Upward Mobility in the Family Self-Sufficiency Program: An Expert Q&A

Amid the US Department of Housing and Urban Development’s (HUD’s) recent emphasis on policies that increase employment among assisted renters, understanding housing-based self-sufficiency programs is more important than ever. Although proposals to increase work through requirements and minimum rent increases have attracted attention, HUD already offers programs through which housing authorities and private owners can encourage and support residents in making economic progress. Through a periodic series, How Housing Matters will clarify the evidence to date on economic mobility programs at HUD.

For the first post in this series, we asked Jeffrey Lubell, director of housing and community initiatives at Abt Associates, about the Family Self-Sufficiency program, which was permanently reauthorized and combined to serve families with HUD assistance through vouchers, public housing, or project-based rental assistance.

What is the theory about how FSS can increase work and promote economic mobility for HUD-assisted renters?

The Family Self-Sufficiency program combines three factors that, together, can help households in HUD-assisted rental housing make progress toward economic security: (a) stable, affordable housing; (b) case management or coaching to help support residents in identifying and pursuing goals, connecting to work-promoting programs and services, and building financial capability; and (c) an economic incentive for participating households to increase their earnings in the form of an escrow account that grows as participants’ earnings’ grow.

While other housing-based self-sufficiency programs, such as Jobs Plus, create incentives for higher earnings by disregarding increases in earnings in setting rent or placing a cap on rent, FSS does not alter the basic rent calculation of subsidized housing residents. This means that FSS participants pay higher rents as their earnings increase, just like other subsidized tenants. This helps FSS participants to get used to paying the higher rents or home prices they may face if and when they leave subsidized housing.

Under FSS, an amount generally equal to 30 percent of any increase in household income due to increased earnings is deposited into an escrow account on behalf of the family. Households that graduate successfully from FSS receive their escrowed funds, which they can use to buy a home, start a business, pay for advanced education, or any other purpose. Participants can also access funds on an interim basis when needed to stay on track toward completion of their goals, such as to repair a car needed to get to work. In addition to creating an incentive for increased earnings, the FSS escrow account provides participants with assets they can deploy to advance their financial goals and increase their resilience in the event they experience an economic setback.

What does the evidence suggest about FSS’s effects on residents’ employment and earnings?

We evaluated a promising FSS program administered by the nonprofit Compass Working Capital in partnership with public housing authorities in Cambridge and Lynn, Massachusetts. We found that, after about three years, Compass FSS produced large impacts on average annual household earnings (an increase of $6,305) and TANF (a decrease of $496) compared to the matched comparison group. Compass FSS participants also experienced sizable increases in FICO scores (23 percentage points) and the share of participants with a FICO score (7 percentage points) and sizable decreases in credit card debt ($655) and derogatory debt ($764). These improvements in credit and debt outcomes significantly exceeded benchmarks calculated from credit bureau data. We also found the program had a strong positive cost-benefit profile, with the costs of the program largely offset by reductions in public benefits expenditures, plus very large net benefits for participants.

While an evaluation of an FSS program established in connection with the Work Rewards Demonstration in New York City likewise found a reduction in TANF attributable to FSS and a positive cost-benefit profile, that evaluation did not find statistically significant impacts on earnings.

In interpreting the evidence, it is important to bear in mind that FSS is very flexible, allowing local programs great latitude for customizing the program based on their needs and capacity. Compass FSS, for example, focuses heavily on helping participants build financial capability. The quality of local program implementation also varies considerably. Future research should study which program elements and implementation characteristics are most strongly associated with impactful local FSS programs.

Are there any groups of HUD-assisted renters or market conditions for which FSS is more or less effective?

We don’t really know the answer yet. We may gain some insight into this question through the HUD-sponsored national FSS evaluation currently being conducted by MDRC. In the meantime, it is important to note that FSS is voluntary from the perspective of the resident. It is not clear to what extent the same approaches that work to help households who choose to participate in a five-year self-sufficiency initiative will also work if applied to households who are required to participate.

What do we know about the cost-effectiveness of FSS?

Our cost-benefit analysis found that participants in the Compass FSS program experienced an average net benefit of $10,345 per participant over the course of the five-year analysis period. This represents the net of substantial gains in earnings and other income, modest reductions in income taxes (largely due to the earned income tax credit and child tax credit), and accrued savings through the FSS escrow account that more than offset participants’ reductions in TANF, housing subsidy, and other public benefits.

From the perspective of the program and the government, we determined that, over the five-year analysis period, the program cost an average of $8,616 per participant but saved the government nearly as much in reduced public benefits and increased taxes (mostly from the employer share of Social Security and Medicare taxes), resulting in a net cost to the government and program providers of only $276 per participant.

As noted above, the Work Rewards analysis likewise found a positive cost-benefit associated with FSS in New York City, but that FSS program appears to have been very different from the Compass FSS program. The New York intervention had substantially lower per household costs but also smaller impacts.

It’s interesting that cost-benefit analyses of two very different FSS programs both found results that were positive on net. We need more impact and cost-benefit analyses of other local FSS programs to help round out our understanding of the costs and benefits.

What can housing providers do if they want to adopt this approach or expand the number of residents served?

Any public housing agency (PHA) may start or expand an FSS program by submitting to HUD (or amending) a document called an FSS Action Plan. HUD will pay for the FSS escrow accounts through the funding formulas for public housing and the Housing Choice Voucher program. There is limited funding available for the case managers that run the program, however. HUD puts out a Notice of Funding Availability (NOFA) every year, but most of the funds go to renew the existing FSS coordinators. Still, it’s worth taking a look at each year’s NOFA to see if an agency can qualify for funding (or more funding if they are already funded). In the absence of HUD funding for FSS coordinators—or to supplement that funding—PHAs can use their own resources, seek funding from foundations, or partner with organizations that already provide case management who agree to provide case management for PHA-served residents in order to access the FSS escrow account.

In addition to PHAs, owners of project-based section 8 multifamily housing developments are now also eligible to participate. HUD has published a special notice for multifamily owners explaining how the FSS program works for them. In the multifamily program, HUD pays for the cost of the escrow accounts through the project-based section 8 funding formula.

The bottom line is that there’s a lot of potential to expand this program, as it is currently serving only a modest share of all eligible households. Partnerships, entrepreneurship, and advocacy will all be needed to increase participation to its full potential.