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The Relationship between Welfare Policy and Housing Assistance—A New Study from HUD

A recent study commissioned by HUD’s Office of Policy Development and Research (PD&R) explores the relationship between housing status and the effectiveness of welfare policy. The study, titled “Housing Assistance and the Effects of Welfare Reform: Evidence from Connecticut and Minnesota,” takes aim at the following five targeted questions:

• Are the welfare recipients who receive housing assistance a harder-to-employ group than the recipients who do not receive housing subsidies?
• Are the welfare reform initiatives any more effective or less effective for welfare recipients who receive housing assistance than for those who do not?
• Does the effectiveness of the welfare reform initiatives vary for recipients who receive different types of housing subsidies?
• Is there a statistical relationship between receipt of housing assistance for welfare recipients and subsequent success in the labor market?

Although welfare and housing assistance often function in separate worlds in terms of U.S. public policy, the two are inextricably linked. Almost half of all families with children who receive federal housing assistance also receive some income from welfare. Moreover, approximately 30 percent of families who receive welfare also receive federal housing assistance ¹. This means that the progress subsidized housing tenants make toward self-sufficiency may be substantially influenced by the performance of welfare policies and programs. Similarly, the responses of tenants of subsidized housing to welfare reform initiatives may influence the overall accomplishments of those initiatives.

The study uses data from two welfare reform initiatives: the Connecticut Jobs First program (Jobs First) and the Minnesota Family Investment Program (MFIP). Both initiatives sought to increase self-sufficiency among recipients of cash assistance under the federal Temporary Assistance for Needy Families (TANF) program, which replaced Aid to Families with Dependent Children (AFDC) in 1996. In both of these experiments, thousands of families were randomly assigned either to the welfare reform program or to the traditional welfare program that was in place prior to 1996. This level of control means that any significant differences in the outcomes for the two groups can be chalked up to the change in policy.

The study yields some compelling results. First, the study showed no major differences between HUD-assisted and unassisted welfare families in education or prior employment. Almost 55 percent of those with and without housing assistance previously worked full-time for at least six months. Almost 60 percent of both groups have their GED.

Second, the impacts of welfare reform on employment and earnings were consistently larger for recipients with housing assistance than for those without assistance. In Connecticut, welfare reform had a $3,965 impact on the average four-year earnings of the assisted housing group, but only a $1,658 impact for the unassisted group. In Minnesota, the MFIP impact over the three-year follow-up period was $5,473 for the assisted group, versus only $603 for the unassisted group. Similarly, welfare reform produced larger gains in income for recipients with housing assistance than for those without housing assistance in both Connecticut and Minnesota.

Finally, in a series of nonexperimental analyses, the study found evidence that receiving housing assistance yields better economic outcomes for families in general. However, this relationship appears to hold only in the context of welfare reform. Among members of the Minnesota program group, the employment rate over the three-year follow-up period for those with housing assistance was 12 percentage points higher than for those with no housing assistance. Moreover, their average earnings were $3,637 higher, and their average total measured income was greater by $3,167. All of these estimates are statistically significant. In Connecticut, the rate of employment during the four-year follow-up to the Jobs First program was nearly seven percentage points higher for the assisted housing group than for the unassisted group. This, too, was statistically significant. Housing assistance was also associated with substantially higher earnings and total measured income, though not by a statistically significant amount.

The findings of this study are consistent with other recent studies showing that welfare reforms are more effective in increasing the self-sufficiency of welfare recipients with housing assistance than increasing the self-sufficiency of those without it. According to this study, eight out of ten analyses done on a range of states and reform initiatives found similar patterns.

The study concludes that the reasons behind the consistent pattern of results remain unclear. One possible explanation is the role that housing assistance might play in fostering conditions that help or encourage people to take advantage of the employment services and incentives offered by welfare reforms. For example, some experts believe that the greater housing stability that can result from housing assistance might make it easier for people who are not regularly working to take advantage of programs designed to help them prepare for and hold a job.

Although patterns of recent analysis suggest that welfare reform is more effective when combined with housing subsidies, the study qualifies that welfare reform can be highly successful for recipients without housing assistance. There are a number of welfare-to-work programs that produced statistically significant earnings impacts for recipients who do not receive housing assistance.

“Housing Assistance and the Effects of Welfare Reform: Evidence from Connecticut and Minnesota” is available as a free download from HUD USER at http://www.huduser.org/publications/pubasst/ housingAsst.html or in printed form for a nominal charge by calling HUD USER at 1-800-245-2691.

¹ “Housing Assistance and the Effects of Welfare Reform: Evidence from Connecticut and Minnesota,” citing Sard, Barbara 2003, “Housing and Working Families — Background Data.” Microsoft PowerPoint presentation given at a forum sponsored by the Brookings Institution Center on Urban and Metropolitan Policy and Harvard’s Joint Center for Housing.

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