A growing body of research confirms the importance of assets in the long-term well-being of individuals and families. Income helps people meet their basic needs. Assets help them move forward, investing in education for themselves and their children, starting a business, or buying a home. Assets also help families weather setbacks such as job loss or medical emergencies and finance retirement.
A whole field has grown up around this insight, developing and implementing a range of creative asset-building strategies for low- and moderate-income families, such as individual development accounts and matched savings accounts for children.
But resources to finance expanded asset-building programs are severely limited. Especially in this budget environment, where can funds be found to help low- and moderate-income families build assets?
One promising approach is to incorporate asset-building opportunities into HUD rental assistance programs. Families in the public housing, Section 8 voucher and project-based Section 8 programs pay 30 percent of their adjusted income for rent. So, if you can help families increase their earnings -- for example, by offering them the financial incentive of an asset-building account that grows as their earnings grow -- you can collect more rent and use the additional rent to pay for the asset account.
This may sound like a shell game, but it's not. It's value capture: similar, for example, to financing public infrastructure investments with tax increment financing linked to expected increases in property taxes. And as explained below, there's good reason to believe it works.
More than 1,000 housing authorities currently participate in HUD's Family Self-Sufficiency (FSS) program. Enacted in 1990 based on a proposal by the first President Bush, FSS helps families in public housing and the housing voucher program make progress toward economic security by combining:
- Stable affordable housing,
- Work-promoting case management to help families set goals and overcome barriers to increased work, and
- An escrow account that grows as families' earnings grow.
Participants who become and stay employed, become independent of Temporary Assistance for Needy Families assistance, and achieve the other goals they set for themselves at the outset graduate from the program and gain access to their escrow account. Families have five years in which to achieve their goals.
A recent HUD evaluation illustrates the power of the model. The evaluation tracked 170 families who enrolled in FSS at 13 housing authorities over a four-year period. The evaluation found strong results for about half the sample group, an impressive "success rate":
- 41 families had graduated from FSS. Their annual earnings had increased from an average of $19,902 in 2006 to $33,390 in 2009 (all in 2009 dollars). 35 had positive balances in their escrow accounts, which averaged $5,294 per family.
- 43 were still enrolled in FSS and mostly employed during the study period. Their average hourly wages had increased from $11.84 to $13.61 (again in 2009 dollars) and their average weekly hours of employment had risen from 29.4 to 34.9. The overwhelming majority had positive escrow balances, averaging in the range of $3,500.
Admittedly, this evaluation had no formal control group. (HUD is about to launch a randomized evaluation of FSS with a control group.) But given the off-the-charts nature of the results, the 20 years of hands-on positive experience with FSS and the fact that the available research literature suggests that earnings incentives work very effectively for families in assisted housing, there is reason to be optimistic that FSS is indeed having a positive impact.
FSS currently serves about 55,000 families. This makes it one of the largest asset-building programs focused on poor or near-poor families in the nation. At the same time, it serves only a small fraction of the 1.3 million non-elderly households in public housing and the housing voucher program that do not include a head or spouse with a disability. There is significant potential to expand participation in FSS and to help existing FSS programs perform at even higher levels. In this regard, it is heartening to see HUD focusing on providing stronger support for FSS and to see Congress considering legislation to expand eligibility to families living in project-based Section 8 developments and to shore up FSS in other important ways.
With the encouragement and support of HUD, Congress and local housing authorities, FSS could serve tens of thousands of additional families, greatly expanding the number of poor and near-poor families with the opportunity to build assets and make progress toward economic security.
Let's start there. But not stop there.
Even as HUD and housing authorities work to get the most out of the existing FSS program, we should be investing in research demonstrations to develop and evaluate the next generation of asset-building and self-sufficiency programs for HUD-assisted families. We should aim high, striving to offer asset-building accounts to all families living in subsidized rental housing. As explained in a paper that I co-authored with Reid Cramer of the New America Foundation, given the value capture potential of the current rent formula in subsidized housing -- rents rise as incomes rise -- it is likely that a system could be devised that both provides a strong incentive for increased earnings and generates sufficient increased rent revenue to fully pay for the incentive.
Imagine if subsidized rental housing were enhanced so that every family had a strong financial incentive to increase their earnings and a powerful opportunity to build assets. Imagine further if human services, labor and other government agencies worked closely with housing agencies to take advantage of the asset-building potential of subsidized rental housing by providing access to the supports that some families may need to overcome barriers to increased work. As families' incomes rose, they would become better able to afford market rents, opening up space for other families. And with their assets, they could invest in a better future for themselves and their children.
For more information, see Taking Asset-Building and Earnings Incentives to Scale in HUD-Assisted Rental Housing.
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Moving Forward is a new monthly column about ideas for the future of U.S. housing policy by Jeffrey Lubell, Executive Director of the Center for Housing Policy. The column offers perspectives on the government role in housing and on broader housing market trends likely to shape future housing policy.