Revised August 27, 1998

Welfare-to-Work Vouchers:
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)


The Need

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.

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.



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.

End Notes

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.