For the second year, Gov. Gavin Newsom is proposing cuts to California’s $54 billion climate investment, targeting programs such as an ambitious initiative to install new electric appliances in low-income homes to accelerate the state’s transition from fossil fuels.
The justice-oriented approach to decarbonization is the first such initiative in the country. But the project, known as the Equitable Building Decarbonization Program (EBD), now faces having a third of its budget slashed as the governor scrambles to close a $38 billion budget shortfall. (The Legislature puts it even higher.)
Initially funded at $922 million through 2027, EBD may only receive $639 million, one of the deepest climate cuts proposed by Newsom, according to an analysis by NextGen Policy’s Climate 100, which tracks California’s spending on climate priorities.
Homes that qualify will have existing gas-fired space or water heating equipment replaced with heat pumps, which use electricity to transfer warm air between the indoors and outdoors to reach ideal temperatures. Many could also get electric stoves or clothes dryers. But advocates fear a third of the households that were going to benefit now no longer will.
Residential and commercial buildings account for a quarter of California’s greenhouse gas emissions, and the program tackles two of the state’s most critical issues — climate and housing. Landlords could use retrofits as a reason to evict tenants. But by paying for the installations and prohibiting landlords from increasing rent or evicting tenants due to the upgrades, California hopes to prevent climate policy from compounding the housing crisis.
In addition to less-polluting appliances, the EBD would offer up to $6,000 to repair single-family homes and units in multifamily buildings, and $7,200 for manufactured and mobile homes. The money could pay for updating electrical wiring and panels, removing asbestos from insulation, installing ventilation systems and other work to bring homes up to code. Those expenses were included at the urging of the Building Energy, Equity & Power Coalition, which promotes policies for lower-income households.
“The real goal from our perspective was to make healthy homes,” said Alex Jasset, director of energy justice at Physicians for Social Responsibility Los Angeles. “To go beyond climate emissions reductions, and to think about things like indoor air pollution.”
The California Energy Commission will start disbursing funds next year. The largest chunk, roughly $400 million, will go to Southern California, while north and central regions will get about $158 million and $131 million, respectively. Tribal communities will also receive funding.
Even at the program’s original funding level, advocates viewed the EBD as a proof of concept, said Zach Lou, coalition manager for the California Green New Deal Coalition. The full cost of electrifying space and water heating for 6 million low- to moderate-income households in California — the number estimated to lack the financial means to upgrade their home — runs as high as $150 billion, according to the Building Decarbonization Coalition.
Anxiety over limited funds already is apparent in EBD guidelines. They note, for example, that while upgrading electrical wiring is an eligible expense, it is discouraged because of the high cost.
“If it’s a miniature pilot project, that doesn’t go as far informing those broader policy discussions,” Lou said.
Among those who could benefit from the EBD is Victoria Mercel, a mother of five who lives in a building in Los Angeles’ University Park that is owned by affordable housing provider Esperanza Community Housing Corporation.
Inside her living room, where rosary beads are draped on a green and white bust of the Virgin Mary, Mercel recalled waiting all night outside the Esperanza office in 2005 for a rental application. When she learned her family had been accepted for a four-bedroom unit, “we almost cried from happiness,” she said. With monthly rent currently at $980, Mercel, an outreach worker with the Los Angeles County Department of Mental Health, is grateful for her home.
But years of deferred maintenance have taken a toll. Rust and black mold have formed on the bathroom’s surfaces due to poor ventilation. A bookshelf covers a hole in the wall left by a repairman. An old gas stove, which emits lung-damaging pollutants when in use, does not always work properly.
The proposed cut is “a devastating blow,” said Nancy Ibrahim, the executive director of Esperanza. Last year she provided an “equitable perspective” in public meetings about how to take advantage of the program.
Landlords like Esperanza are ideal for the pilot because they have a social mission to keep tenants housed and empowered, said Peter Dreier, a professor of urban policy at Occidental College and former board member at the Southern California Association of Non-Profit Housing. “They will have to figure out how to do this while keeping the tenants in place.”
Public money for decarbonization would be a rare lifeline to affordable housing developers with older housing stock. Existing funds for retrofits are hard to obtain and do not cover maintenance at buildings such as those owned by Esperanza. “We are desperately looking for ways to keep our properties standing, and at the same time keep them affordable,” said Iris Alcantara-Reynolds, the asset management director at Esperanza.
Esperanza has secured roughly $391,000 from energy efficiency and electrification programs administered by the Los Angeles Department of Water and Power and the South Coast Air Quality Management District. A state fund, the Low-Income Weatherization Program, is also sending money.
But it is not enough.
Alcantara-Reynolds has a wish list of retrofits for the 15-unit building where Mercel lives, including ductless inverter heat pumps with each unit connected to an air condenser on the roof. Tubing lined with refrigerants would send warm air outside in the summer, and keep it inside in the winter. Other desired items include insulated walls, induction stoves, LED lighting and new windows.
The cost at Mercel’s building, and two others, could total as much as $879,000. That does not include upgrades to the buildings’ electrical panelings, which can cost tens of thousands of dollars. Nor does it include retrofits for six other buildings that Esperanza manages, mostly in South Central Los Angeles.
Ultimately, someone will have to pay for decarbonization. The City of Los Angeles is developing a policy to decarbonize existing buildings by 2050 or sooner. Buildings emit 43% of the city’s greenhouse gas emissions, more than any other sector.
California has set a goal for all household appliances on the market to be electric by 2035, the same year that state law says 90% of electricity must be from zero-carbon sources. Newsom has endorsed a plan to install 6 million heat pumps by 2030.
In addition to the extraordinary costs, the effort to decarbonize buildings is made more fraught by opposition from the gas industry.
Two utilities, SoCalGas and San Diego Gas & Electric, as well as parent company Sempra, increased their donations to the philanthropic arm of the California Restaurant Association after the latter sued Berkeley over its ban on gas hookups in new buildings. Gas executives also tried recruiting restaurateurs to publicly oppose gas bans, the Sacramento Bee reported. In March, the 9th U.S. Circuit Court of Appeals ruled in the restaurant association’s favor, forcing Berkeley to repeal its ban — and threatening similar laws in other cities, including Los Angeles.
A solution for decarbonizing residential buildings while avoiding devastating legal challenges is to create new subsidies for non-gas appliances, combined with tenant protections, said Chelsea Kirk, director of policy and advocacy at Strategic Actions for a Just Economy. Only landlords with little housing stock and demonstrated financial hardship should receive funds, she said.
At its original funding level the program would have had more than $1 billion to spend because of additional money from the nation’s landmark 2022 Inflation Reduction Act. That is an amount “that meets climate science,” said Jose Torres, California director at the Building Decarbonization Coalition.
Yet it may not line up with California’s political reality. Newsom has justified cuts to climate spending by pointing to incoming federal dollars. This includes $292 million from the federal Home Efficiency Rebates program, which will issue rebates for appliances in homes that save energy. Some 60% of that money will supplement the EBD.
But those rebates cannot pay for home remediations and are less flexible than the state’s EBD funds, said Laila Atalla, a policy researcher at the Rocky Mountain Institute. “It is not meant to replace state leadership on equitable home retrofits,” Atalla said.
