Researchers find that certain kinds of financial incentives are more effective than others
5 min
How do you get people to reduce their home’s carbon footprint?
The U.S. government hopes the answer is to appeal to their pocketbooks. As part of the Inflation Reduction Act, the government is rolling out increased federal tax credits and rebates to help offset the cost of energy-efficient upgrades such as electric heat pumps and added insulation, and adoption of clean-energy technologies such as rooftop solar.
But recent research suggests that some financial incentives might be more effective than others when it comes to getting middle- and lower-income consumers to make energy upgrades. Researchers also have found that social pressure can be effective: Consumers notice what their neighbours do, and energy providers might be able to leverage that to get people to make changes, researchers say.
Here is a closer look at what researchers have found that does and doesn’t work:
One concern about many clean-energy tax credits is that historically they have disproportionately benefited the rich. Researchers say wealthier people are more likely to live in single-family homes, where it is easier to install things like rooftop solar and charge electric cars. It also could be that lower-income families have much lower taxes and thus benefit less from these kinds of tax breaks. So for many households, tax credits don’t talk.
But recent research from Lucas Davis, a professor at the University of California, Berkeley’s Haas School of Business, suggests that one of the enhanced energy tax credits in the Inflation Reduction Act could prove to be an exception to this rule.
In a study published this year, Davis and his co-authors found that 14% of U.S. households have a heat pump as their primary heating equipment, and that adoption levels are remarkably similar across different income levels, and even between homeowners and renters. Heat pumps often cost less than installing separate heating and cooling systems. And states with low electricity prices tend to have more heat-pump users since they cost less to operate in those areas.
Those findings suggest that the federal tax credit for purchasing and installing a heat pump—which increased to $2,000 from $300—has the potential to be more widely distributed across income levels than subsidies for many other low-carbon technologies, says Davis, and consequently get more people to invest in the equipment.
Another recent study looked at residential solar-adoption trajectories and why some communities lag behind others. The authors used satellite imagery and computer vision to capture the year-over-year growth of residential solar panels in 46 states between 2006 and 2017. They then looked at what the federal, state and municipal incentives were in place when the panels were installed.
They found that performance-based incentives—payments made to solar-panel owners based on how much electricity their system generates over a certain period—were associated with higher solar adoption rates in lower-income and middle-income communities than incentives tied to property taxes or rebates paid via lower state or municipal taxes.
In some cases, consumers can benefit from both performance-based incentives and net-metering programs, where homeowners can sell back to the utility any surplus power their solar system produces on sunny days, and use those credits to offset the cost of the power they pull from the grid at night or on cloudy days, resulting in a lower electric bill.
“Performance-based incentives reduce the upfront costs of solar panels for homeowners,” says Ram Rajagopal, an associate professor at Stanford University and one of the paper’s co-authors, explaining that if solar installers collect the performance-based incentives, homeowners can lease the panels at a discounted rate and still get the benefit of saving on their monthly electric bill.
A third recent study, meanwhile, finds that net metering and high electricity are two big factors that correlate with rooftop-solar adoption across the U.S. The authors conclude that anticipated electricity-cost savings could stimulate further solar deployment, especially in areas where people are skeptical about global warming, and should be incorporated into promotional campaigns.
Taken together, the recent studies suggest that when it comes to solar adoption, incentives that provide an immediate financial benefit—say, lower upfront installation costs and savings on electricity bills—could be more motivating to low- and middle-income households than tax credits they have to wait to collect.
Researchers also are examining whether social networks and connections can be leveraged to convince more households to make energy upgrades.
“Social norms and interactions affect people’s behaviour, and alternative energy is no exception,” says Kenneth Gillingham, a professor of economics and senior associate dean at Yale School of the Environment, whose work suggests solar-panel adoptions tend to happen in regional or geographic clusters.
Among Gillingham’s findings are that households are more likely to install solar panels if they can see their neighbours’ solar panels from the road. A forthcoming study of his finds that solar-panel installers are likely to reduce prices for customers whose homes are in centralised locations, since their installation is likely to encourage others to follow suit.
Researchers also are studying if the neighbour effect can be used to recruit households in lower-income communities for state and municipal programs that offer free home-energy audits or subsidised solar-panel installations.
The administrators of such programs often struggle to identify which households are eligible. And potential customers often lack key information, are turned off by the paperwork or don’t trust program providers, says Kim Wolske, a research associate professor at the University of Chicago’s Harris School of Public Policy.
“Even when the energy upgrades are free, past research suggests it can be difficult to recruit lower-income households,” she says.
In a recent study, Wolske and her co-authors asked 7,680 low-income homeowners who recently received free installation of solar panels if they could refer other potential customers.
To identify the best approach, the authors divided homeowners into three groups. The control group received a postcard saying they could get $200 for every referral that signed up for solar panels. The second group received that same offer plus a $1 thank-you gift, designed to remind them of the value of the installed solar panels (about $20,000) and to encourage them to return the kindness by referring another homeowner. The third group received the $200 offer, the $1 gift and a form where three referrals could be made along with a stamped and addressed envelope.
The researchers found that homeowners in the third group, who received the stamped and addressed envelope, were 7.5 times as likely to make referrals than the control group, and those referrals were 5.2 times as likely to result in a new solar contract.
Energy providers, meanwhile, are testing whether they can nudge homeowners to make energy-efficiency improvements by comparing their energy use with that of neighbours.
Not only do such home-energy reports coax people into changing their behaviour—say, turning off unused lights or turning down the heat—they also encourage people to make energy-efficient updates in their home, like buying Energy Star appliances, research shows.
A study published in 2022 found that energy consumption in homes that received a home-energy report remained low even after utilities stopped sending the reports and the owners sold the home, suggesting that the long-lasting benefits of these programs come from energy-efficient upgrades.
Another study in Southern California looked at the effect of sending home-energy reports and an additional nudge, called a peak energy report. Peak energy reports are automated phone calls or emails, reminding energy customers to reduce energy consumption during peak hours when demand for electricity exceeds supply.
The researchers found that when customers received both the home energy report and the peak-energy nudge, they reduced their electricity consumption on average by about 6.8%. Customers who received just one of the nudges also reduced their consumption but less so.
“Comparing customers provides a reference for energy usage and taps into their social consciousness,” says Robert Metcalfe, an associate professor of economics at the University of Southern California and author of the two studies on nudges.
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Nearly half of American adults under 30, pinched by the high cost of housing, are living with a parent. It can be an adjustment for both.
5 min
Samantha Stobo was fresh off a breakup and unable to afford her Manhattan two-bedroom alone. So the 29-year-old decided to move in with her mom in Miami until she could get back on her feet. She told herself it would only take a few months.
Now 33-years old, Stobo has no plans to move out.
“I thought it was going to be temporary,” Stobo said. “But it’s been three years now, and I love it.”
Living at home as a 20-something was once viewed as a failure to launch and even a source of embarrassment in a culture that places a premium on independence. That is no longer the case. Living at home is now often viewed as a sign of financial prudence, and for some, a long-term prospect.
Chronically high living costs are helping reshape the milestones of early adulthood in America. The national median home price hovers above $400,000. Rents are at record highs in cities across the U.S., and many recent college graduates are saddled with tens of thousands of dollars in student debt.
Even though some of these young adults pay their folks rent, it tends to be well below the cost of living on their own.
“Everything is just out of reach,” said 28-year-old Megan Talley, who lives at home with her mom in the Atlanta suburbs. If a young person wants to live alone, “you could do it, but you would be dead broke at the end of the month.”
Last year, 49% of adults under age 30 said they lived with a parent, up 12 percentage points from 2019, according to the Federal Reserve’s latest Survey of Household Economics and Decisionmaking. Nearly a third of those adults were 25 or older.
Some economists put that figure lower and note that the Fed study doesn’t distinguish between children living in their parents’ homes versus parents living in their children’s homes.
Still, young people say that living at home in 2026 doesn’t carry the stigma it once did because of how unaffordable life has become. About 55% of young adults who moved back home said it was out of financial necessity, according to a spring survey by financial services firm Thrivent.
So many parents and adult children are living together now that it is beginning to transform aspects of American society—from when members of the younger generation start a family to the way builders think about designing homes.
Far from hiding it, some now broadcast their lives as “stay-at-home daughters” or “stay-at-home sons” on social media. Stobo says posting about her mother-daughter living situation on TikTok has earned her a friendly comment section filled with others in the same position—and makes her some money.
“No one ever judges me,” she said. “The conversation tends to be more like, ‘That’s awesome, and I bet you’re saving money.’”
Casey Wright, 28-years-old, moved back home to Oxford, Mich., three years ago after being laid off from two consecutive jobs. She redecorated her childhood bedroom to match her adult aesthetic, tearing down her Twilight posters and choir awards and hanging a floral tapestry and framed landscapes.
She and her parents have come to an agreement on living together as adults. She no longer has a curfew, for instance. But before she goes out, Wright’s parents require her to tell them where she’s going and what time she expects to be back.
The Wrights have dinner together every night and go golfing or walking together a few times a month. Casey still hangs out in her parents’ room occasionally to talk about movies with her dad or to gossip with her mom.
She just doesn’t spend time with her parents quite as often as she did when she was a child and is more often in her room playing videogames or reading. “It’s not as much as when I was younger, because I feel like there’s almost that separation that’s needed as an adult,” she said. “You’re not just living in your childhood home as a child.”
Multigenerational living has long been more of a norm among Hispanic, Asian and Black households, along with immigrant families.
During the pandemic, a broader swath of 20-somethings returned home. It was supposed to be short-term; then came record inflation and double-digit rent increases.
By July 2020, 52% of young Americans age 18 to 29 lived with at least one parent, according to a Pew Research Center analysis of census data. It was the first time a majority of young adults in the country had lived with parents since the Great Depression. That share has likely dropped since then, but for some people the arrangements have stuck.
Living with parents became a “dominant living arrangement in America for people in this age group,” said Laurence Steinberg, a Temple University psychology professor who recently wrote the book “You and Your Adult Child.”
States such as California and New York have loosened regulations around building accessory dwelling units in recent years. Once nicknamed “granny flats,” ADUs are now used to house budget-squeezed adult children.
Villa Homes, a California home builder, is used to this kind of customer. The firm is seeing more families add detached ADUs for their grown children or other relatives, to live in for a few years and save money for a starter home.
Carmen Johnson, 33, has loved living with her parents in the Detroit metro area since the start of Covid. She doesn’t pay rent, splits grocery bills with her family and invests those savings in her music career and toward a future home. It beats barely making ends meet in her old Los Angeles apartment.
“Covid flipped the script,” Johnson said. “It’s a blessing in disguise.”
She isn’t ashamed of living at home, and doesn’t judge other people for it either. But she wouldn’t necessarily reveal it to a first date unless asked directly.
Bringing home a date also requires a bit of mental calculus.
“It’s like, ‘OK, is my dad going to be in the living room watching TV?’” Johnson said.
Sometimes, that kind of strategizing goes both ways. Jessica Suzio, a 52-year old widow in Michigan, has tried to get back into the dating scene in recent years. But with her two sons living at home, both in their mid-20s, bringing back a new boyfriend is uncomfortable for all involved, she said.
Suzio is happy to have her sons at home, and they help with household expenses by paying her some rent.
“When they were younger, I was daydreaming about the days that I would be an empty-nester,” she said. “But I’ve grown to really appreciate them sticking around.”
Kevin Grolig, a 59-year-old real-estate agent in the D.C. metro area, started noticing that his clients were delaying downsizing their homes because their adult children were still living there. So he came up with a “four-step plan” to get grown children out of the house. The most important: agree on a move-out timeline before the child even steps back in the door.
Casey Wright in Michigan doesn’t pay rent, but her father, Craig, said she has been a big help around the house. She does much of the grocery shopping, helps with the cooking and has learned to use the riding lawn mower, manicuring the yard when Craig is busy.
About five times a day, she says, her mom knocks on her door, often to ask for help with technology.
“If I had the ability to, I would move out tomorrow,” Wright said. Nothing against her parents, “I would just love to have the freedom to do what they were doing at my age.”
Wright’s father wishes the same for his daughter. He and his wife expected to have an empty nest by now.
But he realizes that the housing market is different today than when he was in his 30s in the 1980s and bought a three-bedroom home for $70,000, less than a fifth of today’s median home price. He estimates his salary back then was about $35,000.
Some of Craig’s friends also have adult children living at home. “It’s kind of normal,” he said.
