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The Return on Investment in Affordable Housing

Michelle Johnson and her three children have called a modest three bedroom apartment in North Philadelphia home for almost twenty years. Stepping into their apartment, it’s easy to tell that it’s a place where children have grown up. Small scuff marks in the hallway and old video game controllers stashed on the bottom shelf of a bookcase attest to the past presence of kids. In the family room, there is a collection of framed portraits and school photos. Pointing to a picture in the center, Johnson proudly says, “She’ll be 19 years old next week and is in college now.” Never missing an opportunity to catalogue the accomplishments of her children, Johnson gestures at pictures of her teenaged boys, “They’ll be going soon too.”

Before the Johnsons moved into their apartment, they lived with a series of family and friends. “We were in a lot of temporary living situations because there wasn’t a lot of space,” she explained in an interview during a site visit. When she initially applied for public assistance that would make up the difference between what they could afford and the prevailing market rent, she had low expectations. The wait time to receive a Section 8 voucher was estimated in decades, not days. Fortunately, Johnson found Project HOME, a nonprofit that provides homeless individuals and families with permanent, affordable housing. And for the Johnsons, that stability didn’t just help them survive—it enabled the family to thrive.

Those of us who have never applied for housing assistance might assume families that need help are eventually able to get it. But, in fact, only a quarter of those who are eligible for housing assistance receive it. The Johnsons represent the lucky few, as demand for housing subsidies is far greater than the supply. In cities with significant low-income populations, like Philadelphia, a child can grow into an adult before her family gets to the front of the line. But if we were to invest in all households experiencing housing instability, we could put more families on a pathway to the middle-class.

The Department of Housing and Urban Development (HUD), the agency that doles out the money Congress allocates to public housing authorities across the country, has an interest in making sure the resources that are available help as many families in need as possible. Prompted by a report issued by HUD’s Office of Inspector General (OIG), HUD is considering evicting families, whose earnings exceed current income thresholds, from public housing to make room for poorer tenants.

Currently, federal law does not require people to move out of public housing when their incomes rise, as long as they qualified at the time they moved in. As a result, OIG estimates that as many as 25,000 of the 1.1 million households living in public housing are over-income, meaning they earn more than 80 percent of the median income for their metropolitan area. Though a mere 5 percent of the over-income households earned more than the national median income, the OIG highlighted a few particularly egregious cases of waste to illustrate its point, including a four-person household in New York City that had an annual income of $497,911 when the low-income threshold was $67,100.

Yet the overwhelming majority of over-income households would face significant challenges in affording housing in the private market. Most still have low incomes, as more than half of the over-income households only earned between $1 - $10,000 above the threshold. Further, another half had only been over-income for two years or less—a scant amount of time to accumulate a pool of savings that could facilitate a move. The reality is that many families experience income fluctuations and volatility. This is one of the defining features of being poor in America today. And financial instability exacerbates housing instability. Recent work by sociologist Matthew Desmond examines the debilitating experience of eviction. His ethnographic study, Evicted: Poverty and Profit in the American City, chronicles the devastating impacts of eviction on families, an experience that has become common in communities throughout the country in the long wake of the Great Recession.

Instead of evicting over-income individuals and families, which could send a message discouraging those who receive housing assistance from increasing their earnings, HUD should institute and expand programs that serve as a bridge to financial security and, eventually, to self-sufficiency. One approach that could accomplish this goal and, in time, free up resources for those on the waiting list is HUD’s Family Self-Sufficiency (FSS) Program. Currently serving about 70,000 individuals and families, this program augments a housing subsidy that ensures residential stability through a financial incentive to increase earnings and case management to help participants access services that may enable them to secure employment.

A central feature of the FSS Program is that it establishes an escrow account for each participating household, and any increases in the family’s rent as a result of increased income would produce a credit to the family’s escrow account. Once a family graduates from the program, they would be able to access the escrow and use it for any purpose, including moving out of public housing facilities. Such a financial cushion would make the transition from assistance much easier for participating families, especially if they are able to save enough to stay in their neighborhood or move to an area of greater opportunity.

If policymakers can’t increase the pool of housing assistance so all families can afford to pay for housing stability, they should dramatically expand the FSS Program. To truly address the housing needs of low-income Americans we need to think about housing assistance as an investment in the future. For the Johnsons, stable housing wasn’t just about bookshelves and space: It’s what allowed the next generation to become first generation college students.

Authors:

Reid Cramer is director of the Millennials Initiative at New America. Previously, he served as the Asset Building program's research director and as a co-director of New America's Next Social Contract Initiative.

Patricia Hart was a policy analyst in the Asset Building program at New America where she provided research and analysis on a range of topics, including affordable housing, financial inclusion, and workforce development.