Friday, March 22, 2013

Are Renters Less Energy Efficient than Homeowners?

by Elizabeth La Jeunesse
Research Assistant
According to data from the Energy Information Administration, American renters use nearly a third more energy per square foot than homeowners. What accounts for this difference?

In part it’s because rental units are typically smaller, and are therefore more energy intensive. For example, a family in a small apartment needs a refrigerator, stove, and water heater the same way a family in a larger apartment (or a homeowner) does.  These things require a basic amount of energy, regardless of square footage.  Rental units also tend to be older; 75 percent of renters live in units built before 1990 while 68 percent of owners live in older units.

Source: US Department of Energy, Energy Information Administration, 2009 Residential Energy Consumption Survey.

That said, the above chart shows that the amount of energy used by renters can vary depending on whether their utility costs are fixed (built into their rent) or if they pay for utilities themselves.  As the chart illustrates, renters consume considerably more energy when some or all of their utility costs are fixed.  This shows the general tendency of people to consume more of something when there is no added cost for doing so. Such excess energy consumption drives up the amount of energy renters use overall, further accounting for the efficiency gap between owners and renters.  

Even so, renters who pay for utilities separate from their rent still use slightly more energy per square foot than owners.  This suggests a real, structural efficiency gap between rental and owner units. In fact, a recent study found that multifamily rentals in 2009 had 34% fewer energy efficiency features on average than other housing types. Consumer fuels and utility costs have risen over 50 percent over the past decade, outstripping overall inflation, which makes energy efficiency improvements (insulation, energy efficient windows, compact fluorescent lighting, HVAC upgrades, energy efficient appliances) appealing to people wanting to lower their energy bills.  But when tenants pay for their metered energy usage, a property owner’s incentive to perform energy efficiency retrofits is lower, since any cost savings will benefit the tenants, not the owner. Rental property managers also have less control over how their tenants respond to an energy retrofit (e.g. more efficient windows might still be left open in the winter).  These things can keep rental property owners from performing energy efficiency retrofits at the same rate as homeowners which, in turn, keeps energy usage by renters high.

The gap in energy usage between owners and renters suggests that there are real opportunities for savings through some combination of added incentives for property owners to make these investments in retrofits and greater incentives for tenants to conserve energy. Lowering energy use would have the additional benefit of bringing down the cost of rental housing at a time when more renters are paying very high shares of their incomes for housing as a new study by the National Low Income Housing Coalition shows. 

Tuesday, March 12, 2013

Nonprofits Play Key Role in Repairing U.S. Homes

by Abbe Will
Research Analyst
Private sector spending on improvements and repairs to U.S. homes is approximately $300 billion a year. Yet as a new Joint Center working paper shows, each year nonprofit organizations and public agencies are also investing resources into the rehabilitation and repair of the homes of America’s most vulnerable households—including the elderly, disabled, and those with low-incomes—who might not otherwise be physically or financially able to undertake critical home remodeling and repair projects themselves. Major nonprofits such as Rebuilding Together, Habitat for Humanity, Enterprise Community Partners, the Local Initiatives Support Corporation, and NeighborWorks America, as well as thousands of local community development organizations across the country, are filling a significant and growing need, largely unmet by the private sector, by investing considerable resources—financial, technical, and direct provision of services—to make homes safer, healthier, more energy efficient, and more accessible for disadvantaged households.

The recent foreclosure crisis and sluggish economy undermined years of efforts to stabilize and improve distressed neighborhoods in cities across the country, only adding to the need for nonprofit and public sector involvement. Until this past cycle, housing inadequacy—a measure of the physical condition of housing units—had been on the decline in the United States, largely due to the success of govern­ment housing policies and the growing affluence of the pop­ulation. Since the housing market bust, however, this trend has reversed with the number of moderately or severely inadequate homes increasing by 7% between 2007 and 2011 to 2.4 million units. Certainly the severe housing and economic downturn had a measurable impact on the quality of the nation’s housing.

While a comprehensive data source of home rehabilitation and repair activity by nonprofits and public agencies does not exist, this new Joint Center working paper provides some insight into the topic. Rebuilding Together, one of the nonprofits in the study, provides critical home rehabilitation and modification services to low-income homeowners through its extensive network of local affiliates. A member of the Joint Center’s Remodeling Futures Steering Committee, the organization provided support for an affiliate and homeowner survey that collected data on the various types of projects undertaken by their affiliates, as well as demographic and socioeconomic information about the homeowners served and their experience partnering with Rebuilding Together.

Recent spending on home repairs and replacements, as reported by participating households, suggests that many of the homes worked on by Rebuilding Together have seen significant under-investment over the years. While the average American homeowner spent $3,000 on home improvements and repairs in 2011, according to Joint Center analysis of the American Housing Survey, almost two-thirds of Rebuilding Together program participants reported having spent less than $500 on average in the past year—fully 80% less than the typical homeowner in the U.S. Indeed, according to estimates developed by Rebuilding Together affiliates and the Joint Center’s Remodeling Futures Program, the homes serviced by Rebuilding Together were so in need after years of deferred maintenance, that the average value of the rehabilitation and repair projects undertaken by Rebuilding Together was in excess of $6,000 per home, or twice the annual amount spent by the typical homeowner in the U.S.

Home improvement expenditures under the Rebuilding Together program in 2011 were heavily oriented toward exterior replacements and kitchen and bath improvements—projects that would produce the greatest gains in key program objectives such as health and safety concerns, accessibility, and savings in energy use. Typical projects included additions or replacements of steps, ramps, railings, grab bars, windows and doors, roofing, insulation, energy-saving appliances, as well as painting and plumbing and electrical repairs. In the end, Rebuilding Together participants reported significant improvements in health and safety concerns, improvements in accessibility, and energy use savings as a result of nonprofit involvement.

Source: 2011 Harvard JCHS-Rebuilding Together Household Survey

While a more precise estimate is unavailable, hundreds of millions of dollars are spent each year by nonprofits such as Rebuilding Together, community organizations, and public agencies. Their contributions not only improve conditions for residents, they also help preserve badly-needed affordable housing opportunities, stabilize and revitalize deteriorating neighborhoods—of special importance in recent years—and encourage neighborhood stability by helping long-term residents of the community to remain safely in their homes.

Thursday, March 7, 2013

A Surge in Hispanic Household Growth? The Challenge of Interpreting Short-Term Trends in Datasets that are Occasionally Adjusted

by Dan McCue
Research Manager
Interpreting year-to-year changes in annual surveys from the Census Bureau can be a tricky business, especially around decennial censuses.  Because it is the largest and most comprehensive count of the population, after each new decennial census is released, the smaller but more frequently issued surveys available from the Census Bureau, such as the Current Population Survey (CPS), Housing Vacancy Survey (HVS) and American Housing Survey (AHS), are updated, or “re-benchmarked” based on the findings from the new decennial census.  Prior to this, these surveys were controlled to extrapolations based off of the prior decennial census. While it is inevitable that ten years of extrapolation can lead controls to drift off course, failing to recognize when and how datasets are re-benchmarked to correct for this drift can lead to misinterpretations about short-term trends.  The danger is that the re-benchmarking adjustment can be misinterpreted as an actual trend that occurred in a single month or year, rather than what it really is: a discontinuity in the data due to an adjustment made to correct the net sum of ten years of extrapolation errors that had accumulated in the dataset since the last decennial census.

Take for instance, the following data overview in a recent online article:

"The latest U.S. census figures, for June, show year-over-year Hispanic homeownership increased by 7.3 percent, from 6.2 million to 6.7 million. For black-owned households during the same time, the numbers dipped by 1.3 percent, from 6.3 million to 6.2 million. Likewise, whites' homeownership also saw a slight decrease of about 1 percent, from 58.4 million to 57.8 million." - National Journal

On its face, this data leads us to conclude that the number of Hispanic homeowners surged from June 2011 to June 2012, while at the same time the number of homeowners among both blacks and whites dropped significantly, and therefore without growth in Hispanic homeownership the overall number of homeowners in the US would have dropped significantly over the past 12 months instead of growing slightly as was reported.

However, the Census Bureau’s Housing Vacancy Survey (HVS) showed that both Hispanic and non-Hispanic homeownership rates dropped during the June 2011 to June 2012 period, a time wherein Hispanics also suffered higher than average unemployment rates. At first glance, the divergence in the two reports is puzzling. However, on the Census Bureau’s HVS website, there is a short but significant sentence under the “Changes in 2012” section of the Source and Accuracy of Estimates web page:   

“Beginning in the first quarter 2012, the population controls reflect the results of the 2010 decennial census.”  - HVS Source and Accuracy of Estimates

This note is important, because the distribution of occupied households by tenure, race, and ethnicity of households is based on these population controls.  Therefore, any changes in the number of homeowners by race and ethnicity that spans across the first quarter of 2012 is also incorporating change due to the shift in the distribution of households by age, race, and tenure that occurred with the re-benchmarking of the survey..

The adjustment to Hispanic households due to the re-benchmarking appears to be significant. Looking at the Hispanic share of households in HVS before and after Q1 of 2012, we can see that the re-benchmarking in that quarter led to a significant upwards adjustment that forms a discontinuity in this series (Figure 1).  The existence of a discontinuity is corroborated by data from the Current Population Survey, which re-benchmarked to the 2010 Census in 2011. The CPS Table Creator allows us to see the impact of the re-benchmarking directly by comparing the Hispanic share of households in 2011 under both 2000 and 2010 Census weights.  It shows that the 2010 census weights raise the Hispanic share of households a full percentage point, from 11 to 12 percent, compared to the 2000 census weights.  In short, this all suggests that results from the 2010 Census found that the 2000 Census-based population extrapolations had been underestimating Hispanic household growth in the 2000s, and therefore these household counts needed to be shifted upwards in 2012 as a correction.

Figure 1:  The Shift to 2010-Based Population Controls in Q1 of 2012 in the HVS Coincides with an Apparent Discontinuity in the Hispanic Share of Householders

Source: JCHS tabulations of US Census Bureau, Housing Vacancy Survey data.

With the change in population controls in the HVS in Q1 of 2012, the amount to which the shift in the distribution of households towards Hispanic households was underestimated incrementally over the last ten years gets corrected all at once, and gets attributed as change measured between Q4 of 2011 and Q1 of 2012.  And as we see in Figure 2, the quarterly change recorded in Q1 of 2012 has a huge influence over our view of the recent trend in household and homeownership growth by Hispanic ethnicity. 

Figure 2: Concurrent with the Switch to Census 2010-Based Population Controls, The First Quarter of 2012  Has a Large Influence on the Recent Trend in Hispanic and Non-Hispanic Household Growth 

Source: JCHS Tabulations of the 1995-2011 AHS

Without the ability to compare alternative HVS household counts for Q1 of 2012 under both 2000- and 2010-based population controls, it is difficult to determine exactly how much of the change in Hispanic and non-Hispanic households and homeowners in 2011 to 2012 was due to the re-benchmarking and how much was due to actual change measurable in the survey.  We refrain from presenting alternative scenarios here, but because the quarter is such an outlier, most assumptions to smooth or discount that quarter of data would conclude with much lower Hispanic household and homeowner growth and much higher growth among non-Hispanics over the past year.