Refocusing the ‘infrastructure’ conversation on people

Infrastructure is more than just roads and bridges — it’s the entirety of the built world that keeps our society running. Housing is a critical component of our infrastructure and key to providing the basic platform from which to succeed, yet many lack access to affordable, safe and healthy housing. In fact, there is a true “affordable” housing crisis. Old, dilapidated structures and even new ones cause disproportionate cost burdens meaning that 30 to 40 percent of incomes are spent on housing costs.

In addition, energy burdens are also disproportionately high for low to moderate income (LMI) residents, and structures often lack climate resilience upgrades to protect the lives and assets of those already income-constrained. It is time we spoke of affordable housing as being more than a low-rent or low-cost home, but rather a place where families can live comfortably, develop in a safe environment — and afford all of their bills.

Homes provide the basic foundation for American families to thrive and prosper. The pandemic revealed how greatly our health, ability to make a living and educational opportunities depend on our ability to keep up a working home. Our homes, running overtime as offices and classrooms, needed to be warmed in the winter and cooled in the summer — and then, protected against hurricanes and wildfires.

Yet, many LMI homeowners and tenants, lacked proper heating and cooling appliances, or suffered from leaking roofs, with homes unfit to face climate events putting at risk all of their assets and most importantly, their lives. The reason: The upfront costs of climate and energy upgrades are out of reach for LMI Americans with low credit scores and incomes. Similarly, landlords and developers lack incentives and access to adequate capital for these investments. 

Most traditional banks base their lending on credit scores, which can provide an inaccurate picture of an individual’s ability to repay. The United Way describes the average working-class American household as “ALICE” (Asset Limited, Income Constrained, Employed) — a population not rich enough to access fair-priced capital, but not poor enough to benefit from grants or subsidies. ALICE households represent about 42 percent of all households. Traditional credit-based underwriting is punitive for “ALICE” individuals who often are denied financing and forced into the hands of predatory lenders who trap them in an inevitable cycle of poverty and indebtedness. 

Energy efficiency and resilience upgrades such as high efficiency air conditioners, rooftop solar, fortified roofs and hurricane shutters, not only save money on energy and insurance, but also improve quality of life, safety, health and equity in the home. While bettering the lives of residents, these improvements also help reduce carbon emissions.

Affordable and accessible capital should be available to the 42 percent of LMI households. The disproportionate vulnerability of working-class America cannot be ignored any longer.

That is why access to fair, affordable financing for climate resilience and clean energy and efficiency home upgrades is key to building a productive, healthy and resilient society.

Recently, I testified before the U.S. Senate Environment and Public Works Committee about the benefits of S.283, the National Climate Bank Act. My organization, Solar & Energy Loan Fund (SELF), is one of many green banks proving that financing climate resilience projects is financially, socially and environmentally viable.

Green banks bridge the financing gap for deserving working class Americans by providing unsecured loans based on ability to repay rather than credit scores. Borrowers will never face losing their home and instead, they can rebuild their credit. After $18 million in over 2,000 loans for mostly LMI homeowners, SELF has less than 2 percent average default rates.

People like Carolyn, a widow in her late 70s, illustrate the impact of green banks well. Shortly after her husband’s death, she had back surgery and her air conditioner broke. She was suffering in Florida’s stifling heat. Throughout her life, all of the bills were under her husband’s name, so she had almost no credit history resulting in a low credit score. When she applied for loans to replace her A/C, multiple banks rejected her. But SELF was able to see she had the ability to repay and also the desire to prove her creditworthiness. In days, Carolyn had a new energy-efficient air conditioner that she could afford to run comfortably within her budget. She has never missed a payment.

The National Climate Bank Act has ensured that 40 percent of funds would go to projects benefitting LMI communities. This would provide green banks with flexible, low-cost capital needed to benefit even more families with resilience and clean energy projects. Furthermore, these funds will be deployed by a network of green banks that are expanding to every state in the country, so no one will be left behind.  

Green banks know how to leverage and blend public, private and philanthropic funding to maximize impacts. However, more flexible, low-cost capital is needed to fill the financing gaps, scale operations, reach deeper into underserved, vulnerable communities.

Climate change is the greatest crisis of the 21st century, but it is also an opportunity. It’s time to rethink capital deployment to make housing climate resilient and truly affordable. We need to catalyze investments in our communities and place our bet on America’s working-class everyday heroes. A National Climate Bank will go a long way in supporting healthier, more resilient infrastructure for all Americans to thrive.

Duanne Andrade is the chief financial and strategic officer of Solar & Energy Loan Fund (SELF), which serves low-and-moderate income homeowners with small unsecured loans for crucial home improvement projects. Andrade is a Bolivian national who has held positions in financial institutions in the United States, Bolivia and Mexico and also spent many years consulting for innovative financing programs focused on low-and-moderate income communities.