I appreciate the invitation to testify today. I am Barbara Sard, director of housing policy for the Center on Budget and Policy Priorities. The Center is a nonprofit policy institute in Washington that specializes both in fiscal policy and in programs and policies affecting low- and moderate-income families.
Reauthorization of the Temporary Assistance to Needy Families (TANF) program this year provides an important opportunity to focus on the role that housing strategies can play in strengthening welfare reform policy and supporting working families. Housing-related issues too often are ignored when TANF-related policies are discussed. Yet unstable or inadequate housing is frequently a significant barrier to employment, and the high cost of housing can impose a serious burden on low-income families struggling to transition from welfare to work. While the connection between affordable housing subsidies, housing location and employment has not been adequately studied, there is a growing body of research suggesting that welfare reform successes are greater among families with assisted housing than among other low-income families. These findings suggest both that welfare policy should include housing assistance as a strategy for success and that housing policy should better promote successful employment outcomes.
This testimony will cover the following areas:
Families Leaving Welfare for Work Still Experience Housing Problems
Housing affordability is a real problem for families currently receiving TANF benefits as well as for families that have recently moved from welfare to work. In only three states are TANF benefits high enough for families to obtain modest housing with less than their entire TANF grant. (The three states are Alaska, West Virginia and Wisconsin.) In every other state, modest rental housing costs – as reflected in HUD’s Fair Market Rents – exceed the entire monthly TANF grant.
Most families that leave welfare for work do not earn enough to afford decent-quality housing and do not receive housing assistance. Studies indicate that the average total monthly income of households that previously received welfare benefits and have at least one working member is $1,261 (in 2002 dollars), which falls below the federal poverty level for a family of three. A family with this income would have to pay 58 percent of its total income to rent a two-bedroom unit at the Fair Market Rent in jurisdictions with rental costs at the national median. In the 14 jurisdictions with federally-financed studies on the earnings of recent welfare leavers, modest housing costs would consume 52 to 129 percent of estimated average monthly earnings. (See Appendix A.) Housing subsidies can help families leaving welfare for work close the gap between what they earn and the cost of rent and other necessities.
Nationally, only about 30 percent of families receiving monthly income from the Temporary Assistance to Needy Families (TANF) program also receive federal housing assistance. This percentage varies across states from about 12 percent to 50 percent. (Federal housing assistance usually allows families to pay 30 percent of their income for rent and utilities, with the remaining cost paid by the government subsidy.) Relatively few TANF families receive housing assistance because federal housing programs serve only about one-quarter of eligible households and because few states invest significant resources in low-income housing programs.
Not surprisingly, the combination of low earnings and scarce housing assistance results in housing problems. Nearly three-fifths of working poor renters with children who do not receive housing assistance face serious housing problems — that is, they pay more than 50 percent of their income for housing or live in seriously substandard housing, or both. Among unsubsidized poor renter families with at least full-time, year-round minimum-wage earnings in 1999, some 36 percent spent more than half of their income on housing.
Housing Problems of Welfare Leavers Appear to Be Getting Worse
There is some evidence that the housing problems of families leaving welfare are getting worse. An Urban Institute study found that families that left welfare between 1997 and 1999 were more likely to report an inability to pay a mortgage, rent, or utility bill than families leaving welfare between 1995 and 1997. Of the more recent group of welfare leavers, nearly 1 in 10 reported being forced to double up with others because of an inability to afford the cost of housing.
One reason housing problems may be getting worse for welfare leavers is that the number of rental units affordable to poor families (defined as requiring the family to pay no more than 30 percent of its income for housing costs) has declined, from 85 units for every 100 poor families in 1987 to 75 units for every 100 such families in 1999. The number of units that are both affordable to these households and available for them to rent is even lower: in 1999, there were only 39 such units for every 100 poor renters. The situation likely has not improved much since 1999. In 2000, rents increased faster than inflation for the fourth consecutive year, and the recent brief recession is unlikely to have reduced rent levels significantly.
Private market forces are mostly responsible for the reduction in the number of affordable rental units, but federal housing policy has contributed as well. Between 1995 and 1998, the number of households receiving federal rent subsidies declined as a result of the demolition of public housing, the expiration of federal subsidy contracts for more than 120,000 privately-owned units, and the lack of federal funding for any new housing vouchers. While the Low Income Housing Tax Credit (LIHTC) and the HOME block grant — the two current federal subsidies for the production and rehabilitation of rental housing — add more than 100,000 units of decent-quality rental housing per year, households with incomes below about 45 percent of the area median income generally cannot afford these units unless they have additional rental subsidies such as vouchers. (Note: in late 2000, Congress enacted a 40 percent increase in LIHTC funding.)
Congress did fund about 213,000 new housing vouchers for the four years from 1999–2002, including 50,000 vouchers for welfare to work rental housing assistance in 1999. The number of new vouchers being funded declined in FY 2002, however, and is lower this year than the number funded in any year between 1983 and 1994.
Lack of Affordable Housing with Access to Jobs Compounds the Problem
Lack of housing subsidies or other assistance can prevent families from moving in some circumstances when doing so could improve their economic prospects. Such circumstances include moves to areas with greater employment opportunities, as well as moves to areas where parents feel safe enough to go to work and leave older children unattended or to return from work at night on public transportation. Studies of the Chicago, Cleveland, Detroit, Milwaukee and Los Angeles metropolitan areas have found that welfare recipients who live closer to employment opportunities are more likely to be employed. Living in lower-poverty, less-disadvantaged neighborhoods also may improve the chances of being employed, due to better information about job opportunities or other factors.
A growing share of employment opportunities are located not in cities, where TANF recipients are increasingly concentrated, but in the suburbs. Between 1992 and 1997, job growth in the suburbs of the largest central cities was more than double that in the cities themselves. In about a quarter of the cities, the number of jobs fell while the number of jobs in the surrounding suburbs increased. This decentralization of employment affects cities in all parts of the country, although about 20 percent of cities have bucked the trend. Cities with some of the most slowly declining TANF caseloads in the nation — Los Angeles, Richmond, Hartford, and Washington, D.C. — actually lost jobs from 1992 - 1997. Unfortunately, a number of factors — including lack of affordable housing, discrimination, and inadequate public transportation — can make suburbs largely inaccessible to low-income families in central cities or rural areas.
Rental housing vacancy rates are lowest in the portions of metropolitan areas outside of the core central cities. In every region of the country in 1999, suburbs had lower vacancy rates for units with rents affordable to families with housing vouchers than cities or rural areas did. Not surprisingly, a recent study by Abt Associates found that the tighter the housing market, the lower the percentage of families that succeeded in renting housing with vouchers, and the longer the successful families took to find housing. In the fall of 2000, some 61 percent of the families that received vouchers in very tight housing markets succeeded in finding a unit to rent, compared to 80 percent in loose markets.
Thus, there is a need for additional rental housing that is located in job-growth areas and is affordable to working poor families, or at least affordable to those fortunate enough to have housing vouchers. Yet, our current housing production programs are doing little to meet this need, in part due to federal law and in part due to state and local decision-making. A substantial majority of units developed with Low Income Housing Tax Credits are built in central cities or rural areas and not in the metropolitan suburbs where most job growth is occurring and where half of the population now lives. An analysis of the location of family-sized tax credit units in comparison with job opportunities in 12 metropolitan areas shows that tax credit units are poorly located in relation to centers of job growth. In addition, HOME-assisted rental units are more likely than Section 8 vouchers, but less likely than public housing units, to be located in high-poverty neighborhoods.
Lack of Decent, Affordable Housing Is Harmful to Families
There is no question that the demand for affordable housing far exceeds the supply and that much of the current stock of affordable housing is concentrated in areas at a distance from the centers of job growth. As a result, many families may face a Catch-22 situation. If they live in housing they can better afford, they may not be able to get or keep a job; but if they move closer to work, their housing costs may rise to the point where they have difficulties affording necessities, including work-related expenses.
In addition, families that pay too much of their income for housing or live in severely inadequate or overcrowded housing may have to move frequently. A recent study in Ohio found that 42 percent of families that had recently left welfare and paid more than half of their income for housing moved in the six-month period after leaving welfare. (Some 38 percent of the recent welfare leavers in the study paid more than half their income for housing.) In contrast, roughly 8 percent of the general population moves in a six-month period. Frequent moves may interrupt work schedules and jeopardize employment.
Lack of stable housing also can have other negative consequences:
Children may be affected adversely. A number of studies demonstrate that frequent moves can undermine school performance, reduce skill development, and increase the risk of dropping out. Inadequate housing also has been linked to increased rates of asthma and respiratory disease, lead poisoning, and poor nutrition, which can retard a child’s physical and intellectual development. Conversely, housing assistance that helps families move from high-poverty to low-poverty neighborhoods can have positive impacts on children. Some studies indicate it can contribute to improved educational outcomes, eventual increases in employment, and reduced involvement in violent crime as victim or perpetrator.
Health can be affected adversely. A recent study by the Manpower Demonstration Research Corporation indicated that poor housing conditions can cause or exacerbate welfare recipients’ health problems. In addition, the Task Force on Community Preventive Services of the Centers for Disease Control recently recommended housing voucher programs as a public health strategy to improve household safety by enabling families to move to less violent neighborhoods.
Housing Assistance and Location Can Support Welfare Reform Goals
There is a growing, although not conclusive, body of evidence that housing assistance, particularly housing vouchers that enable families to choose where they live, can help families stay off welfare once they leave the rolls. A number of studies also suggest that housing assistance can help welfare recipients become and remain employed, often outweighing other potentially detrimental factors in families’ lives. While under federal housing programs, families’ rents generally increase if their incomes rise, well-designed welfare programs can offset this financial disincentive to work by disregarding part or all of a family’s increased earnings. This research suggests that as policy makers struggle to find the tools to improve job retention, they should give more attention to housing strategies.
Housing vouchers may help families leave and remain off the welfare rolls. Among families that left welfare in Cuyahoga County, Ohio (Cleveland) in 1996, households with housing voucher assistance were 16 percent less likely to return to the welfare rolls in the following year than families without housing assistance. Based on detailed analysis of actual residential and job locations, the researchers attributed this result to the fact that families with housing vouchers were more likely to be employed closer to their homes and to have shorter and more direct commutes; they also had access to more job openings than families without housing assistance or that lived in public or project-based Section 8 housing. In the Moving to Opportunity Demonstration in Baltimore, families that used vouchers to move to low-poverty areas were only one-third as likely to be receiving welfare three years later as families that remained in high-poverty areas. (Interim data from the other four sites in the Moving to Opportunity Demonstration have not replicated this finding.) Analysis of data from a program in Chicago found that families using vouchers to move to areas with a greater number of educated residents were about one-third less likely to receive welfare than similar families that used vouchers to move to areas with fewer educated residents.
Former welfare recipients appear more likely to succeed in the workplace if they have housing assistance. This is an important issue, since only about 75 percent of welfare leavers are employed in the year after leaving welfare. Of a national sample of families that left welfare in 1997 – 1999 and were interviewed in 1999, leavers with housing assistance were significantly more likely to be working than their counterparts without housing assistance (68 percent compared with 58 percent). Employment among recent welfare leavers in Massachusetts was higher among families with housing subsidies than among those without housing assistance, even though the former group had greater barriers to work. (They generally had been on welfare longer, had larger families, and were almost twice as likely to be minorities.) A study of welfare leavers in Los Angeles County found that families with housing assistance were more likely to be employed in each quarter in the first year after leaving welfare than families without housing assistance. Families with vouchers were somewhat more likely to remain employed than families with other kinds of housing assistance as well as families that did not receive housing assistance. Families with vouchers that stayed off welfare also had higher average earnings.
One study that covered a period prior to the recent changes in the welfare system also found a substantially higher rate of employment among Chicago families that used vouchers to move to low-poverty suburbs than among Chicago families that used vouchers to move within the city. After five years, 64 percent of the families in the study that moved to the suburbs were working, compared with 51 percent of those using their vouchers to move within the city of Chicago. It is not yet clear whether these results will be replicated in other ongoing demonstrations.
Welfare interventions are more effective when combined with housing assistance. An evaluation of the Minnesota Family Investment Program (MFIP), widely considered to be one of the country’s most comprehensive welfare reform strategies, found that the greatest positive impacts occurred among families that received housing assistance in addition to other welfare benefits and services. This study is significant because, taken as a whole, the gains it found — including reductions in poverty, increases in employment and earnings, and even increases in marriage — are among the strongest ever documented for a welfare reform undertaking in the United States. Most of MFIP’s success was due to the substantial increases in employment and earnings it generated among families receiving housing assistance (primarily Section 8 vouchers); families without housing assistance had little or no gains.
Eligibility for full MFIP services (including generous financial incentives) boosted the employment rates of long-term welfare recipients living in public or subsidized housing by 18 percentage points. This was more than double the gain in employment rates for long-term welfare recipients not living in public or subsidized housing who were eligible for the same services and financial incentives. In fact, nearly all of the gain in earnings that MFIP produced occurred among families living in public or subsidized housing. Quarterly earnings increased an average of 25 percent among the families eligible for full MFIP services that lived in public or subsidized housing. Earnings increased only two percent, an amount that was not statistically significant, among families eligible for full MFIP services that did not live in public or subsidized housing.
In addition, the National Evaluation of Welfare-to-Work Strategies (a comparison of human capital development and quick labor market attachment programs in seven sites) found that families with housing assistance were more successful in sustaining employment than other recipients who received the same services but did not have housing assistance. Unlike the Minnesota demonstration, the different approaches to employment tested in these seven sites did not include additional financial incentives. While the better outcomes for families with housing assistance were not as significant as the MFIP results, the NEWWS demonstrations further substantiate that housing assistance may enhance the success of welfare interventions.
Current Policy Proposals for Housing Strategies to Strengthen Welfare Policies and Support Working Families
While TANF reauthorization legislation is not primarily about housing, there are a number of ways to modify the TANF statute to make it easier to address the housing needs of families with children and to encourage states to consider addressing housing-related barriers to work. It also is important to increase the work-promoting services available to low-income families that receive housing assistance; many of these families face greater barriers to work than other families that receive TANF assistance. Helping these families make a successful transition to work furthers states’ welfare reform goals while also advancing HUD’s strategic objectives. (Families whose employment and earnings levels rise generally pay more for rent and are more likely to give up their federal housing subsidies, making scarce resources available to other needy families.)
Housing-Related Changes in the TANF Statute
S. 2116, the Welfare Reform and Housing Act recently introduced by Sen. Kerry, contains six provisions that would make modest but important changes in the TANF statute and (in one respect) in housing law. The bill would:
For states to take full advantage of any enhanced flexibility to address the housing needs of families moving from welfare to work, they will need to have sufficient resources. The Administration has proposed freezing funding for the TANF block grant over the next five years, and it has also suggested imposing stringent new work requirements that would force states to devote substantially more resources to costly workfare programs. If states’ resources get consumed by the costs of running workfare programs on a greatly expanded scale, they have less left to provide work supports, including housing assistance, for low-income working families that are no longer receiving cash assistance and are struggling to get by on low wages. Congress should be sure to provide additional funding for TANF above a freeze level (as well as resources needed to meet any additional work requirements), if it expects states to continue innovating and providing a range of work supports to ensure that families succeed in moving from welfare to work and then stay employed and off welfare.
Proposals to Revise Housing Programs to Support Working Families
Senator Sarbanes has circulated a draft bill entitled "The Housing Voucher Improvement Act of 2002" that contains several provisions designed to promote employment. The bill includes the following work-related provisions.
Implications for HUD Appropriations
Realizing positive results from these work-related amendments to the housing statutes generally will require additional appropriations. More funding for vouchers will be needed. (Note: a portion of incremental vouchers could be earmarked for use as welfare-to-work vouchers; it may make sense to set aside about a third of new vouchers for this purpose, which would ensure that other new vouchers are available for PHAs to serve elderly, homeless or disabled individuals on their waiting lists as well as working families without prior history of welfare receipt.) In addition, Congress should increase the amounts allotted for FSS coordinators within the overall appropriations for the public housing operating subsidy and the Section 8 Certificate Fund, and make any necessary adjustment in the total amounts appropriated for each of these accounts in anticipation of additional families participating in the escrow savings feature of the FSS program. The appropriation for ROSS, which has generally been a set-aside within a larger account such as the Community Development Block Grant or the Public Housing Capital Fund, should be increased so services to public housing families are not reduced in order to serve Section 8 families. (In the last few years Congress has appropriated $55 million for ROSS.)
Finally, the FY 2003 VA-HUD Appropriations Act should fund the already-authorized earnings disregard for Section 8 families. Public housing residents who were previously unemployed or recently received TANF benefits do not face an immediate rent increase when they go to work and increase their income. For a two-year period, their increase in earnings is disregarded when their rent obligation is calculated. (In the second year, half the earnings increase is disregarded.) Congress authorized this earnings disregard for families that have vouchers or live in units with project-based Section 8 subsidies in QHWRA, but never funded it, despite the fact that 70 percent of families that receive both welfare and housing assistance are served by these housing programs rather than by public housing. The lack of an earnings disregard for these housing assistance recipients may weaken welfare reform efforts and also may diminish the impact of TANF-funded earnings disregards.
Should Work Requirements Be Imposed on Families Living in Public or Section 8-Assisted Housing?
Some may argue that rather than authorizing and funding these improvements in federal housing programs to promote work, Congress should simply impose work requirements on assisted tenants. For the reasons explained below, a proposal imposing work requirements on assisted tenants would create administrative burdens far out of proportion to the gain to be achieved, as there are few able-bodied heads of households receiving housing assistance who are not already working or subject to work requirements in another program such as TANF. Furthermore, if the goal is actually to promote work rather than to terminate housing assistance to vulnerable families and individuals – some of whom may then slip into homelessness – the proposal would be quite costly to implement and would be likely to interfere significantly with effective implementation of other housing program requirements and goals.
Based on HUD data from the fall of 2000, some 89 percent of the heads of households receiving HUD-funded housing assistance are either elderly, disabled, working or subject to work requirements under TANF. Many of the remaining 11 percent of HUD-assisted families with a non-elderly, non-disabled head of household who are neither working nor receiving TANF are likely to face severe barriers to work, such as poor physical and mental health, limited literacy or work experience, or a history of substance abuse or involvement in the criminal justice system. Overcoming these barriers will be neither easy nor cheap and will require comprehensive services skillfully delivered. Few housing agencies currently have the in-house expertise or existing partnerships with other service providers to help such individuals enter and remain in the workforce. To impose work requirements on such individuals without funding to provide the services they need would be ineffective. It also could cause many of them to become homeless. To require PHAs to divert already inadequate resources from housing maintenance, eligibility and rent determination or other essential functions to enforce work requirements for this relatively small number of households would undermine the primary mission of the housing programs.
Imposing work requirements on housing assistance recipients is impractical for another reason as well. The majority of the small fraction of such households who report having no current income live either in private units rented with the help of a Section 8 voucher or in a development that receives a Section 8 project-based subsidy. It is unlikely that Congress would, or legally could, impose obligations on private owners with existing project-based Section 8 contracts to administer work requirements. While Congress could require owners to agree to administer work requirements as a condition of renewing their project-based Section 8 contracts, such a requirement would likely discourage many owners from continuing to administer Section 8 subsidies. Similarly, while Congress could impose the obligation to enforce work requirements on PHAs administering voucher programs, such requirements also would be likely to discourage owner participation. Assuming that work requirements would have to be enforced through reduction or termination of the housing subsidy, such requirements would put owners at risk of increased turnover in their units. Increased turnover imposes additional uncompensated maintenance and tenant selection costs and reduces rent payments while units are vacant. At a time when about 30 percent of households receiving new vouchers are unable to use them, imposing new federal requirements that would further reduce owner participation in the voucher program would be counterproductive. This suggests that the current practice of imposing work requirements and the obligation to deliver work-related services through TANF and related programs, rather than expecting housing programs to take on this new role, is the appropriate course of action.
Family Formation Issues in the HUD-Assisted Housing Programs
Perhaps to a greater extent than is true of other poor families, families with children in HUD-assisted housing tend to have only one parent in the home. It would often be better for children to live with both parents. There are certain federal admissions and rent policies that discourage two-parent families in federally assisted housing. The two policy changes recommended below could increase the proportion of children in assisted housing that live with both parents (or a parent and spouse) without substantially interfering with other housing policy objectives.
These rent policies create a financial disincentive to add a working parent or spouse to a tenant family. To reduce this financial disincentive, federal law could require a PHA or owner to disregard some or all of the income of a newly-admitted spouse or parent for a limited period of time in determining the family’s rent. Alternatively, federal law could make such a policy optional in the Section 8 program like it now is in the public housing program, and provide reimbursement to agencies for the additional costs. It is possible that over time such a policy would increase total household income and rent payments, and therefore would not require additional federal funding.
The Administration’s "Superwaiver" Proposal Is Not the Appropriate Response to the Need for Better Coordination Between Welfare and Housing Programs and May Reduce the Housing Resources Available to Families Moving from Welfare to Work
A final important issue concerning housing policy and welfare reform is raised by the "superwaiver" proposal in the Administration’s welfare reauthorization plan. The "superwaiver" would constitute an unprecedented transfer of authority from Congress to the executive branch to establish funding priorities, set funding levels, and fix program parameters, and could diminish the housing resources available to families moving from welfare to work.
The Administration’s "superwaiver" proposal would grant sweeping authority to the Executive Branch to waive, at a governor’s request, most provisions of authorization and appropriations laws related to a range of low-income and other domestic programs, including federal housing and homeless programs. Executive Branch officials could override nearly all provisions of law governing how these programs operate. They also could override Congressional appropriations decisions by redirecting funds that Congress appropriated for one or more of these programs to other covered programs, including programs in other federal departments. Of particular relevance to housing programs, Executive Branch officials could move federal funds and program control from the local agencies or elected officials in whom Congress has invested such authority to the governors.
The potential inclusion of low-income housing programs under the superwaiver poses a thorny set of issues, since states generally do not operate the principal housing programs. Inclusion of these programs in the superwaiver thus could enable a governor to seek to gain control over federal housing resources currently directed to local public housing authorities and to alter the uses of these funds. A state might, for example, seek to sell off a public housing project located in what has become prime real estate and use the proceeds from the sale to launch or expand homeownership assistance programs geared more toward moderate- or middle-income constituencies.
Alternatively, a state could seek to take and redirect a portion of the resources used to support rental housing vouchers that are "turning over." ("Turn-over" vouchers are vouchers that become available when a current voucher-holder leaves the program. Currently, when a voucher becomes available, the public housing authority re-issues the voucher to a poor family or individual who has been on the local waiting list for a voucher.) A state could seek to take control of a portion of the resources that become available when vouchers turn over and to transfer these resources to programs providing employment- or marriage-related services. The state might seek to use the transferred resources to substitute for state funds being provided for such services. Or the state could seek to use some of these federal housing resources to substitute for state funds being used for homeownership or rental assistance programs or for community-based residential services for severely disabled people. Other types of waivers involving the housing programs might entail overriding federal statutory requirements that target a substantial majority of housing vouchers on families with incomes below 30 percent of the area median income (which is roughly equivalent to the poverty line) and shifting more of the vouchers to families at higher income levels.
A loss of public housing units, a reduction in the overall number of housing vouchers, or a shift in rental housing resources toward higher income families would increase the shortage of affordable housing for families moving from welfare to work. In addition, the superwaiver proposal is not likely to be effective in accomplishing these modest goals, and threatens to disrupt the overall framework and local governance of housing programs and to diminish scarce housing resources available to poor families.
This kind of far-reaching authority is not what is needed to improve the housing situation of families transitioning from welfare to work. Rather, what is suggested here are more modest changes in the TANF statute and in housing programs that can be accomplished through the federal legislative process. These include incentives such as authorization of a new Welfare to Work Housing Voucher Program that would encourage housing and welfare agencies to collaborate in comprehensive efforts to assist families to get jobs and remain employed, in order to qualify for additional targeted federal housing resources. Housing, welfare and workforce agencies also would be encouraged to consult with each other in better-coordinated planning efforts at the state and local levels.
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