Community Development Through Weatherization : Benefits to Low-Income Consumers and Minority-Owned Firms

Abstract

The Weatherization Assistance Program (WAP) is one of the oldest and leading energy conservation programs which focuses on the needs of low-income communities. The program was designed to provide low-income households with energy conservation measures which they could not obtain by their own .resources. Also, the WAP currently employs general contractors to render the services provided by the program. Why is this program a necessity for low-income households and an important opportunity for minority-owned contracting firms? For the consumer, there exists a trade-off between the benefits in weatherizing and not weatherizing. Weatherization is expensive in the short-run, but it allows the consumer to use less energy to heat his/her home in the long-run. If a consumer does not weatherize, he/she will need more energy to heat the home and this option is more expensive in the long-run. ln this paper, a mathematical model is used to simulate impediments which prevent some low-income consumers from purchasing adequate energy conservation measures. The model shows two consumers who want to purchase energy conservation measures, but insufficient capital resources have inhibited each consumer from purchasing adequate energy conservation measures. Each consumer attempted to borrow on their future income from a bank. However, the low-income consumer was declined such a loan because the expected future income did not represent sufficient collateral. But, the WAP is one of the solutions which eliminates the effects of such impediments. It is argued that as long as low-income consumers• face hindrances, the need for the WAP and the demand for general contractors will be continual. Thus, the contracting opportunities for minority-owned firms are apparent and will exist. Focusing on the Chicago area, the opportunities for minority-owned contracting firms are explored for the purpose of understanding the options for the minority-owned firms and exposing any impediments which prohibit them from receiving contracts in the WAP.