In May, the Office of Management and Budget published a request for comments on the way in which the federal government measures inflation. This week, MHP submitted comments strongly opposing OMB Directive No. 14: "Consumer Inflation Measures Produced by Federal Statistical Agencies." Directive No. 14 would reduce the number of families eligible for programs such as the Low-Income Home Energy Assistance Program (LIHEAP) and the Weatherization Assistance Program (WAP) — programs essential to helping families afford their homes. Read our full comment letter below.
MHP Comments on OMB Directive No. 14: Consumer Inflation Measures Produced by Federal Statistical Agencies
Dear Ms. Potok:
On behalf of the Minnesota Housing Partnership, thank you for the opportunity to provide comments on OMB Directive No. 14: "Consumer Inflation Measures Produced by Federal Statistical Agencies."
Minnesota Housing Partnership (MHP)
MHP convenes, guides and mobilizes a diversity of partners working to improve conditions of home and community, from private developers and tribal leaders to elected officials. Crossing boundaries to forge broad coalitions, we amplify a common vision: Building strong, equitable communities that provide opportunity for everyone, especially those with lower incomes. We provide capacity building and technical assistance in rural areas and Native nations, produce original research, and advocate for policies that advance affordable housing and strengthen communities
The Minnesota Housing Partnership strongly opposes OMB Directive No. 14, which would reduce the number of families eligible for programs such as the Low-Income Home Energy Assistance Program (LIHEAP) and the Weatherization Assistance Program (WAP). Our policy priorities include serving those residents with the greatest needs for housing, particularly those with the lowest incomes. Many rural communities, that we work with directly, rely on LIHEAP and weatherization resources to meet their needs. Our original research, through our Minnesota State of the State of Housing report of 2019, has identified that more than one in four Minnesotans have housing cost-burden, including renters and homeowners; in short, low-income Minnesota families desparately need these resources.
Chained CPI Would Hurt Low-Income Americans
OMB Directive No. 14 would change how the official poverty measure (OPM) for federal assistance programs is adjusted for inflation, by adopting the chained Consumer Price Index (C-CPI-U) rather than the CPI for Urban Consumers (CPI-U). The C-CPI-U assumes that as prices of goods rise, individuals substitute less expensive items, thereby reducing their overall expenses. There is evidence, however, that low-income people cannot as readily take advantage of such substitutions, since they are already forgoing expensive goods. Research suggests that costs may rise more rapidly for low-income households than for the population as a whole. They pay a greater percentage of their income for housing and utilities, for instance.
Between 2004 and 2013, average inflation accumulated to 33 percent for households with incomes below $20,000, but just 25 percent for households with incomes above $100,000. Because low-income households experience more inflation in the goods they purchase than households with higher incomes and do not have as much opportunity to switch to less expensive items, the C-CPI-U is not an appropriate means of calculating the poverty line. It would inaccurately define low-income working or retiree individuals or households as out of poverty when they are struggling to pay for necessities. Denying these households eligibility for benefits, such as heating or cooling assistance, will increase hardship and threaten health, child development, and family stability, contrary to the intent of Congress in establishing these programs
We understand that OMB it is not seeking comment on the impact of changing the poverty guidelines. However, OMB Directive No. 14 should not be undertaken without in-depth research and analysis. We urge OMB to solicit public comments regarding impacts such as the number of individuals losing assistance and a demographic profile of those individuals and families, how service providers would be affected, and how the impacts would change over time.
Chained CPI would Harm LIHEAP Recipients
LIHEAP is an essential program that helps reduce energy burdens for approximately 5.9 million households, assisting an estimated 15 million Americans. LIHEAP is the primary source of heating and cooling assistance for some of the poorest families in the United States. Households with young children, elderly individuals, those with disabilities or significant energy needs are prioritized, representing 92 percent of recipient households.
By adopting the C-CPI-U rather than the CPI-U, 0MB Directive No. 14 would make families ineligible for LIHEAP, but it would not make them any less in need of this assistance. A 2017 Urban Institute survey found that over 60 percent of non-elderly adults with income between 100 and 200 percent ofthe poverty line reported one or more material hardships, including missed payments for utility bills. Even using the existing poverty measures, people in need of these programs do not have access to them. Moving to C CPI-U would only make the problem worse, ensuring that even fewer families can receive the assistance they need.
Most states set eligibility for LIHEAP at 150 percent of the federal poverty guidelines. (Under the law, states can choose to set a lower eligibility level, but not less than 110 percent of the poverty guidelines.) A 2018 survey conducted by the National Energy Assistance Directors' Association (NEADA) found that
- 46 percent of LIHEAP households had a senior in the household aged 60 or older;
- 52 percent had a disabled household member;
- 36 percent had a child aged 18 or younger; and
- 82 percent had an annual household income below $20,000.
The NEADA survey found that one-third of low-income American households who received LIHEAP assistance last year to pay utility bills had previously received shut-off notices and 15 percent had their heat and light shut off before obtaining LIHEAP assistance. The poor are hit hard by energy bills, which take about 12 percent out of a low-income paycheck, compared to 2.7 percent from households with higher wages. In winter, the heating bill can cost a low-income family 25 percent of its income.
Over time, shrinking the inflation adjustment for the poverty measure will mean more households will exceed the 150 percent cutoff so that they will be denied LIHEAP assistance.
Impact on Weatherization Assistance Program (WAP)
The Minnesota Housing Partnership also opposes the anticipated impact of 0MB Directive No. 14 on low income households currently eligible for WAP, which helps low-income Americans reduce their home energy bills by implementing energy efficiency measures like heating and cooling system upgrades and insulation. WAP supports 8,500 jobs and provides weatherization services to approximately 35,000 homes every year. Through weatherization improvements and upgrades, these households save on average $283 or more every year according to a national evaluation of the program. Since the program began in 1976, WAP has helped improve the lives of than 7 million families through weatherization services.
While states vary in the eligibility levels they set for WAP to improve the energy efficiency of low-income households, the federal government sets the maximum income for eligibility at below 200 percent of the poverty guidelines. Weatherization assistance is cost-effective, in that it can reduce annual heating or cooling costs. Near-poor households, either working or with retirement income, struggle to pay high housing costs, including utilities. Weatherization will help fewer near-poor households over time if a shrinking inflation adjustment makes some of them ineligible. If fewer households can save on energy costs through weatherization, more of them may be forced to make unhealthful trade-offs, cutting back on medicine or food to pay heating bills. Such choices would threaten the health of vulnerable children, seniors, and people with disabilities.
Thank you for your consideration of these comments.
Director of Strategic Initiatives and Policy Minnesota Housing Partnership