Issue #137, September/October 2004
Family Self-Sufficiency Program
An Asset-Building Opportunity
By Reid Cramer
Like many others in the community development field, Marianne Garvin recognizes that moving up and out of poverty requires not just a stream of income but also a reservoir of assets. As the executive vice president of the Community Development Corporation of Long Island (CDC), her challenge is to assemble an array of tools that can help her clients increase their earnings and become homeowners. To do this, Garvin knows, combining entrepreneurship and collaboration is the key. She’s always on the lookout for opportunities within existing programs that will leverage additional resources for the families the CDC serves.
In HUD’s extended roster of programs, one is ripe for the picking: the Family Self-Sufficiency (FSS) program, one that CDC has been successfully harvesting for years. Already prescribed in statute, this underutilized program has ample room to grow and, fortunately, new money is not required to reap its bounty. But a little initiative is required to get community groups to work in tandem with local housing authorities. The results may be fruitful.
FSS is not so much a program as it is a mechanism; it was created by Congress in 1990 to help boost employment and savings for certain recipients of federal housing assistance. By law, residents living in public housing or receiving Section 8 vouchers are required to pay 30 percent of their adjusted income for rent and utilities. While this rule keeps rents relatively low, increases in income are siphoned off by higher rents, creating a work disincentive. FSS creates a structure for residents to save the money that would otherwise go toward increased rents and to become independent of public assistance.
The statute allows public housing authorities (PHAs) to create escrow accounts where these savings are stored. As the earnings of FSS participants rise, their rents go up; and while they still have to pay a higher rent, an amount equal to the increase in rent is deposited into participants’ accounts each month. Significantly, the housing authorities are held harmless as they are reimbursed by HUD to cover their lost rent.
To participate, families must work with service coordinators to develop and carry out a personal action plan, the initial purpose of which is to delineate a path that will allow them to leave public assistance behind. The plan specifies personal goals over a five-year contract period and helps link the family to other support services, which might include financial literacy, child care, transportation and employment training. The service coordinators must ensure that a family is on track and must connect them to a range of services.
A simple example demonstrates the potential of the FSS program to help a family accrue meaningful savings over time. A family with an income of $500 a month pays $150 in rent to live in public housing or a rental unit assisted by a Section 8 voucher; if the family’s income rises to $750 a month, the monthly rent obligation would increase to $225. An FSS participant would still have to pay $225 in rent, but the $75 increase in rent would be deposited each month in an escrow account. In this sense, the FSS participant has the opportunity to recoup the value of his or her increase in rent. So, in this example, if the family maintains this level of earnings, its account would have a balance of at least $4,500 after five years. Families receive the full value of their escrow accounts upon successful completion of their action plan. At this time, a family isn’t required to relinquish its rental assistance if it is not ready to move out. But each service plan is designed to foster the transition toward independence, away from such assistance.
Today, FSS serves over 75,000 households, 67,000 of whom receive Section 8 housing vouchers; the other 8,000 are public housing residents. As such, FSS represents one of the largest asset-building programs in the country. Yet this is a fraction of the number of households that would avail themselves of this savings option if given the chance, and it is significantly short of the almost 140,000 households that Congress has mandated be served by the program.
Although HUD has been guilty of some benign neglect, devoting few staff resources to promoting FSS, it has not actively mismanaged the program. Moreover, federal rules do not impose limits on the expansion of FSS. No legislative or administrative change is required in order to offer this opportunity to others. This is because current HUD policy does not place a limit on the number of individuals a housing agency can enroll in the FSS program. Further, HUD’s commitment to fund the escrow accounts creates a virtually unlimited stream of resources to support this savings incentive.
A large-scale, systematic evaluation of FSS has yet to be performed, but there is ample evidence from the field that the FSS model is effective as an asset-building tool. A number of PHAs have tracked the performance of current and graduate participants, and the results are impressive in terms of increased earnings, employment levels, asset growth and home purchase.
A survey of the Portland, OR, FSS program found that escrow payments at graduation averaged $7,000, and the earnings of participants increased from $4,000 upon entry to $17,500 at graduation an increase of over 300 percent. Some 40 percent of these graduates used their escrowed savings to become homeowners. Although, without a larger study, it’s unclear whether these results are representative, data from a number of other programs reveal that these kinds of returns have been matched across the country, in places like Montgomery County, MD; Boston; Council Bluffs, IA; and Fairfield, CA. One study of 19 FSS programs around the country found asset growth of $6,000 per FSS graduate, earnings growth among FSS graduates of 100 percent or more and about 30 percent of graduates becoming homeowners. Of course, the impressive results are influenced by the characteristics of both the families and housing authorities that choose to participate. The FSS program will attract households already predisposed to savings even though they are either unemployed or marginally employed before their participation. It will also attract housing authorities with an inclination and ability to operate this kind of service.
What has been proven is that the model works and is worth building on. Without any new money, statutory authorization or special appropriation, FSS offers an ingeniously designed program that addresses several enduring policy dilemmas by providing a structure for savings and asset building; reducing the work disincentives for recipients of housing assistance; and promoting independence from public assistance, which frees up subsidies for others in need.
So how come this program is needlessly underutilized? Barbara Sard, a housing advocate at the DC-based Center on Budget and Policy Priorities, calls the program “HUD’s best-kept secret for promoting employment and asset growth.”
Although the pieces to the puzzle are all there, housing authorities don’t always have the capacity or available resources to put them all together. PHAs have the ability to open and maintain escrow accounts, but they are required to identify designated service coordinators in order to provide case management. Many housing authorities have been reluctant to enroll families in FSS because they have had to rely on their limited supply of administrative fees to pay for case management. To address this conundrum, HUD has in recent years provided funding for housing authorities to hire service coordinators. (Last year, $46 million was awarded.) Unfortunately, the latest Bush Administration budget proposes to cancel this and reduce the cost of the voucher program by funding it as a block grant. If passed by Congress, a reduced overall funding level will put the squeeze on local housing authorities, making it less likely that they will choose to fund FSS service coordinators out of their reduced base.
The combined threat of lower general funds and loss of a dedicated funding source certainly will threaten the short-term viability of the FSS program. But, regardless of whether these proposed changes are adopted, the statutory underpinning of the FSS program will remain. The law allowing housing authorities to maintain and operate escrow accounts won’t change. At issue is how to leverage existing resources to provide access to this potent asset-building opportunity. Without identifying other sources of funding or in-kind case management services, it is unlikely that PHAs can serve more families under the FSS program.
Fortunately, a little information and creativity can go a long way, when people and organizations are prepared to work together. Connections have to be made between community and welfare organizations that have case management capabilities and housing authorities that can run and maintain the escrow accounts. It may take some effort, but housing authorities that lack the resources to fund additional case managers should find willing partners that can take up the slack. In fact, many types of organizations in the nonprofit field are already in the service coordination business and possess the skills, funding and capabilities to perform the heavy lifting required by the FSS model.
The key is to find the right match. This is one of the central objectives of the FSS Partnerships, a Houston-based national initiative of the Local Initiatives Support Corporation directed by Jeff Lubell. Lubell is committed to expanding awareness of the potential of the FSS model and to fostering local partnerships among organizations with complementary skill sets. Developing and publicizing FSS partnership arrangements will help FSS practitioners, by sharing best practices and entrepreneurial approaches to program growth.
One such arrangement worth replicating is the coordination of state and local Temporary Assistance for Needy Families (TANF) agencies with housing agencies to expand FSS to more of their mutual clients. If the TANF agency pledges to provide case management service for new FSS enrollees, the housing agency can enroll more families in its FSS program. In many cases, this is a service the TANF agencies are already providing their clients. A number of TANF programs are already taking advantage of this opportunity, including Alaska’s Division of Public Assistance and the Department of Employment and Temporary Assistance in Fresno, CA. Other potential partners are county agencies. In Baltimore and Montgomery County, MD, the county’s Health and Human Services department provides FSS case management, which enables the local housing authorities to meet their FSS enrollment goals.
In other cities, it might be the existing community development corporations or social service agencies that maintain close, ongoing relationships with their client base, many of whom are recipients of housing assistance. These types of organizations could be ideal partners to fill the case management void. The housing authority would be responsible for managing the escrow accounts and ensuring that their community partners provide a level of service consistent with FSS requirements. Fortunately, the decentralized nature of service provision in America today and the growing capacity and track record of the nonprofit sector has created a long list of potential partners capable of expanding the asset-building potential of the FSS program. Many of these organizations have access to funding streams that specifically support case management; in addition to TANF agencies, this list includes community action agencies, Head Start programs, community development corporations and child welfare agencies.
The partnership model described here may seem novel, but it should be standard practice. It has done wonders for the CDC of Long Island, which has already graduated 86 families and currently serves another 285 in its FSS program. The perception in many communities that the local housing authority is not an active or capable partner is a historic legacy that must be overcome. Community groups and others with case management expertise must seek out housing authorities, which, in turn, need to be open to forming alliances that better serve their clientele.
In many communities, forming these alliances may not be easy. Several steps can be taken to broadly support these efforts. The first is informational. A broad range of actors, including welfare groups, community agencies and local housing authorities, need to learn more about the FSS program and to understand its value as an opportunity to better serve their clients and communities. HUD, as the sponsoring federal agency, could do a better job of highlighting the potential impact of FSS and reaching out to other agencies at the federal level. But a more pressing need may be for stronger institutional supports. A HUD-funded technical assistance contract in support of FSS would be a relatively inexpensive way to facilitate the requisite partnerships it would provide guidance and access to best practices. Additional support, beyond that supplied by HUD, must be provided by the field. Professional associations for service providers and case managers should create a support network for practitioners working with the FSS program.
This basic roadmap must be adapted in each community to forge relationships that work. Organizations that have embraced asset building and those that focus on social services, housing and community development should find their interests intertwined with those of local housing authorities. The FSS program provides some common ground. Not only does this approach enable community organizations to build on their capacities; it also represents a significant expansion of asset-building opportunities for recipients of housing assistance that are currently untapped. That’s a road worth taking.
For additional information on asset building, go to www.AssetBuilding.org.