Family Self Sufficiency Program Shows Great Promise for Economic Mobility

EDITOR’S NOTE: This is the first in a series of blog posts published by Prosperity Now’s Affordable Homeownership team about the role of financial capability in affordable housing services to help more low- and moderate-income householdswith an emphasis on those of colorachieve financial security, wealth and prosperity. This post was written by Patricia Belden, President of POAH Communities, the property management company affiliated with the non-profit, Preservation of Affordable Housing (POAH). Special thanks also to Compass Working Capital, a non-profit financial services organization that provides residents with financial education and individualized, client-driven financial coaching to help participants chart and follow a path to reach their financial goals.

The series will feature stories from organizations across the country that are implementing financial capability services into their existing programs. These stories highlight opportunities to integrate existing services that housing organizations provide with financial services to increase the financial stability of their clients and build wealth for them through affordable homeownership. Join the Affordable Homeownership Network to learn more about financial services integration and the work Prosperity Now is doing to make homeownership affordable for everyone.

Compass Working Capital and Preservation of Affordable Housing (POAH) recently released a report showing early successes in our work promoting economic mobility in housing through the Family Self Sufficiency (FSS) program, which enables families assisted by the Department of Housing and Urban Development (HUD) to increase their earnings, build savings and make progress toward self-sufficiency.

The story of Rochelle shows its great promise. Rochelle, a single mother of two girls ages seven and one, moved into a POAH community in North Kingstown, Rhode Island, in 2016. On maternity leave from a part-time, minimum wage job, Rochelle had $2.18 in her checking account and no savings. Safe, decent affordable housing is an essential part of Rochelle and her girls’ stability, because with no savings, limited income, and young children to raise, stability is thin.

It might appear that the best way for Rochelle to improve her finances would be to move from a part-time to a full-time position when she returns to work. The tricky thing is that each time Rochelle’s wages increase, her rent will also increase. Families living in HUD-assisted housing pay about 30% of their income on rent, so any increase in wages results in a comparable increase in rent payment. The design of the program ensures that households pay what they can afford, but for a family like Rochelle’s, rent increases can make taking on additional work seem like less of a boon and more of a burden.

In May of 2016, Rochelle enrolled in FSS. FSS allows participating households to save rent increases attributable to earnings growth in a special escrow account, a savings account tied to participant success in the FSS program. The program essentially converts increased monthly rent payments into a monthly savings deposit. This way, FSS turns a disincentive into a powerful incentive for employment and earnings. Participating families can use these savings, which increase monthly over a five-year period, to achieve their financial goals, so long as they also come off welfare, stay employed, and make progress toward personal and financial goals that they set for themselves. On top of that, the coaches from Compass Working Capital provide one-on-one “client-centered” guidance to help participants achieve their financial goals.

After only 10 months in the FSS program, Rochelle has made some major changes to her family’s financial situation. She moved to a full-time position with benefits at a company where she feels she can grow and excel professionally. Within a few months, she received two raises and a promotion. She opened a retirement account through her employer, set up direct deposit into her savings account (which now has a balance of $1,100) and started a 529 college savings account for her newborn through Rhode Island’s CollegeBoundBaby program. She has increased her annual income by $25,000, reduced her debt by $5,000 and saved $4,416 in her FSS escrow account. With her escrow funds, she plans to open an additional 529 account for her other daughter, pay off the remainder of her debt and save the remaining amount as an emergency fund. Rochelle’s story is just one among many stories of success for families who have enrolled in FSS programs across the country.

In the last two years, POAH has launched seven FSS programs for residents of privately-owned assisted housing. We’ve seen tremendous success in our program to date, with over 160 families enrolled and nearly 50% actively saving each month. The average earned income of our FSS participants is steadily rising, employment rates are growing and credit scores are improving.

Although it is harder to quantify, we believe another important success of our FSS programs is that they are driven by the hopes and dreams of the resident participants. When residents are empowered to make choices and set goals for themselves, we believe the outcome is more meaningful, sustainable and valuable for the entire community. In less than two years into this five-year program, five participants have already graduated (one purchased a home) and moved out of POAH’s subsidized communities, making those affordable homes available to other families in need. For more about our successes, be sure to read our outcomes report.

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