Jeff Lubell¹

For people with disabilities that are able to and want to work, a number of disincentives to working exist. They include the phase out of SSI and SSDI benefits as earned income increases, the potential loss of Medicaid benefits, and the added costs of going to work (i.e., transportation, work clothes, child care, etc.). On top of all these increased costs and lost benefits, families receiving rental housing assistance from the U.S. Department of Housing and Urban Development (HUD) that experience an increase in income must also pay more for rent. While HUD rules exempt 100 percent of the increased earnings of people with disabilities from the calculation of rent for a period of one year, only 50 percent of the increased earnings are disregarded in the second year, and by the third year, the disregard is gone completely.²

Fortunately, there's a way for households in public housing or with Section 8 Housing Choice Vouchers to recover much of the increased rent payments that they pay due to increased earnings. The recovery is in the form of an escrow account accumulated through HUD's Family Self-Sufficiency (FSS) program that also helps participating households build assets that they can use for the downpayment on a home, advanced education, to buy a car, or any other purpose. Because the escrow account is held and controlled by the housing authority until the household meets the criteria for disbursement, it does not count as an asset of the household for purposes of SSI or SSDI until actually disbursed to the household. At that point, the household will have nine months to spend the funds before they count as an asset for purposes of SSI/SSDI eligibility.

In short, FSS is a way for people with disabilities living in public housing or with housing vouchers to keep more of their hard-earned money when their earnings go up and build savings for homeownership or other purposes without immediately impacting their SSI/SSDI eligibility.

Brief Summary of FSS

FSS is a holistic approach to helping low-income individuals build assets and make progress towards self-sufficiency that combines (a) stable affordable housing with (b) case management to help individuals access the services they may need to increase their earnings and (c) a strong financial incentive (in the form of an escrow account) for individuals to increase their earnings. FSS has proven to be very successful in helping low-income people build assets, substantially increase their earnings and become homeowners.

FSS is a voluntary program open to adults residing in public housing or the housing voucher program. Upon enrollment, the individual meets with a case manager who helps the individual develop a five-year training and services plan that charts the steps he or she needs to take to become and stay employed, increase his or her earnings, become independent of welfare assistance, and achieve other individual goals (such as homeownership). As the household's earnings increase, the household's rent also goes up (families in subsidized housing are generally expected to pay 30 percent of their income for rent). However, an amount roughly equal to the increase in rent due to the household's increase in earnings goes into an escrow account that the household receives upon successful graduation from FSS.

A survey of 19 FSS programs illustrates the great potential of this model:³

• Most programs reported earnings gains among graduates of 100% or more;

• The typical program reported average asset accumulation of around $6,000 per FSS graduate.

• About one-third of FSS graduates became homeowners.

Expanding FSS programs

Many state and local housing agencies already have an FSS program, and those that do not yet have an FSS program have the option of starting one. Moreover, HUD places no limit on the number of FSS participants a housing agency may enroll. Since FSS escrow accounts are eligible expenses under both the public housing and Section 8 Housing Choice Voucher programs, there is in effect a virtually unlimited stream of HUD funding for asset-building through FSS. (But see the accompanying article on current policy issues affecting FSS.)

One of the principal barriers to expansion of local FSS programs is the shortage of funding for FSS coordinators to provide case management and other necessary services. While HUD covers the costs of FSS escrow accounts, HUD provides funding for only a limited number of FSS coordinators,⁴ and most PHAs have little discretionary income to fund additional coordinators.

The key to taking advantage of FSS as a resource for expanding asset-building opportunities for low-income families is to build partnerships between (a) state or local housing agencies that run or could run FSS programs and (b) organizations or agencies that can provide the case management services necessary to support an expansion of FSS. If sufficient supportive services are already available in the community to meet the service needs of participants, such partnerships may be enough in and of themselves to permit significant expansion of the number of families benefiting from FSS. In some cases, the necessary case management can be provided simply by improving the coordination of local FSS programs and existing case management services funded by other agencies.

Enrolling More People with Disabilities in FSS

Among the many potential partners that can supply the case management services needed to enroll more households in FSS are several that serve people with disabilities. For example, Vocational Rehabilitation (VR) programs often work closely with people with disabilities living in public housing or with housing vouchers. If a VR program wanted to make the benefits of FSS available to these individuals, they could partner with the local housing authority to incorporate the case management responsibilities associated with FSS into VR's regular work with their current clients. Since many VR programs already provide work promoting case management, this may not increase their workload significantly. By adding a work incentive and asset-building tool that the VR program does not have to pay for, FSS helps the VR program accomplish its self-sufficiency goals, resulting in a win-win for everyone involved.

This opportunity is by no means limited to VR organizations. This opportunity would be a natural for any organization that currently provides work-promoting case management to people with disabilities that live in public housing or have a housing voucher. Disability organizations that do not provide these services directly can play a valuable advocacy role to build the necessary partnerships between housing authorities and existing providers of work-promoting case management services.⁵

FSS and Section 8 Homeownership

As noted above, FSS can be a powerful strategy for helping low-income households become homeowners. One reason for this is that FSS provides excellent preparation for Section 8 homeownership - a HUD program whereby families use their housing vouchers to meet monthly homeownership costs, rather than for rent. When a person with a disability uses a Section 8 voucher for homeownership, the voucher lasts up to 30 years, providing a steady stream of subsidy to help low-income families pay for their housing costs. (For non-elderly non-disabled households, the voucher lasts 15 years.) Households using a Section 8 voucher for homeownership pay 30 percent of their adjusted income for their homeownership costs (which include principal, interest, taxes, insurance, and allowances for utilities and repairs), with the government paying the difference between the household's contribution and the actual costs, up to a locally determined maximum.

Depending on the market, Section 8 homeownership can bring homeownership within reach of households with income of $12,000 or even less. In some markets, the voucher in and of itself is enough to enable a low-income household to buy a home. In other markets, particularly on the coasts, the voucher will need to be layered with other subsidies, such as those available through the HOME or CDBG programs or from the Federal Home Loan Bank system.

FSS primes the pump for Section 8 homeownership by providing participating households with an opportunity to build savings for a downpayment. (The housing voucher itself only covers monthly homeownership costs; it does not assist with a downpayment.) In addition, FSS provides a structured program during which one can work with individuals with low credit scores to help them improve their credit and be in a position, upon graduation, to secure a mortgage with their vouchers.

For more information on FSS, visit www.fsspartnerships.org

1 Jeff Lubell is Project Director for FSS Partnerships, a project dedicated to expanding asset-building opportunities through HUD's FSS and Section 8 homeownership programs. Prior to starting FSS Partnerships, Jeff was director of the policy development division for HUD's Office of Policy Development and Research and a housing policy analyst at the Center on Budget and Policy Priorities.

2 For more information on the earned income disregard for people with disabilities in HUD-assisted housing, see the National Housing Law Project, Earned Income Disregard Information Packet.

3 For more information on FSS results, see Jeff Lubell. 2004. A Diamond in the Rough: the Remarkable Success of HUD's FSS Program. Houston, TX: FSS Partnerships.

4 Traditionally, HUD has made funding available for at least two FSS coordinators at each PHA: one to serve Housing Choice Voucher (HCV) residents and one to serve public housing residents. Each FSS program (i.e., an HCV FSS program or a public housing FSS program) must have at least 25 approved FSS slots to qualify for coordinator funding. (Small PHAs can submit joint applications to meet the threshold.) In some past competitions, HUD has allowed PHAs to apply for funding for additional coordinators. For FY 2004 and FY 2005, HUD funded public housing FSS coordinators through the Resident Opportunity and Self-Sufficiency (ROSS) programs NOFA, rather than through the public housing operating fund. In FY 2005, the NOFAs for both ROSS and Housing Choice Voucher FSS coordinators were included in HUD's SuperNOFA. The SuperNOFA typically comes out somewhere between March and May. Links are available at: http://www.fsspartnerships.org/Funding.htm.

5 For an expanded discussion of strategies for expanding FSS through partnerships, see Jeffrey Lubell. 2005. Expanding Asset-Building Opportunities for Low-Income Families through FSS. Houston, TX: FSS Partnerships.