GUEST POST: Investing in Family Self-Sufficiency

Rebecca Sauer is an affordable housing and community development professional in New York City.

Many people see public housing or a Section 8 Housing Choice Voucher as a crucial means of survival when wages are low and cost of living is high. Few, however, see these options as springboards out of asset poverty. Boston-based non-profit Compass Working Capital has set out to shift a common perception about subsidized housing by providing clients with asset building opportunities through robust financial coaching. Compass has collaborated with a public housing authority in Lynn, Massachusetts to implement HUD’s Family Self-Sufficiency (FSS) program in a way that brilliantly bridges the gaps between social welfare policy, philanthropy, and bootstrap capitalism. Six months into the program, 48% of participants had already increased their income by at least $6,800.

FSS functions on the assumption that, given the right incentives, many poor families want to and are able to achieve independence from government assistance, a notion that dovetails nicely with the entrepreneurial tide washing over the philanthropic community. HUD launched FSS in 1990 to address a common conundrum. Families that live in federally subsidized housing must pay 30% of their income towards rent, meaning that every increase in wages brings a corresponding increase in rent. Confronted with this situation and concerned about their continued eligibility for benefits, many households rationally resist opportunities to increase their wages and build assets. FSS changes the incentive structure. For each participating household, the municipality’s public housing authority (PHA) manages an escrow account that grows as their income increases. When a family’s wages go up, they must still pay the higher rent; however, an amount equal to the difference between the old rent and the new rent is deposited into the escrow account. At the end of the program, families can withdraw the funds and accumulated interest. Participants are encouraged to use these funds to buy a car or home, or pay for education.

The program has been implemented in municipalities across the country and each site provides some type of case management. Compass’ program in Lynn, however, is unique in its ability to attract outside resources and its precise focus on building participants’ financial capabilities. (Other FSS programs receive only public funding and most focus on referral services and job placement). Jeffrey Lubell and Maya Brennan of the Center for Housing Policy cite Compass as a promising new model. While FSS is already by nature a major leap from the welfare stereotype, Compass’ introduction of “financial coaches” as opposed to “case managers” is significant. More than ever, participants are seen as enterprising agents with the capacity to make sophisticated financial choices given the right tools.

Since 2005, Compass has operated IDA and college savings programs. According to executive director Sherry Riva, they “stumbled across the Family Self-Sufficiency program” because some of their clients were participants. Riva saw in this program a tremendously powerful means by which working poor families could build assets. A Section 8 voucher could become a tool to improve a family’s economic status rather than an entitlement. In 2010, Compass partnered with the Lynn Housing Authority and Neighborhood Development (LHAND). LHAND manages compliance with HUD and the escrow accounts, while Compass recruits participants and provides them financial education and coaching throughout the length of the program. 

Advocates for asset building policy assert that FSS (dubbed “HUD’s best kept secret” by Barbara Sard in 2001) is underutilized. One possible explanation is that HUD provides little financial support for the program’s administration, implementation, and case management. It’s no secret that PHAs are overloaded and underfunded.

The experience in Lynn shows that PHAs don’t have to go it alone. Compass has attracted the support of venture philanthropists Social Venture Partners Boston and Strategic Grant Partners. The venture philanthropy model, which has permeated the non-profit field in the past decade, focuses on long-term grants that build the capacity of the recipients to engender lasting, scalable change. (Read historical articles about the rise of venture philanthropy here and here). The increase in participants’ incomes and assets bred by FSS is a quintessential example of the type of leverage venture philanthropists like to see as a result of their investments.

While early results of Compass’ program are promising, a long-term evaluation is necessary before declaring this model a best practice. Still, the results of HUD’s 2011 study of FSS programs across the country should be enough to lure more like-minded organizations to invest. For those interested in taking advantage of scarce government opportunities to encourage asset building, this is a model to watch.