Scaling Energy Efficiency in the Heart of the Residential Market: Increasing Middle America's Access to Capital for Energy Improvements

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Policy Brief

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Middle income American households – broadly defined here as the middle third of U.S. households by income – are struggling. Energy improvements have the potential to provide significant benefits to these households – by lowering bills, increasing the integrity of their homes, improving their health and comfort, and reducing their exposure to volatile, and rising, energy prices. Middle income households are also responsible for a third of U.S. residential energy use, suggesting that increasing the energy efficiency of their homes is important to deliver public benefits such as reducing power system costs, easing congestion on the grid, and avoiding emissions of greenhouse gases and other pollutants. 

While middle income Americans have historically invested in improvements that maintain and increase the value of their homes, they have seen an important source of financing – the equity in their properties – evaporate at the same time that their access to other loan products has been restricted. A number of energy efficiency programs are deploying credit enhancements, novel underwriting criteria, and innovative financing tools to reduce risks for both financiers and borrowers in an effort to increase the availability of energy efficiency financing for middle income households. While many of these programs are income-targeted, the challenges, opportunities, and emerging models for providing access to capital may apply more broadly across income groups in the residential sector. 

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