Low- And Moderate-income Households Research Articles

Housing policies and energy efficiency spillovers in low and moderate income communities

Housing policies address the human dimensions of increasing urban density, but their energy and sustainability implications are hard to measure due to challenges with siloed civic data. This is especially critical when evaluating policies targeting low- and moderate-income (LMI) households. For example, a major challenge to achieving national energy efficiency goals has been participation by LMI households. Standalone energy efficiency policies, such as information-based programmes and weatherization assistance, tend to attract affluent, informed households or suffer from low participation rates. In this Article, we provide evidence that federal housing policies, specifically community development block grants, accelerate energy efficiency participation from LMI households, including renters and multifamily residents. We conduct record linkage on 5.9M observations of housing programme participation and utility consumption to quantify the hidden benefits of locally administered housing block grants in a typical entitlement community in the US Southeast. We provide long-run evidence across 16,680 properties that housing policies generate 5–11% energy savings as spillover benefits to economically burdened households not conventionally targeted for energy efficiency participation.

Recent Innovations in Reducing Home Energy Costs and Improving Resilience for Low- and Moderate-Income Renters and Homeowners

Community Development (CD) practitioners across the western U.S. are engaging in new efforts to reduce energy costs and improve resilience for low- and moderate-income (LMI) communities and other populations that face barriers to economic participation and household financial stability. Energy costs and resilience are factors in housing stability, which impacts economic participation. New federal and state funding sources, as well as growing involvement from philanthropy and Community Reinvestment Act (CRA)-motivated investors, have prompted growth in energy cost savings and resilience (ECSR) options for LMI households. To help scale this work, CD practitioners are experimenting with partnerships—between workforce development providers and employers, mission-driven lenders and nonprofits, state government and utilities, retrofit companies and the public sector, state government and municipalities, to name a few. These partnerships have led to innovations in lending (for homeowners, renters, and landlords), technical implementation of retrofits, coordination across programs, consumer protection, workforce development, and technical assistance (TA) for CD practitioners. This brief provides descriptive findings from focus groups and interviews about ESCR-related work in the CD field and discusses takeaways for policy and practice.

Recent Innovations in Reducing Home Energy Costs and Improving Resilience for Low- and Moderate-Income Renters and Homeowners

Community Development (CD) practitioners across the western U.S. are engaging in new efforts to reduce energy costs and improve resilience for low- and moderate-income (LMI) communities and other populations that face barriers to economic participation and household financial stability. Energy costs and resilience are factors in housing stability, which impacts economic participation. New federal and state funding sources, as well as growing involvement from philanthropy and Community Reinvestment Act (CRA)-motivated investors, have prompted growth in energy cost savings and resilience (ECSR) options for LMI households. To help scale this work, CD practitioners are experimenting with partnerships—between workforce development providers and employers, mission-driven lenders and nonprofits, state government and utilities, retrofit companies and the public sector, state government and municipalities, to name a few. These partnerships have led to innovations in lending (for homeowners, renters, and landlords), technical implementation of retrofits, coordination across programs, consumer protection, workforce development, and technical assistance (TA) for CD practitioners. This brief provides descriptive findings from focus groups and interviews about ESCR-related work in the CD field and discusses takeaways for policy and practice.

Rooftop solar incentives remain effective for low- and moderate-income adoption

Financial incentives for rooftop solar photovoltaic (PV) adoption have declined in the United States over time by policy design. Incentive phase-down can efficiently promote early adoption and avoid ineffective payments to late adopters. However, incentive phase-down may exclude low- and moderate-income (LMI) households from realizing the same financial benefits from PV adoption as high-income early adopters. Here, data from two state-level LMI PV incentive programs are analyzed to test whether incentives still drive PV adoption among LMI households. As a first order approximation, the analysis suggests that incentives drove adoption that would not otherwise have happened in about 80% of cases. To the extent that policymakers prioritize PV adoption equity as part of the emerging energy justice policy agenda, the results suggest that ongoing incentive support for LMI adoption may be merited.

Income-Targeted Marketing as a Supply-Side Barrier to Low-Income Solar Adoption

Despite improving economics, low- and moderate-income (LMI) households remain less likely to adopt rooftop solar photovoltaics (PV) than higher-income households. To date, researchers and policymakers have focused on demand-side drivers of PV adoption inequity, but supply-side factors could also play a role. Here, we use quote data to explore whether PV installers implement income-targeted marketing strategies and the extent to which such strategies drive adoption inequity. The quote data show that installers submit significantly fewer quotes to households in low-income areas. Further, the data show that households that receive fewer quotes are less likely to adopt. As a first order approximation, the data suggest that income-targeted marketing explains about one-quarter of the difference in PV adoption rates between LMI and higher-income households. Policymakers could explore a broader suite of interventions to address both demand- and supply-side drivers of PV adoption inequity.

The impact of policies and business models on income equity in rooftop solar adoption

Low- and moderate-income (LMI) households are less likely to adopt rooftop solar photovoltaics (PVs) than higher-income households in the United States. As the existing literature has shown, this dynamic can decelerate rooftop PV deployment and has potential energy justice implications, in light of the cost-shifting between PV and non-PV households that can occur under typical rate structures and incentive programmes. Here we show that some state policy interventions and business models have expanded PV adoption among LMI households. We find evidence that LMI-specific financial incentives, PV leasing and property-assessed financing have increased the diffusion of PV adoption among LMI households in existing markets and have driven more installations into previously underserved low-income communities. By shifting deployment patterns, we posit that these interventions could catalyse peer effects to increase PV adoption in low-income communities even among households that do not directly benefit from the interventions. The concentration of rooftop solar photovoltaics among high-income households limits deployment and access to benefits. Here the authors find that some policy interventions and business models increased photovoltaic adoption equity in existing markets and shifted deployment to underserved communities.

Using financial tips to guide debt repayment: Experimental evidence from low- and moderate-income tax filers

Tax filing in the U.S. often has substantial implications for the debt burdens of low- and moderate-income (LMI) households. The tax refund—often the largest payment LMI households receive in a year—provides these households with an opportunity to reduce their debt, while tax liabilities can lead them to take on additional debt. Though paying down debt is among the most common uses of the tax refund, households often do not optimally allocate their debt payments. We assess whether offering simple financial guidance can help households meet their debt obligations by administering a field experiment that provided debt management tips to LMI tax filers after tax filing. Four treatment groups saw one of four tips, while a fifth treatment group could select which of the four tips was best suited to their financial situation. Results from a follow-up survey found no effects of the intervention on reported rates of following the tips or on the amount of debt held. However, we do find that the tips reduced the incidence of holding unsecured debt by 5 percentage points (p<0.05). The primary drivers of these effects were tips advising participants to prioritize paying their smallest debt balance or their highest cost debt.

Distributional disparities in residential rooftop solar potential and penetration in four cities in the United States

Single-family residential rooftop solar adoption in the United States has not occurred equitably across the country, nor across socioeconomic and demographic groups. In response, state and local governments have developed solar equity programs, primarily focused on increasing adoption by low- and moderate-income (LMI) households. This study merged national datasets that estimate rooftop solar potential, the distribution of rooftop solar systems, and census tract- level socioeconomic and demographic characteristics to answer three questions. First, how are spatial distributions of rooftop potential and penetration similar and different across cities? Second, how is rooftop penetration distributed across non-LMI and LMI communities in different cities? Third, how do the relationships between rooftop penetration and local socioeconomic and demographic characteristics, identified as barriers to solar adoption, differ? Using GIS, bivariate and multivariate analyses, these questions were examined in four US cities – Riverside and San Bernardino, California, Washington, DC, and Chicago, Illinois – to understand both universal and distinct local manifestations. Findings include: higher rooftop potential existed in some LMI communities; higher rooftop potential did not necessarily translate to higher rooftop penetration, especially if higher potential was in LMI communities; and beyond income, other socioeconomic and demographic characteristics such as race/ethnicity, limited English proficiency, age of housing stock, and internet access were associated with rooftop penetration. While there remains great potential for expanding rooftop solar to LMI households and communities, understanding the local dynamics of solar potential and penetration may inform better policy development and implementation.

Financial Shocks, Liquid Assets, and Material Hardship in Low- and Moderate-Income Households: Differences by Race

Low- and moderate-income (LMI) households need financial assets to help cope with income and expenditure shocks. Prior research identifies racial differences in wealth and wealth effects. We examined whether these gaps and effects exist for liquid financial assets. Using group invariance tests in structural equation modeling, we assessed the relationship between financial shocks and material hardship, as mediated by liquid financial assets and moderated by race/ethnicity among a sample of LMI tax filers (N = 7544). Though most study participants were employed (71%), average income was only $18,055 and average liquid financial assets was $4701. Black households had $2774 less in liquid financial assets compared to white households (p < .001) after controlling for income and other factors. Model fit for the final moderated mediation model was excellent (RMSEA = 0.026, 90% C. I. [0.020, 0.033], CFI = 0.977). The mediating effect of liquid financial assets was 10.4% for white, but only 3.6 and 4.4% for black and Latino households, respectively. That is, the proportion of the relationship between shocks and hardship mediated by liquid financial assets varied by race/ethnicity. Policies aimed at helping LMI households build emergency savings such as tax refund savings matches may be less likely to benefit black and Latino households than white households, suggesting the need for other policies to address this form of the racial wealth gap.

The Mediating Role of Assets in Explaining Hardship Risk among Households Experiencing Financial Shocks

Material hardship is common among low- and moderate-income (LMI) households. Without liquid financial assets, these households are more likely to experience hardship in the face of financial shocks—large and unexpected expenses or dips in income. Authors hypothesized that shocks have a direct effect on hardship, and that liquid financial assets partially mediate the relationship between shocks and hardship. Authors used structural equation modeling with tax data and responses to a household financial survey from a sample of LMI tax filers (N = 8,251). Most (66%) filers experienced at least one shock and had an average of more than two hardships in the six months after tax filing. The structural model fit the data well (comparative fit index = .966, root mean square error of approximation = .029 [.026, .032]). The direct effect of shocks on hardship and the indirect effect through liquid financial assets comprised 90.5% and 9.5% of the total effect, respectively (p < .001). Results suggest that liquid financial assets enable households to meet basic needs in the wake of financial shocks. Implications for social workers to help LMI households build liquid financial assets and address other hardship risk factors through direct and policy practice are discussed.

Effects of a Tax‐Time Savings Intervention on Use of Alternative Financial Services among Lower‐Income Households

Alternative financial services (AFS) such as check cashing and payday loans may help unbanked households meet transaction and credit needs, yet often at a very high price. Saving tax refunds can help low‐ and moderate‐income (LMI) households build emergency savings as a way to reduce dependence on AFS and cope effectively with irregular cash flows and financial shocks. This study examined the impact on AFS use of message‐based interventions encouraging LMI households to save their refunds when they electronically filed their federal income tax returns. We found that 3 out of 18 interventions resulted in statistically significant reductions in credit‐related AFS use with small effect sizes. None of the interventions resulted in reduced transaction‐related AFS use. Other factors—especially prior AFS use and financial shocks—were strong predictors of AFS. Financially vulnerable households may need additional opportunities and protections to reduce dependence on AFS.

Racial disparities in education debt burden among low- and moderate-income households

Evidence now demonstrates significant variation in education-debt levels by race and household income, with Black and lower-income students accumulating higher levels of education debt compared to their White and upper-income peers. This study is one of the first to evaluate whether racial disparities in education debt extend to a low- and moderate-income (LMI) population. With data from a national sample of LMI households in the Refund to Savings study (N=17.684), we employ a two-part modeling approach with a matching-estimator robustness check to estimate racial and ethnic variation in education debt. We find that significant disparities in education debt remain: the odds of student loan indebtedness are twice as high for LMI Black students as for White counterparts. In all, LMI Black students are estimated to incur $7721 more in education debt than LMI Whites, with disparities persisting after graduation. These findings suggest that LMI Black and White students, who face similar liquidity constraints and borrowing risks, are at unequal risk of accumulating education debt. We conclude by discussing the implications of this research for asset-building policies and student loan repayment efforts, both of which offer promise in bolstering college affordability and easing the burden of education debt.

Homeownership and Neighborhood Satisfaction among Low- and Moderate-Income Households

ABSTRACT:Most research on homeownership is conducted on nationally representative samples of homeowners and fails to isolate the unique experience of low- and moderate-income (LMI) homeowners. Given the interest of policymakers in promoting homeownership among LMI households over the past 20 years, along with the apparent role played by risky borrowers—many of whom are low-income—in the current housing market crisis, it is important to evaluate both economic and social outcomes for this subgroup of homeowners. Using a matched set of LMI owners and renters in the 2007 Community Advantage Program (CAP) panel, we assess the effect of homeownership on neighborhood satisfaction. By including various individual and neighborhood characteristics as covariates, we employ multilevel modeling and propensity score matching to address the nested structure of the data and endogeneity issues. Findings indicate that homeownership is an important predictor of neighborhood satisfaction among LMI households, even when controlling for a host of socioeconomic, demographic, and neighborhood characteristics. This may suggest that homeownership can serve as a viable way to improve neighborhood satisfaction among LMI households. This is important as neighborhood satisfaction is highly associated with overall quality of life.

Preferences for Banking and Payment Services Among Low- and Moderate-Income Households

This paper characterizes the features of an account-based payment card--including bank debit cards, prepaid debit cards, and payroll cards--that elicit a high take-rate among low- and moderate-income (LMI) households, particularly those without bank accounts. We apply marketing research techniques, specifically choice modeling, to identify the design of a specific financial services product for LMI households, who often face difficulties maintaining standard bank accounts but need banking services. After monthly cost, we find that, on average, non-monetary features of a payment card, such as the availability of federal protection and the type of card, are factors LMI consumers weigh most heavily when choosing among differently designed payment cards. We estimate a high take-rate for a well-designed payment card that is decreasing in its cost. The sensitivity of the take-rate with respect to cost varies by income and bank account ownership. These results can guide private and public sector initiatives to expand the range of financial services available to LMI households.

Homeownership, wealth accumulation and income status

This paper examines the extent to which homeownership had an independent effect on the ability of low- and moderate-income (LMI) households to accumulate wealth during the mid-to-late 1990s. Using household data from the PSID, we generate a panel of households whose homeownership we observe over a 15 year period and whose wealth accumulation we observe at three points in time: 1994, 1999 and 2001. We investigate the extent to which homeownership has an independent impact on the wealth accumulation of LMI households, controlling for a host of other variables and unobserved heterogeneity. Accounting for the skewed nature of the wealth distribution, we find that each additional year of homeownership increases total net wealth by $13.7 K on average for the full sample. Interacting income status with years of homeownership indicates that the impact of homeownership varies by income status, with each additional year of homeownership being associated with $15 K more in wealth holdings for high-income households and roughly $6 to 10 K more in wealth holdings for LMI households.

Third‐Party Tax Administration: The Case of Low‐ and Moderate‐Income Households

Using a unique household‐level data set, this article investigates the tax‐filing experiences and refund behavior of low‐ and moderate‐income (LMI) households. We document households’ tax‐filing behavior, attitudes about the withholding system, use of tax refunds to consume and save, and the mechanisms by which households would prefer to receive their income. We also document the prevalence of the use of tax‐preparation services and the receipt of tax refunds and refund‐anticipation loans. Finally, we argue that there may be a role for tax administration to enable LMI households to make welfare‐improving financial decisions.

Financial Services, Savings and Borrowing Among Low- and Moderate-Income Households: Evidence from the Detroit Area Household Financial Services Survey

This paper presents new empirical evidence documenting the financial services behavior of low- and moderate-income (LMI) households based on a household survey designed by the author and implemented with the Survey Research Center at the University of Michigan. The Detroit Area Household Financial Services (DAHFS) survey uses a random, stratified sample to explore the full range of financial services used by LMI households, together with systematic measures of household preference parameters, demographic characteristics, and households' balance sheets. Results from over 1,000 interviews in the DAHFS study suggest that the structure of the financial services, credit and payments systems in the formal and informal sectors imposes significant costs on LMI households, including high transaction costs, lessened opportunities to save, higher costs of borrowing, and other difficulties. The paper discusses strategies to help transform the financial services market for LMI households.

Comments on ?performance of residential mortgages in low- and moderate-income neighborhoods?

Given the loan quality problems plaguing federal loan programs, it is often presumed that people who cannot obtain conventional mortgages are not creditworthy in an ex ante sense. Mills and Lubuele assess the profitability of seven mortgage programs targeted toward lowand moderate-income households. Comparing the performance of this sample with national data, the authors find evidence suggesting that such lending programs need not be as costly as conventional wisdom assumes. The authors mention several factors that may explain this finding and investigate a few factors that may contribute to cross-sectional variation in the performance of mortgage lending to less affluent households.