Revised August 27, 1998
Making Welfare Work
Funding for rental housing assistance has traditionally flowed directly from the Department of Housing and Urban Development to the 3,400 public housing authorities throughout the country. States and local governments have played only a minor role in the provision of federally funded housing assistance to poor families.
The new housing vouchers that both the House and Senate appropriations bills would target on families making the transition from welfare to work would begin to change this. The program would establish new partnerships between housing agencies and state and local agencies working to promote and implement welfare reform and help states meet the goal of moving families from welfare to work. In conjunction with state and local welfare agencies and local entities administering the new federal welfare-to-work funds, public housing authorities (PHAs) would compete for the vouchers. PHAs, welfare agencies, and administrators of welfare-to-work grants would collaborate to design programs that meet their particular needs. For the first time, federally funded housing resources would be provided specifically to complement and further the goals of state welfare reform programs.
In its version of the FY 1999 appropriations bill, the House appropriated $100 million for an estimated 17,000 welfare-to-work vouchers, and came within 14 votes of adding an additional $97 million. The Senate, by contrast, appropriated $40 million for an estimated 7,000 vouchers. Both the House and Senate fell short of the Administration's request for $283 million for 50,000 such vouchers.
In addition to its substantially lower funding level, the Senate bill would restrict most of the new vouchers to use in designated cities, rather than having the award of funds subject to a national competition as the Administration had proposed. Housing voucher funds have not previously been subject to such earmarking by Congress.
The Congressional Budget Office (CBO) scores funds appropriated for welfare-to-work vouchers with a spend-out rate of 6.3 percent in FY 1999. The welfare-to-work vouchers thus would have comparatively little outlay effect in FY 1999. Given the significant contribution the welfare-to-work voucher program could make to welfare reform efforts, the conferees should appropriate no less than the House level, and more if resources permit, without earmarking to particular cities.(1)
Only families that currently are eligible for or have received TANF in the last year and that have housing needs related to their ability to obtain or retain employment would be eligible for a welfare-to-work voucher. Families would use these vouchers to rent housing on the private market; public housing is not involved. (A family with a voucher typically pays 30 percent of its income in rent; the housing authority pays the difference between the family's rent payment and a "reasonable rent standard" for housing.) Beyond this, the combination of state and local welfare agencies, employment agencies, and public housing agencies competing for these vouchers would have flexibility to design programs that meet local needs and support local welfare reform strategies to help families achieve self-sufficiency. These vouchers could be awarded for such purposes as providing incentives for families to move from welfare to work or to retain employment, enabling families to move to where job opportunities and transportation networks to job opportunities are located, and enhancing coordinated economic development initiatives.
Studies indicate a substantial proportion of families that move from welfare to work have difficulty retaining employment. Researchers who have tracked families over time have found, depending on the study, that between 20 percent and 60 percent of families that moved off AFDC returned to AFDC within two years.(2) A recently completed study by the University of Maryland Department of Social Work found that one-fifth of families who left Maryland's cash assistance program between October 1996 and March 1997 returned to the program within six months after leaving.(3) Two of the factors that contribute to this job instability are difficult commuting regimes and high housing costs.
- Job Access Problems. Current and former welfare recipients tend to be concentrated in high poverty areas where, in many cases, job opportunities are limited. High housing costs often make it difficult for these families to move to areas that have lower rates of unemployment and are closer to where jobs are located. If parents must travel long distances and take several bus lines to get to their place of employment, they may face difficulties in finding and retaining employment. Such access problems can be particularly difficult for poor families living in rural areas. Moreover, as the length of the workday increases due to time-consuming commutes, child care costs rise, and some children may be left unsupervised for longer periods of time.
- Housing Cost Burdens. Housing costs generally consume more of a low-income family's budget than any other item. More than 40 percent of working poor households with children pay at least 50 percent of their income in rent.(4) Such high housing costs can leave families with little disposable income to meet employment-related expenses such as transportation, unsubsidized child care costs, and additional clothing that may be required for work. For example, in the nation's 20 largest metropolitan areas, a single mother with two children who works full time throughout the year at $6 an hour would, on average, pay over two-thirds of her income in rent for a two-bedroom apartment at the "fair market rent."
Due to these high housing costs, many low-wage working families have difficulty affording housing of their own. If these families are forced to move from one relative or friend to another (or even worse, if they end up homeless), they may face major hurdles in securing and retaining employment. By helping families afford their own housing, the provision of vouchers could protect families from having to move and potentially disrupt their employment.
The welfare-to-work voucher program would enable welfare agencies and housing providers to reach out to families whose employment prospects are clouded by problems of job access and lack of affordable housing.
How the New Initiative Could Reward and Encourage Partnerships and Innovation
Under this initiative, state and local welfare agencies, entities administering welfare-to-work funds provided in last year's Balanced Budget Agreement, and housing authorities would have a great deal of discretion over the program's design. Housing vouchers could be used to provide incentives and supports for families making the transition from welfare to work in a number of ways, as selected by state and local welfare agencies and PHAs.
- Incentive to Work. Housing vouchers could be used as a reward for families that have successfully obtained a job, thus providing additional incentives for families to move into the workforce or remain employed.
- Addressing Job Access Problems. It often is difficult for a family that receives a voucher from one PHA to use the voucher in a location closer to available jobs or transportation networks in an area where the voucher program is administered by a different PHA. Under this program, PHAs in high-poverty areas could link with PHAs in areas with good job opportunities and transportation networks. A mother from a high-poverty neighborhood could work with a job training and employment services agency in a high-growth area in her search for a job. If successful in her job search, the mother could be given a voucher to help her move closer to her new place of employment.
- Meeting Families' Housing Needs. Welfare agencies, job training providers, and employers often are able to identify situations in which long commute time or housing instability undermine a family's ability to make the transition from welfare to work or to retain employment. But if the agency or employer directs the family to the local public housing authority, it takes an average of 26 months between the time of application and receipt of a housing voucher or certificate.(5) In many areas, the waiting lists are so long that they are closed to new applicants. Under the proposed initiative, welfare agencies, current and would-be employers and training providers could directly refer to public housing authorities families whose unstable housing situations or long commute times are affecting their ability to find or retain jobs.
- Links with Employers. In certain areas, employers face a shortage of low-skilled labor. An employer facing a shortage of labor could make a commitment to hire a certain number of parents moving from welfare to work, and the local housing authority could commit to providing these new hires housing vouchers so they could move closer to their new jobs.
- Links to Housing Producers. In certain areas, even if a mother has been offered a job and a voucher, she may be unable to move near her prospective place of employment due to an insufficient supply of housing at reasonable cost. These vouchers could be administered by a state housing agency that administers the low-income housing tax credit. The welfare-to-work vouchers could be tied to new units financed through federal- or state-funded production programs, such as the low-income housing tax credit or the HOME block-grant program, and located in areas with employer need and a high demand for low-skilled labor. Links with housing producers and employers could contribute to economic development efforts in such areas.
- Leveraging State Resources. The competition could give priority to PHAs in states that agreed to match the assistance the federal government provided, thereby leveraging additional resources for housing and related social services. A state could match the federal dollars provided on a one-for-one basis, thus increasing the number of families served. State-funded supportive services, such as mobility and employment counseling, could be combined with the federally-funded housing assistance. Two states, New Jersey and Connecticut, as well as San Mateo County, California, have recently established housing allowance programs for certain families making the transition from welfare to work. Federal welfare-to-work vouchers could help these states and localities expand such programs and encourage others to launch their own state-supported housing assistance efforts targeted at families making the transition from welfare to work.
- Building on Successes. Prior experience indicates that coordinated efforts between housing, welfare, and other service providers yield positive results. Under the Family Unification Program, for example, housing and child welfare agencies have successfully coordinated efforts to provide housing assistance to families whose children are determined by the child welfare agency to be at imminent risk of being placed in foster care because of housing problems. The family unification program has already served to reunite or keep together nearly 10,000 families.(6) Other PHAs that have established Family Self-Sufficiency programs or launched a Moving to Work demonstration have established linkages with providers of supportive services. PHAs that have been successful in offering families the needed supports and resources necessary to transition into the workforce, however, have been unable to expand these programs due to funding constraints. The provision of the welfare-to-work vouchers could provide such PHAs the opportunity to reach out to new families with employment-related housing needs, while building on successful programs.
More TANF recipients are served by HUD-financed voucher and certificate programs than any other federally-funded housing program, including public housing. In FY 1997, about 500,000 AFDC/TANF families used tenant-based certificates. By encouraging welfare agencies, housing authorities, local developers, and employers to create new partnerships, this program could yield important lessons concerning how best to coordinate these housing resources with state and local efforts to move families from welfare to work. Important lessons also could be learned about how to link the provision of rental housing assistance, production of new low-cost housing, and economic development initiatives. Successful programs could serve as models for state welfare agencies and housing authorities as they continue the push to move more people from welfare to work and help families that have already moved into the workforce to stay employed and attain self-sufficiency.
In view of the contribution the welfare-to-work voucher program would likely make to welfare-reform efforts, the conferees should appropriate no less than the House level of $100 million, and more if resources permit, without earmarking to particular cities.
1. In the committee report accompanying its bill, the House (but not the Senate) required HUD to develop and implement performance measures to gauge the success of the welfare-to-work program. This language should be retained. The language also should give Senate conferees increased confidence in their ability to monitor the effectiveness of the welfare-to-work program.
2. See Meyer, Daniel, R. and Cancian, Maria, "Life After Welfare: The Economic Well-Being of Women and Children Following an Exit from AFDC:", August 1996: 3. The data are based mostly on families who exited AFDC during the late 1970s or 1980s.
3. Maryland Department of Human Resources and University of Maryland School of Social Work, "Life After Welfare: An Interim Report", September 1997: 35.
4. Tabulations of the American Housing Survey, 1995. Any household with earned income greater than or equal to half-time earnings throughout the year at the minimum wage is defined here as 'working'.
5. Data based on the national average wait for receipt of assistance through the Section 8 voucher and certificate program. US Department of Housing and Urban Development, Office of Policy Development and Research, A Picture of Subsidized Households, Vol. 11, December 1996: 72.
6. Rog, Debra J., Gilbert-Mongelli, Ariana M., and Lundy, Ezell, The Family Unification Program: Final Evaluation Report. CWLA Press, Washington, DC, 1998:3 . For FY 1997, numbers are based on the Notice of Funding Availability for FY 1997.