the East Ohio Gas Co., and the Standard Oil of As of February,

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1 Poor People, Neighborhood Groups and Energy Conservation Norman Krumholz and Mark McDermott Cleveland Center for Neighborhood Development Cleveland State University ABSTRACT Cleveland is a city located in a northern climate with many poor and working class families0 The majority of these families live in uninsulated, wood-frame, single-family detached houses averaging 80 years in age - the most energy-consumptive form of housing@ Today, in the face of rapidly increasing energy prices, many poor Cleveland families spend 50 percent of their incomes for fuel and housing. Their conservation efforts are largely driven by higher fuel prices, a process which demands -- and gets -- inequitably greater sacrifices from the poor than the rest of the population& One of the ways in which public policy has attempted to redress this problem has been through crisis intervention payments made to utility companies on behalf of low-income families who are behind in their utility bills and face service curtailments$ But policies that increase the long-term dependency of poor people on government programs are flawed from the start. Insulation/weatherization programs to improve the efficiency of poor people's homes offer a more promising way of reducing the impact of fuel prices, with more lasting benefits$ The Cleveland Center for Neighborhood Development has been operating three such insulation/weatherization programs for the past two years~ Using existing neighborhood networks, the program offers free audits and low interest loans and grants for retrofits$ Originally funded by the Ford Foundation, the program is now operating in eighteen Cleveland neighborhoods and has attained support from two local foundations, the City of Cleveland, the East Ohio Gas Co., and the Standard Oil Co@ of Ohio@ As of February, 1984, 60 neighborhood people have been trained to state specifications as energy auditors, 3,000 housing units have been audited, and 1,200 retrofits have been executed@ A recent cost-effectiveness survey has concluded that energy savings of between 25-40% were common, with pay-back periods generally under three years@ Cleveland 8 s program suggests that neighborhood based energy conservation efforts may be more effective than top-down efforts organized by utility companies~ It also suggests a number of conditions that must be met before poor people will decide to make their homes more efficiento First, the home must be relatively inefficient at the onset~ Second, people must have adequate knowledge of what to do and confidence in the source of informatione Third, they must have the resources to invest and be pursuaded that the payback period is an acceptable onee State of Ohio is now designing its statewide program for residential energy conservation on the Cleveland model $

2 Poor People, Neighborhood Groups and Energy Conservation: A Cleveland Study by Norman Krumholz, Director Mark McDermott, Research Assistant Cleveland Center for Neighborhood Development College of Urban Affairs Cleveland State University There are roughly 25 million Americans who live below the federal poverty level of $3,140 a year for a single person living in a city~ In the colder parts of this country during the winter they commonly spend 20 to 30 percent of their monthly income on heating and 30 to 40 percent on housinge In these cases, poor people are paying 50 percent or more of their total monthly income on heat and shelter@ For these people, Uheat or eat U is more than slogan@ In cities like Cleveland, the energy crisis is sharpened@ Cleveland's housing stock is old; of the 264,000 homes in the city, three out of four were built before 1940@ These older houses are almost always more expensive to heat than newer homes, because they lack weatherization or an efficient heating systeme More than 82 percent of the homes in the city are detached, wood-frame single or double homes~ Only two percent of the structures have more than ve uni they make only eighteen percent of the total housing As a result, the city lacks the energy-conservation advantages multiple-family housing which costs less to space heat per dwelling unit s i 1e f am i 1y home (C arro 11, 1977) ~ only is ion, but housing stock old and poorly suited to energy occupants generally have low or moderate incomes~ In 1980, the median household income in Cleveland was only $12,277 0 Twenty-two percent of all Cleveland families fell below the poverty line in that year 0 About 24 percent all Cleveland families now receive Aid to Dependent H-64

3 Children and one-sixth of the city's households earn less than $2,000 a year@ Low income families living in older, less expensive and less efficient homes, pay more for heat per square foot of living space than middle or upper income families living in newer or improved homes e A student of the relationship of energy and the poor has estimated that lithe unweatherized condition of homes of low income families results in their paying about 50 percent more (for energy) than regional averagese U (Eccli, 1977)@ Energy pricing policies also work hardships on the poore Low-income families pay more for each unit of energy they consume than higher income households because of pricing policies that reward larger consumers by charging them less per unit. And Cleveland1s utilities add a fixed monthly service fee to their per-unit charge$ This minimum fee must be paid by the poor, regardless of how little energy they use* Average monthly utility bills for Cleveland consumers nearly doubled from 1975 to 1980, with Cleveland residents in 1980 paying the highest monthly utility bills among eight Ohio cities~ As if all this were not enough, accelerated decontrol of gas could quadruple average wellhead gas prices by resulting in a gas bill increase to average Cleveland households of roughly $900 a year~ This x of old housi, poor le and sharply rising energy costs presents many problems~ To help counterbalance these problems, Clevelandls well-organized, block club-based, neighborhood organizations and community development corporations have developed a cooperative approach iting, weatherizing and retrofitting over the past few years@ The Center for Neighborhood Development at Cleveland State University (CSU/CND) has coordinated these efforts@ This paper will describe three of

4 these programs, present an evaluation and draw some conclusions from the effortg THREE PERCENT LOAN PROGRAM With a $100,000 grant of loan money from the Ford Foundation and $75,000 more in administrative funds from the Cleveland Foundation, CSU/CND has successfully contracted with five Cleveland neighborhood organizations to deliver a three percent loan program for low and moderate income households in single to four unit structures0 (The five neighborhoods are: Tremont, Broadway, Glenville, Detroit-Shoreway and St0 Clair-Superior@) Support from the city of Cleveland also enables the program to offer grants of $450 for attic insulation to non-bankable low-income households~ The program was initiated when staff from two of the neighborhood izations, Citizens to Bring Broadway Back (ebbs) and Tremont West Development Corporation (TWDC), approached CSU/CND with a request to devise a rn~nnranl~ncive the residents energy conservation program that would provide some relief for ir working-class neighborhoods who were caught between high prices and low incomes@ At the time, the only service related to ion in Cleveland was a Residential Conservation Service (RCS) it fi llars the East Ohio Company~ Interest in is was very low@ The neighborhood groups were confident that a it a low-interest loan program for insulation and weatherization would be more successful@ CSU!CNDis staff agreed, helped design the program sold concept to Ford@ loan, which is the program1s central feature, provides three percent, ree-year financing through Central National Bank using standard underwri n9 cri ia~ A single family may borrow up to $2,500; two-family ~~

5 KRur4HOLZ structures are eligible for up to $3,000; and four-family structures can borrow to a limit of $4,000e All conservation measures which meet the RCS seven-year payback requirement are eligible. These include attic and wall insulation, storm windows and doors, and furnace retrofitse After two years of operation, 248 retrofits have been completedo They include 168 subsidized loans for a variety of conservation improvements and 80 grants for attic insulation, totalling $200,000 in weatherization work@ Two of the five participating neighborhood organizations -- TWDC and CBBB -- have had particular success in marketing loans@ The two are responsible for generating 75 percent of the loan requests in the cityes five participating neighborhoodse Their program successes are attributable to the following explanations: o Neighborhood organization credibility and related experience~ Both groups have years of experience in organizing and providing a range of services~ TWDC has four years of experience with housing rehabilitation loan program@ Both have high visibilitye Walk-ins seek; other program advice and word-of-mouth have generated many audit and loan requests@ Both organizations enjoy the trust of their neighborhoodse o av i 1i a Res it~ This enabled the organizationms two energy auditors to drop flyers, go door-to-door persuade their colleagues and neighbors to push the loan program and audit$ o The availability of a high quality, very low cost insulation service@ This service provided by ebbs enables customers to have insulation and weatherization installed at close to 25 percent of the going market rate~ The general reputation of the organization overcame H-67

6 neighborhood distrust about contractor work in the home improvement o The availability of $450 grants for attic insulation. Even though both organizations have provided fewer than a dozen grants each, the attractiveness of this grant and its availability has increased neighborhood interest in the program~ o Program management@ The program is well managed0 The Ford and Cleveland Foundation grants provide administrative salaries and related expenses for a staff person (one-half time) to administer the program0 Experience with rehabilitation loans and weatherization services moves both organizations far along the learning curve in financial management and energy expertise@ All staff members have been trained to steer people into the audit and loan programs@ o Overall marketing strategy@ The combined effort of block meetings, posters, flyers, door-to-door canvasses, advertisements, news articles and word-of-mouth stimulated by staff presence in the neighborhoods reinforce each other@ o Recent utility rate hikes~ Over the past year natural gas prices in C veland have increased 40 percent stimulating consumer interest in ion~ o Simplicity~ The loan is both straightforward in its terms (three for a three year term) and available to virtually everyone in neighborhoods@ The five neighborhood groups involved in this program expect to complete another 230 subsidized loans and 80 attic grants through the end of the demonstration in 1985~ In the meantime, both the City of Cleveland and State

7 of Ohio have modeled their new five percent loan programs on the Ford programls success$ FEE-FOR-SERVICE AUDITS A second program involves the energy audit itself which is the essential first step in any weatherization or insulation program@ Energy auditing is now being done in Cleveland by neighborhood residents under a fee-for-service contract with the East Ohio Gas Company which trains and pays auditors -- and their sponsoring organizations -- for the full costs of providing audits~ Under the agreement, East Ohio Gas agrees to pay the auditors $30 per audit for single family homes, and $45 per building for two family residences$ The neighborhood group sponsoring the auditor also receives fifteen dollars per unit, while prime contractor a company which processes the audit forms also receive s@ As of this writing, nineteen different neighborhood organizations from all parts of the city of Cleveland are involved in this fee-for-service program~ d, 60 neighborhood people (most of whom were previously loyed) have been tr ned as energy auditors to state specifications, 32 le are d members of insulation crews, over 3,000 homes have been 1,200 costi $700,000 have been executed$ SOH IS ENERGY CONSERVATION PROGRAM third energy conservation program involving CSU/CNO and Cleveland neighborhood groups is supported by grants from Standard Oil of Ohio (SOHIO)~ Over the past two years, SOHIO has supported Cleveland neighborhood-based organizations engaged in a variety of energy-conservation measures ranging' from construction and installation of inexpensive plastic inside storm ~69

8 windows to expensive solar SOHIO s grants over that period have totalled well over $1 millionq This unique corporate partnership operates under the overall perception that, as a leading national energy business, it has an obligation to ease the impact of rising energy costs on the poor and to encourage many different approaches to energy conservation@ SOHIO believes that neighborhood groups offer a good vehicle to accomplish energy conservation and that the corporation's investment can provide conservation measures with quick paybacks and high cost-effectiveness$ The program has proved to be invaluable with over 2,000 units weatherized in the first two years~ The neighborhood organizations use their grant to shore up aspects of their energy conservation efforts that are in need of support, such as program administration and grants for low-income homeowners@ SOHIO s presence as a dominant corporation on the Cleveland scene provides the wi more than money; it also provides a measure of legitimacy and an entry to other forms of support@ SOHI01s contribution also makes it possible evaluate cost iveness of all the energy conservation programs coordi by CSU/CND~ ive is all is in terms of energy savings and payback? CSU!CND ana 86 residential properties weatherized by four nei These groups were chosen because data were available for them ior 1/1/83~ Table I below depicts the type of ion treatment by length of payback period; Table II below shows the ian decrease in gas consumption for each category$

9 TABLE I Summary of Mean Weatherization Improvement Costs, Mean Heating Bill Savings and Mean Payback Periods, Shown by Type of Weatherization Number of Payback Period Type of Treatment Observations Mean Cost Mean Savings (months) Wall Insulation Only 18 $ 349 $ Full Insulation Attic, Sidewall, & Caulk/weatherstrip Storms &Other Infiltration Attic Insulation Only Storm Windows Only TABLE II Gas Consumption Decrease for Weatherized Structures Type of Treatment Range of Decrease Median Decrease Attic Insulation Only - 8@O% to 84% Attic &Sidewall/Attic &Other % to 63% 1 Insulation Only 12~0% to 67% Storm Windows Only -26@O% to 52% Storms & Other Infiltration -15~O% to 72% 9*3% 43% 33% 15% 33% aggregate, the payback period for weatherization work analyzed was j over years (25 5 months), with paybacks by type of treatment ranging a low s in the case of Wall Insulation Only category to a high of 35 months for Storm Windows OnlYe relatively short payback periods found in our sample argue with other fi s in more comprehensive studies@ For example, Robert Socolow and his coll studied energy characteristics of a group of recently built s in n Rivers, New Jersey, and experimented with various ways of reducing heating and cooling requirements~ By installing insulation and blocking off routes of air infiltration, they managed to make a 2/3 reduction

10 in the amount of energy used for space heating& They estimated the total cost of the job, at retail prices, as $1,245 per house (1978 dollars), not counting the important cost of discovering all the air leaks to be plugged$ At then current prices for gas heating they calculated that the investment would pay for itself in fuel savings in ten years (Socolow, Our short payback findings may simply be a commentary on how many old houses in Clevelandls poorer neighborhoods in fact, "leak like a sieve n and are therefore susceptible to radical energy savings with only a few fundamental improvements to the housing envelope provided at lower cost by the non-profit organizations~ CONCLUSIONS approximate three years of experience in these Clevel neighborhood energy con ion programs, a number of findings can sted: o of fact at their resources are scarce, poor and worki class people are willi to invest and conserve the amounts they can invest are limited~ As of May, r example, Foundationms three percent loan program loans ants@ median amount of all loans was,200~ App 1y, many neighborhood homeowners were 111 e modest investments in weatherizing and/or sul i ir if co s involved in the energy conservation work were less an the energy saved within a short payback (Cunningham Lopreato, 1977)0 In a system such as prevails in the Uni ates where the main incentive to conserve H-12

11 is the rising cost of fuel, low income people are apparently willing to invest their limited money to achieve greater energy efficiency~ o o It is possible to realize large savings in fuel bills and in energy conserved in homes that are inefficient from the starte The typical single home in many Cleveland neighborhoods is so inefficiently designed and so poorly constructed that comparatively modest investments can produce dramatic results@ As Table I suggests, insulating attic and sidewalls and caulking and weatherstripping windows can be accomplished for about $700 and will pay for itself in 27 months with energy saved0 Many consumers in Cleveland1s neighborhoods were unable to invest at all@ Recall that in the Ford program the grant funds for attic insulation were made lable only to persons willing to borrow, but unable get a loan from the participating and generally empathetic commercial bank@ Yet, the number of grant requests exceeded the number of loans made0 Poor consumers clearly require more support in the form direct assistance payments and grants for to lp them meet their energy needs0 This is an absol need which must met through expanded payments, not ive of such direct assistance payments and grants is not to increase the long-term dependency of the poor on programs to help pay their bills - that approach is flawed from the start -- but to share whatever sacrifices energy policy demands on an equitable basis~ o Organized neighborhood groups are capable of delivering a variety of energy conservation programs while maintaining broad support from more traditional political, financial and philanthropic

12 institutions~ Indeed, in certain neighborhoods, the effectiveness of neighborhood organizations to deliver services far exceeded the efforts of more formal institutionso In the first several years of the RCS audit program as offered by the East Ohio Gas Company, only 1,500 audits were completed in Cleveland; in the one year since the fee-for-service arrangement between the neighborhood groups and East Ohio Gas Company was negotiated, 3,000 audits have been completed and~ more importantly, 1,200 retrofits have resulted from the audits~ o Neighborhood-based energy conservation programs appear to have great potential both for leveraging funds and for generating new jobs& So far, the three Cleveland energy programs administered by CSU/CND have generated jobs for 60 auditors, 32 insulation-crew members that some of the groups have set up to do their own work, and fourteen hal ime administrators in the participating agencies~ These jobs do not include the supporting jobs generated in the production and distribution of materials0 These neighborhood-based efforts are unlikely either to reverse the rise in natural gas prices or get everyone back to work~ Their contribution is to lower energy bills conserve energy, to soften the impact of industrial line, provide some useful work at the unemployed can do, and to sust n morale while promoting the physical revitalization of neighborhoods@ iques being developed for energy conservation at the neighborhood level may well applicable to such problems as street crime, basic rnai ance, job placement, and other functions& They may, in fact, represent a revo ion in public administration, one that might give us an opportunity restore confidence in government while also restating our compassion for human needs and our concern for greater equality~ H-74

13 FOOTNOTES Cunningham, William H. and Sally Cook Lopreato, Energy Use and Conservationlncentives: A Stud of the Southwestern United States~ New York: Praeger, 977, ppg Carroll, Owen, et al. The Plannerls Energy Workbook, Brookhaven National Laboratory, June, 1977, p. 20. Eccli, Eugene, lithe Feasibility of an Energy...Related Loan Program ll, Community Services Administration, October, Socolow, Robert H~, edo Saving Energy in the Home: Princetons Experiments at Twin Rivers Cambridge: Ballinger, 1972, ch. 20