Rental Assistance Asset Accounts

The rental housing market in the United States is characterized by a fundamental disconnect between rents and household incomes. It has been this way for decades. Millions of Americans simply earn too little to afford to rent a decent home. To meet these families' basic needs for shelter, the federal government spends more than $25 billion each year to provide rental assistance to more than four million poor and near-poor households. This assistance is delivered through a mix of housing vouchers and deep subsidies to public housing agencies and private owners to maintain a stock of affordable housing developments built in prior decades. Despite this large and important federal investment, the unmet need remains vast. As of 2007, some eight to nine million renter households spent more than half their incomes for rent and utilities.

Given current budget deficits and political realities, dramatic increases in federal rental assistance seem unlikely. Some have argued that we should spread out the available assistance to a larger number of households. While this idea is worth investigating further, many practitioners believe that the reduced assistance amounts would be too low to enable families to achieve stable rental housing in a decent neighborhood, undermining a fundamental objective of housing assistance.

We propose an alternative approach that would revise federal rental assistance rules to create stronger incentives for existing beneficiaries of rental assistance programs to build assets and make progress toward economic self-sufficiency. If successful, this reform in the delivery of housing assistance would help existing residents transition more quickly to private-market housing and help those who remain on assistance to achieve higher incomes and assets so that they need lower levels of assistance. Both outcomes would free up funds for assisting additional families.

There are certainly many challenges in designing a rental assistance policy that provides the right bundle of incentives to support this process. People are different, their needs are diverse, and many of the tools that are needed to fully accomplish these objectives lie outside the housing assistance system. Despite these challenges, we believe a system of housing assistance can be designed that more effectively encourages work, promotes savings, and creates a path to future independence. In this paper, we introduce an innovative proposal to achieve these objectives, articulate its policy rationale, explore how it might be tested and implemented, and consider the potential implications for future policy development.