Asset-Building Model for HUD’s Family Self-Sufficiency Program Shows Promise for Increasing Earnings and Building Financial Capability
Abt Associates recently completed an evaluation of Family Self-Sufficiency (FSS) programs in Lynn and Cambridge, Massachusetts administered by the nonprofit Compass Working Capital in partnership with public housing agencies (PHAs) in those cities. Our initial report found that Compass FSS produced strong earnings gains, a reduction in Temporary Assistance for Needy Families (TANF) program expenditures and improvements in credit and debt outcomes that exceeded available benchmarks. A subsequent cost-benefit analysis found that the program’s benefits greatly outweighed its costs.
In a policy analysis, I explore the implications of this research for the broader debate about how to help residents of subsidized housing increase their earnings and build assets and financial capability. In this Perspectives post, I’ve summarized the key takeaways.
About Compass FSS
FSS is a U.S. Department of Housing and Urban Development (HUD) program established by Congress in 1990 that seeks to help participants in three HUD rental assistance programs (the Housing Choice Voucher, Public Housing and Project-Based Section 8 programs) improve their economic security. FSS works to achieve these goals by combining stable, affordable rental housing with: (a) case management or coaching to help participants identify and achieve their goals and (b) an escrow savings account that increases in value as participants’ earnings and rent contributions rise.
Compass Working Capital is an asset-building nonprofit organization based in Boston, Massachusetts, that works with public housing agencies and private owners in several states to administer FSS programs. The oldest Compass FSS programs, which were the subject of our evaluation, are in Lynn (launched in October 2010) and Cambridge (launched in November 2012), Massachusetts.
In addition to the traditional FSS program requirements and components, Compass’s implementation of FSS includes several innovative features, including a strong focus on helping clients build their financial capabilities, pay down high-interest debt, accumulate savings, and improve their budgeting and FICO® Scores, complementing the asset-building that occurs through the FSS escrow accounts. Compass calls this an “asset-building model for FSS.”
The following are the principal policy implications of our research:
- Proof of concept and program execution. FSS can be an effective framework for helping residents increase their earnings and build assets and financial capability, but it’s likely that the quality of local program execution matters considerably. Compass exhibits many of the hallmarks of a high-performing non-profit organization; additional research is needed to clarify the key characteristics of a successful local FSS program.
- Voluntary self-sufficiency efforts. Compass FSS demonstrates that there is substantial potential to expand FSS programs through self-sufficiency efforts that are voluntary rather than mandatory for recipients of housing assistance.
- Effects on young adults in households. Abt’s evaluation found that roughly half the impacts on earnings through Compass FSS was attributable to earnings of the head of the household, while the other half was attributable to the earnings of other household members, most of whom were young adults in their teens or young twenties. This suggests Compass FSS may have important effects on children that merit further study.
- Boosting earnings among families that are already working. Descriptive data show that strong earnings increases were experienced not only by those with little or no earnings at baseline but also by households with starting household earnings between $26,000 and $35,000. While more research is needed to assess whether this growth is due to the program (we did not have a large enough sample to detect subgroup impacts), these descriptive data suggest that Compass FSS may have the potential to not just help unemployed or underemployed people obtain low-wage employment but to boost employed participants’ earnings to more substantial levels.
- Asset growth. Since the start of Compass’s FSS program, graduates have received an average of $7,600 in disbursements from their FSS escrow account. Such sizable accrued savings can play an important role in helping families manage income fluctuations and achieve homeownership and other financial goals.
- Potential of non-standard escrow model. More than half of the families in the study received an FSS escrow equal to about half of the traditional FSS escrow. While further research is needed to test this hypothesis, it may well be that smaller, non-standard escrow accounts could produce earnings gains similar to those generated by larger escrow accounts, allowing scarce government resources to be spread out further to benefit more families. Of course, smaller escrow accounts by definition generate smaller savings for families, so the effects of lower asset accumulation also need to be considered.
Stay tuned for further research on this promising program.