Commentary: To unlock the IRA’s full potential, we need to include low-income renters

The following commentary was submitted by Jesse Cohen. Cohen is a graduate student at the Yale School of the Environment, where he studies energy policy. He has worked for the Brattle Group as a senior research analyst, RMI as a graduate student intern, and the City of Ithaca’s Sustainability Office as a graduate student consultant. See our commentary guidelines for more information.

As we enter 2023, Gallup pollsters report the economy — inflation, in particular — remains America’s self-perceived ​“most important problem.” 2022 was a historic year for inflation. In June, inflation reached 40 year highs. And while inflation shows signs of slowing, the most recent Bureau of Labor Statistics report still shows a 6.5% annual price growth across consumer goods. Energy and housing prices are particularly volatile, growing at 7.3% and 7.5% respectively over the past 12 months.

Inflation hits low-income Americans the hardest. The lowest-income American families are most vulnerable to inflation because they spend the greatest portions of their budgets – upwards of 80% – on essentials. For energy, the gap is particularly striking: low-income Americans spend three times as much of their incomes on energy bills as middle- and upper-income Americans.

High quality affordable housing, powered by efficient, clean energy, can help fight inflation and more. Affordable housing provides economic relief to low-income families while reducing crime and increasing property values. Home energy efficiency cuts monthly bills and offers numerous health benefits. Clean energy-powered buildings mitigate greenhouse gas emissions and can help keep the lights on during extreme weather emergencies.

Current U.S. policy leaves too many of these benefits on the table. The original Build Back Better (BBB) Act legislation, passed by the House of Representatives in November 2021 but unsupported by the Senate, included $150 billion in funding for affordable housing. The Biden Administration expected this money to lead to the construction and improvement of over a million affordable housing units. Combined with historic funding for clean energy, BBB promised to simultaneously address the dual crises of U.S. housing unaffordability and climate change, paving the way for an equitable, inclusive transition to an affordable, clean energy future. But the Inflation Reduction Act (IRA), signed into law in August 2022 in place of BBB, removed the $150 billion dedicated to affordable housing, instead addressing housing indirectly through energy investments and incentives.

The IRA’s most impactful housing provisions are likely to be the expanded tax credits for homeowners, builders, and commercial property owners undergoing energy efficiency upgrades and installing clean energy resources such as rooftop solar. However, the majority of low-income American families rent their homes and pay their own utility bills. Renters often cannot afford to undertake tax credit-eligible energy upgrades on homes they do not own, and landlords have little incentive to invest in energy improvements if they are not the ones paying the utility bills. The result is that IRA benefits are largely inaccessible to low-income renters. Existing inequalities are exacerbated and climate progress is inhibited because tens of millions of Americans remain unable to decarbonize their homes.

To unlock the full potential of the IRA, we need to include low-income renters. To do so, policymakers should prioritize three actions in 2023:

1. States and local governments should utilize the $1.2 billion in funding to upgrade building codes from the IRA and the 2021 Infrastructure Investment and Jobs Act (IIJA) to aggressively implement energy efficiency standards that mitigate greenhouse gas emissions, reduce unhealthy indoor air pollution, and lower monthly bills for all buildings—including rentals. 
2. Under the IRA, the Environmental Protection Agency (EPA) is providing $41.5 billion for tools to address climate change and advance environmental justice. $15 billion of this funding is earmarked for low-income and disadvantaged communities. Policymakers should ensure that as much of this funding as possible goes to projects that benefit not just climate, but also community health and housing affordability. Furthermore, in defining disadvantaged communities, policymakers should consider the proportion of households that are renters. 
3. Lawmakers should continue to promote new legislation prioritizing low-income renters. Examples include the development of new public housing, powered by efficient, clean tax-credit eligible energy technologies; expansion of the IRA’s $1 billion efficiency upgrade grant to the Department of Housing and Urban Development’s assisted multifamily housing programs; and increased funding for utility bill relief and weatherization of low-income housing, as envisioned in the Markey/​Bowman Heating and Cooling Act introduced last Congress. 

Together, these three actions would strengthen the IRA, driving a future where affordable, healthy, climate-friendly housing is accessible not just to homeowners, but to every American.