major contributing factors, increasing the rates of ‘housing cost overburden’ (where housing costs are more than 30-40% of household income), and leaving already vulnerable households less able to afford basic energy needs, let alone undertake retrofits.

Prior to the pandemic, in 2019, 11.8 % of the European urban population lived in such a household, and in the same year 30.2% (or 37.1 million US households) of all US households were spending 30% or more of their income on housing. One in seven U.S. households — 17.6 million in total — were “severely cost burdened,” spending half or more of their income on housing.[3]

Along with the decades-long trend of house price growth significantly outpacing the rise in average household earnings, more recently ‘financialisation’ (major corporate investing in housing) has further limited access to affordable housing. Cities are most affected; between 2013 and 2014, corporate buying of larger properties in the top 100 recipient global cities rose from approximately EUR 520 billion to EUR 870 billion. During the same period, foreign corporate buying of properties in Amsterdam/Randstad rose by 248%, and by 180% in Madrid.[4]  

Reform of European capital market rules protecting profit-making on the housing market is badly needed, according to Van Sparrentak. “The priority is to enable the flow of money and ensure investment in Member States,” she says, and this a barrier to the provision of affordable and sustainable housing. “For example, the European Commission has repeatedly recommended to the Dutch government to reduce social housing capacity, because it’s seen as a distortion of the market,” she says. Sparrentak also cites European rules on state aid that limit the ability of authorities to provide housing for lower middle-income families that can’t afford to rent on the private rental market. “This is an internal market perspective from the European Commission, not a human-centred one,” says Van Sparrentak.

Many major cities are also dealing with the adverse effects of the burgeoning buy-to-let sector, meaning that international cooperation on ensuring housing rights is also needed, reckons Van Sparrentak. “Financialisation is a transnational issue. American pension funds are investing via companies like Blackstone in European residential real estate, and vice versa. Social housing companies simply cannot compete with investment entities on this scale.”

A political opportunity

Despite the significant challenges ahead, both Toon and Van Sparrentak see more government-led provision of affordable and sustainable housing as a political opportunity. “Social housing corporations are ready, and now we need to give government support” says Van Sparrentak. “We’re not just talking about energy here, we’re also talking about multiple benefits – like health benefits as people living in energy poverty typically suffer more often from respiratory diseases. It’s time to show - not tell - the people how this can positively change their lives”.  

“Focusing on housing will help the Green Deal. Housing is so close to our lives, if we can demonstrate early on that the Green Deal and climate action means positive change for people in their everyday lives, then we will have a lot more political support to fight the climate crisis as fast as we need to,” she adds. Indeed, “the political understanding about the opportunities of building renovation seems to be increasing,” says Oliver Rapf, executive director of the Brussels-based think-tank Buildings Performance Institute Europe (BPIE). Rapf notes that Member States’ post-pandemic recovery plans include renovation: “Renovation is part of almost all the national Recovery and Resilience Plans though with large discrepancies. The individual commitments have a range of a factor 10, measured on a per capita basis, with some of the poorer EU countries making a significantly higher effort than some of the richer countries.”  

Toon’s perspective is informed by his twenty years of experience in housing, which includes running large-scale programmes on green retrofits of multi-family housing at the U.S. Department of
Housing and Urban Development (HUD). He directly links the improvements in today’s building standards to subsidised intervention in the affordable housing sector.  

“For the last two decades, the affordable housing sector has led the green housing revolution in the U.S.,” explains Toon. “And it was philanthropic and government funds that did it – by stepping in and providing the capital for deep retrofit on multi-family housing. At that time, private capital wouldn’t touch it, it wasn’t proven enough, the paybacks weren’t proven, and you just couldn’t get a bank to lend on it.  Now we can do the same again, with new construction and deep retrofit. We can prove the concept, even if the market is not convinced yet.”

 

On 23rd September, Toon and Van Sparrentak will speaking at the webinar How to achieve energy-efficient and affordable housing on the nexus between affordable, efficient housing and a just transition. Register here.

 

 

[2] 2015 Residential Energy Consumption Survey (RECS) (US Energy Information Administration, 2018).

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Matt Chester's picture
Matt Chester on Sep 14, 2021

Both Toon and Van Sparrentak cite as yet anecdotal evidence that the pandemic has compounded the problem of energy poverty, with stay-at-home orders necessitating higher domestic energy consumption. Soaring house prices and unemployment are also major contributing factors, increasing the rates of ‘housing cost overburden’ (where housing costs are more than 30-40% of household income), and leaving already vulnerable households less able to afford basic energy needs, let alone undertake retrofits.

The pandemic gave insights into problems like this that have always been under our noses. Just as we debate about whether a tax is regressive, it's important to consider the same regarding utility programs/rates. 

Henry Craver's picture
Henry Craver on Sep 20, 2021

I worked as in English teacher out of college in the small city of Ourense, Spain. I barely turned on the heating in the winter to save money, wearing coats and thick wool socks in the house, and yet the two-month gas bill still came out to something like 240 euros. That's a ton of money in a country where the average annual income is 27,000 euros. 

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