Modeled on the successful Family Self Sufficiency (FSS) Program — an existing HUD Program enacted in 1990 — the Rental Assistance Asset Accounts would provide a means to connect the provision of housing assistance to other important social policy goals. This program has been deployed effectively by innovative housing authorities throughout the country, and can now serve as a national model for reform. In addition to helping families build assets and make progress toward economic self-sufficiency, these accounts could become a stepping-stone to sustainable homeownership by helping families build up the necessary down payment to purchase a home. And if designed and marketed effectively-with careful and rigorous experimentation to test various approaches to structuring, marketing and supporting the incentives-we believe the policy would have little or no cost to the federal government. The costs of deposits into the accounts would be offset by increased rental revenue flowing from the increased earnings that the accounts encourage. Offering these accounts to every recipient of housing assistance would represent a significant and productive reform in the delivery of housing assistance.
Better Alternative to Lowered Rents
For a number of reasons, this approach is more attractive than the alternative of lowering rents by disregarding income:
- First, the account would provide a flexible source of assets for families that need help overcoming barriers to work.
- Second, assets built up in the account could be used to transition away from assistance when families are ready.
- Third, these accounts can operate as a forced savings mechanism.
Similar to how automatic payroll deductions to 401(k) accounts and mortgage payments that pay down principal work to help people save automatically, deposits to the rental assistance asset account would happen automatically as earnings rise.
As policymakers explore how to shore up homeowners threatened by rising mortgage defaults, falling home prices, and contracting credit, they should also consider how best to provide support to renters. The current system of federal rental assistance works well, but it could work even better if we experimented with more creative approaches for administering it. Given the mounting federal deficits, low-cost innovations that deliver assistance more effectively deserve serious consideration. It is time to get all the incentives moving in the right direction.
Reid Cramer is Research Director at the New America Foundation.
Jeffrey Lubell is Executive Director of the Center for Housing Policy.