Today, we spend roughly $30 billion dollars a year in rental housing assistance to benefit almost 5 million households. It is a primary part of our social safety net. But millions of eligible families don't receive any support. To get the most out of our resources, we should be looking for more effective ways to encourage those receiving assistance to increase their earnings and transition toward self sufficiency. Housing assistance should be a foundation for this process, especially if it can be re-made to more effectively promote income and asset growth.
Currently, families that receive housing assistance are required to pay 30 percent of their income for rent. This means that for every extra $100 they earn, their rent goes up $30 automatically, which is not a very good incentive structure to maximize work effort. But what if this additional rent could be diverted into a savings account that the recipient could eventually gain access to if they pursued a program focused on gaining long-term independence. We actually know that this approach holds promise, thanks to a small program HUD runs in select housing authorities across the country. The Family Self Sufficiency Program offers a model for reforming the larger housing assistance delivery system.
My colleague, Jeffrey Lubell of the Center for Housing Policy, and I argue that we can use this model to take asset building and earnings incentives to scale in HUD-assisted rental housing. In a recently-released paper, we present the case for developing and evaluating the next generation of economic security policies that would incorporate earnings incentives and asset-building objectives into the basic structure of rental housing assistance. We believe this can work for all families in subsidized housing. Central to this approach would be to offer every recipient of housing assistance the ability to build assets through a Rental Assistance Asset Account (RAAA) that would grow as the family's earnings rise. The papers explains how this approach might work and explores various ways to implement this policy that could make it cost neutral or even save money for the government and local housing authorities. In today's political climate, this should be an especially attractive approach for a wide range of stakeholders.