Tough economic times are straining what is already a maxed-out system of social services. Despite the attention being paid to beleaguered homeowners, renters are being squeezed as well. Since an increasing number of Americans simply earn too little to afford to rent a decent home, one vital element of our social net is the provision of rental housing assistance. To help these families meet their basic needs for shelter, the federal government spends more than $25 billion a year through a mix of housing vouchers and direct subsidies to help about four million households. But the demand for such assistance is increasing as job loses spread and incomes fall.

Housing stability is critically important for ensuring the well being of families experiencing economic stress. For this reason, Congress should appropriate additional rental assistance funds to allow local housing authorities to assist more families in need. At the same time, we believe the time is right to experiment with new ideas for strengthening federal rental assistance-especially ones that help families get back into the mainstream as quick as possible. One problem in particular should be addressed head-on. Existing program rules create an unintended barrier to increased earnings once families begin receiving assistance, undermining what could otherwise be a strong platform to help families make progress toward self-sufficiency.

Families receiving rental assistance currently pay 30 percent of their adjusted income to cover the costs of rent and utilities. This wisely ensures that families’ rental payments do not consume a disproportionate share of their disposable income and that families with greater needs get more help. But as assisted families’ earnings rise, their rent also increases, creating a likely disincentive for them to pursue jobs that would substantially raise their incomes. To address this “incentives” problem while also expanding the number of families benefitting from assistance, we recommend providing all assisted families with a Rental Assistance Asset Account that grows as their earnings grow.

Build a Pool of Resources

Under our proposal, families would continue to pay 30 percent of their adjusted income for rent and utilities, but if their earnings go up, a portion of their increased rent payments would be placed into a personal account. The more they earn, the more their account would grow. Over time, they would build up a pool of resources that could be strategically deployed to advance their personal goals. This could mean buying or fixing up a car, making a down payment on a home, investing in education or training, or facilitating a move away from assistance. This combination of increased earnings and increased savings—together with complementary services to help families overcome barriers to increased work effort—could help families prepare to access private-market housing, freeing up scarce resources for other qualifying families.