Evidence Matters Banner Image

Spring 2011   

    HIGHLIGHTS IN THIS ISSUE:

        Informing the Next Generation of Rental Housing Policy
        A Spotlight on Rental Market Research
        Multibank Consortia Sustain Communities by Advancing Affordable Rental Housing
        Viewpoints: The Mortgage Interest Deduction


Informing the Next Generation of Rental Housing Policy

Highlights

      • Rental housing is a platform through which better outcomes for children can be delivered.
      • Because net worth is a key predictor of long-term educational attainment, asset building among low- and middle-income families is necessary to increase college attendance rates, economic mobility, and net worth of the next generation.
      • A balanced housing policy that utilizes interagency collaboration is key to establishing effective supportive housing.


Comprehensive rental housing policy promotes outcomes that result in improved opportunities for children.
Farmworker Housing Development Corporation
Comprehensive rental housing policy promotes outcomes that result in improved opportunities for children. Farmworker Housing Development Corporation

Falling home prices, tightened credit markets, and record foreclosures have forced many Americans to reconsider what has long been considered a hallmark of the American dream: homeownership. Partly as a result, an ever-increasing number of renters are facing a shortage of decent, safe, and affordable homes. Yet, not since the 2008 publication of Revisiting Rental Housing — before foreclosures reached their peak — have we examined our national rental policy.

The housing crisis is not the only impetus for such a national reckoning. Derek R.B. Douglas, a special assistant to the president who serves on the White House Domestic Policy Council and leads an interagency rental policy working group, reflected:

It is not just homeowners who are struggling in the economy; a third of the population rents. We need to start the conversation, and the thinking, about what we can do at the federal level, and what can be done by the state, local, and private sectors to support those renters who are now looking for affordable housing options, or having trouble making rents, or living in communities where rental prices are going up, as more people who were homeowners move into the rental markets.1

To that end, in October 2010 the White House, along with the Departments of Housing and Urban Development, Treasury, and Agriculture, invited leading thinkers and practitioners to discuss next-generation rental policy. More than a dozen experts from the nonprofit, development, financial, and academic worlds offered budget-neutral policy initiatives under three different rubrics: rental housing and low-income households, the relationship between rental housing and neighborhoods, and the financial and regulatory barriers inherent to the industry. These research- and experience-based visions offered ways to ensure equitable housing choices and options for as many Americans as possible. Presenter Rosanne Haggerty, MacArthur Fellow and founder and president of Common Ground, a nonprofit committed to ending homelessness, praised these “well-honed, proven ideas, which ought to be replicated, and ought to be shaping opportunities for decent housing in all parts of the country.”

A “children’s healthy start voucher” would link affordable housing to early interventions such as quality early childcare.
A “children’s healthy start voucher” would link affordable housing to early interventions such as quality early childcare.

Some of the more ambitious proposals positioned rental housing as a basis for achieving such broad mandates as better outcomes for children, asset-building for low-income families, and the means to end chronic homelessness. Julia Stasch, vice president for U.S. programs at the MacArthur Foundation, a cosponsor of the conference, commended such suggestions, which “enhance the positive role that rental housing can play in promoting outcomes across a whole array of domains — good schools, better outcomes for kids, better neighborhood conditions. It has not been easy to see housing, and even more narrowly rental housing, in these other positive outcomes.” Stasch also praised the commitment to interagency cooperation and collaboration evidenced by the presenters and the administration alike. The conference, she said, demonstrates the “administration’s continued efforts to press for a
less-siloed type of thinking,” and for “more cross-function, cross-agency problem solving.”

The Platform That Delivers: Rental Housing + Children
Nancy O. Andrews, president of the Low Income Investment Fund, was one of several presenters to propose using rental housing as a platform for creating better outcomes for children of low-income families. Specifically, she envisioned a “children’s healthy start voucher” that would link affordable housing to an array of early interventions: prenatal nutritional support; quality early childcare; community health care; replications of the family nurse visitation program, which trains caregivers to parent effectively; and quality schools.

Evidence exists for the efficacy of many of the services included in the proposed voucher. Research suggests that nutritional support programs such as the Special Supplemental Nutrition Program for Women, Infants, and Children, as well as increases in family income in the early childhood years, have more long-term effects than similar initiatives aimed at adults. Likewise, studies and experiments “have shown long-term effects — effects into adulthood — of high-quality early childhood education,” said Jeanne Brooks-Gunn, a social scientist at Columbia University Teachers College. Finally, each early intervention initiative “saves government spending later” on remedial programs, criminal justice, unemployment, and welfare, said Tama Leventhal, assistant professor of child development at Tufts University.

Cornell professor Gary Evans’ 17-year longitudinal study, which suggests that the stresses of poverty pose a serious threat to children’s brain development, inspired Andrews to conceive the idea of rental housing as the delivery platform for a healthy start voucher. Evans’ research, said Andrews, shows that the high stresses of poverty on children “actually create physical impairments in child brain formation. In other words, poverty poisons children’s brains.”2 Specifically, Evans demonstrated that these stresses inhibit executive function and working memory, the parts of the brain used in learning. Making matters worse is that the diminished function appears to be long lasting, perhaps permanent. The key point, said Andrews, is that the findings showed these mental impairments to be “the consequences of stress from poverty, and poverty alone.”

According to Andrews, Evans’ research is significant because it puts the results of the Moving to Opportunity experiment and Welfare to Work housing studies in a new light. Those two studies showed that families who moved to higher-opportunity neighborhoods experienced reductions in stress-related problems, including anxiety disorders, obesity, and depression. In the past, the results seemed disappointing “because we’d hoped for income and economic mobility…. But with Evans’ research on the impairment in child brain development, the importance of housing affordability and safe, quality communities came into sharp relief,” she said. “I began to see the connections among housing, community, and human potential.” When implemented together, the services embedded in her voucher concept will counteract the stresses on children’s brains and the resultant deficits. As a result, Andrews believes that lower-income children will enter kindergarten ready to learn, which may help diminish the achievement gap over the long term.


Asset-Building Among Low- and Middle-Income Families
Over the past few decades, income disparity in the United States has widened — in fiscal year 2006–2007, 61.4 percent of all earned income went to the top 20 percent of earners. Distressing as those numbers may be, the distribution of assets is far more unequal; during that same period, 85 percent of total net worth belonged to the top 20 percent of wealth holders. The disparity is even greater between white households and communities of color; according to Brandeis University’s Institute on Assets and Social Policy, African-American households have only 10 cents for every dollar of net worth in a white household. Even more striking, according to Andrea Levere, president of the Corporation for Economic Development, 22.5 percent of families would not be able to survive for 3 months at the poverty level if their main source of income were disrupted.3 Notably, the data used to compute this statistic were collected before the current economic crisis, she said.

Although it may not seem as critical as quality childcare or education, research shows that net worth is a key predictor of long-term educational attainment. According to Youngmi Kim and Michael Sherraden, “Parental net worth has a significant effect on total years of schooling, post-high school years of schooling, and college attendance.”4 For instance, a 2003 study that used data from the National Survey of Families and Households determined that savings of $3,000 or more positively affected children’s high school graduation rates.5 Net worth and nonliquid assets also affect whether parents can take out loans to support their children’s college attendance. Even when other factors are taken into account — parental involvement in children’s education, for example — net worth remains critical.6

Asset-building strategies for renters, such as credits for helping to manage a property or reducing energy consumption, can help families secure their financial future.
Farmworker Housing Development Corporation
Asset-building strategies for renters, such as credits for helping to manage a property or reducing energy consumption, can help families secure their financial future. Farmworker Housing Development Corporation

Net worth, and its impact on educational attainment, appears even more significant in light of the link between a college degree and average income. Studies show, for example, that the average income for a person holding a college degree ($58,613) is nearly double that of a person without one ($31,283). In that way, the relationship among net worth, college attendance, and economic mobility is cyclical; parental net worth exerts a major influence on whether one attends college, and college attendance affects parental net worth for the next generation.7

To help build assets among the 4 million people receiving rental assistance and the 8 million families who spend more than half their income on rent and utilities, Levere proposed embedding asset-building strategies within rental housing. In her vision, these strategies will complement other poverty-alleviation and social services already in place.

“There’s no silver bullet to ending poverty or to building economic security,” she said. “We need multiple strategies that work together…to really help a household succeed financially.” First, she proposed creating opportunities for renters to build assets through positive behaviors: contributing to a building’s maintenance, paying rent on time, helping to manage properties, and reducing energy usage for individually metered apartments. These activities would be rewarded with credits, convertible to cash, that are deposited in savings accounts. Residents who receive financial counseling can borrow against these credits. They are advised to use the loans for asset-building investments, including education, debt reduction, homeownership, and launching a business.

Levere’s proposal, inspired by the Cornerstone Renter Equity program, has a bonus: it encourages buy-in among tenants of rental properties. In other words, and in addition to the tangible assets that her proposal can build, Levere’s vision engenders “a sense of pride and quasi-ownership in a multifamily building” — qualitative assets that are difficult to quantify but highly important to quality of life.

To enact such programs on a large scale, Levere envisions making use of appropriate HUD resources, specifically Sustainable Communities Initiative, Community Development Block Grant, and HOME Investment Partnerships funds. She added that rebalancing America’s expenditures on asset building so that they more equitably provide for low- and middle-income families would create further funding opportunities. For instance, nearly half of the $400 billion spent on asset-building programs in 2009 — for retirement, small-business loans, making college tuition affordable, and homebuying — went to the top 5 percent of taxpayers. That disproportionate figure, Levere said, demonstrates the need to repurpose “those investments to help low- and moderate-income families build assets.”

Finally, Levere suggested expanding the Family Self-Sufficiency program. Typically, an applicant for subsidized housing must meet income limits and cannot have more than $2,000 to $3,000 in assets. These requirements essentially mean that one cannot have a savings account or even a car, said Levere. Income limits also discourage people from earning more money, because doing so will force them to leave their subsidized rental homes. Levere explained that these constraints unintentionally conspire to inhibit economic mobility. But the Family Self-Sufficiency program makes it possible for people to stay in subsidized housing as their income rises and bank those extra funds in escrow accounts. Those accrued savings ultimately enable residents to put a downpayment on a house or a deposit on a market-rate apartment. As a result, people are encouraged and enabled to move out of subsidized housing, freeing up apartments for others who need them. The most recent report on the Family Self-Sufficiency program found that the 24 percent of participants who had graduated from the program by the end of the study period received an average escrow balance of about $5,300, more than twice the average escrow account balances for the 37 percent of participants who exited the program before graduating, forfeiting their escrow.8

Interagency Collaboration for Effective Supportive Housing
Like Levere and Andrews, Common Ground’s Haggerty envisions using housing as the means to provide a range of social services. Specifically, she proposes blending nine different housing and services programs to create long-term supportive housing with the ultimate goal of ending long-term homelessness. To do so, Haggerty explained, mental health, health care, and other programs would share risk and pool their resources.9 “If you can get those services tied to the places where people live, the evidence of the effectiveness of supportive housing is overwhelming,” she said. “It’s not just effective in that vulnerable people don’t lose their homes; it’s far more cost-effective than letting people linger on the streets or in institutions, whether it’s hospitals or shelters or other types of institutions.”

As evidence for the efficacy of supportive housing, Haggerty points to a recent 3-year study of 1811 Eastlake, a supportive housing development for homeless alcoholics in Seattle. That research, funded by the Substance Abuse Policy Research Program of the Robert Wood Johnson Foundation, found that the development saved taxpayers more than $4 million in its first year — funds that would otherwise have gone toward emergency care, the criminal justice system, and other services. Remarkably, the development realized cost savings in the first 6 months of its existence, even after taking into account the costs of administering housing for its 95 residents.10 Haggerty also cited research by Dennis Culhane, a professor at the University of Pennsylvania, that compared the costs of housing a homeless person with the systemic costs of homelessness (costs borne by hospitals, law enforcement, and other crisis services). That study, she said, showed that the costs of housing a homeless person for one year were nearly the same as the systemic costs of the individual remaining homeless for a year.11 These studies complement other research that has shown significant savings to hospitals and the criminal justice system. Supportive housing, Haggerty concluded, is a “basic model that works. Just about everybody succeeds, even people with very challenging histories.”

Multiple support services provide for neighborhoods of opportunity.
Reach CDC; Traci Hill
Multiple support services provide for neighborhoods of opportunity. Reach CDC; Traci Hill

As a model for how to implement supportive housing, Haggerty points to the New York/New York III Supportive Housing Agreement, signed in November 2005, which will create some 9,000 new units of supportive housing in New York City by 2015. This city-state partnership reaches a broader group of homeless and at-risk persons than its precursors, including chronically homeless families and young adults aging out of foster care. “One of the elegant things about the New York/New York III agreement…is that it integrates the activities and the resources of 10 different city and state agencies,” Haggerty said. Haggerty believes that its specificity provides a blueprint for how such a proposal might operate on a large scale. “It goes into what amount of money is to be invested by each agency to get clearly articulated results, and who specifically benefits, who has the decision rights, how the process works,” she said. “It’s been remarkable in achieving silo-busting in a practical and implementable way.” To establish the program in other cities, or even on a national scale, conceptually, one need only “substitute different federal agencies and different state agencies” for the New York-specific entities the agreement currently describes.

Although she has focused on its potential to end long-term homelessness, Haggerty added that supportive housing “is an approach to housing that is relevant to so many more people and families than the homeless. All of us at some point are going to need supportive housing — to have options other than nursing homes or being a burden to our kids. Individuals and families are able to lead more stable and productive lives when they have a secure home and the help that they need to manage challenges, whether they be related to health or employment.”12

A Milestone Conference, but Was It Bold Enough?
MacArthur’s Stasch, who calls the conference a “milestone,” praised the administration’s commitment to rental housing. “Simply having high-level administration officials put a spotlight on rental housing was very rewarding,” she said. At the same time, she cautioned that the conference was not meant to signal that “homeownership has lost its luster.” Rather, a more balanced approach signifies that “rental housing is a significant element of our economy. It’s a form of housing arrangement that many, many people — and most people at some time during their lifetime — take advantage of. Some people do it through choice. But other people do it because that is the only type of housing arrangement that’s available to them.”

Nevertheless, said Stasch, the proposals “could have been even a little bolder and a little more long term. While it’s really hard to get work done in a day-to-day environment, we need to remember that it’s not all about the present. We need to be thinking about the framework for housing policy for the next 20-plus years.” Such an approach, she said, demands an understanding of “how society is changing: how it’s aging, how it’s becoming more diverse, what the impact of technology is, and the globalization of capital. We have to keep pushing ourselves to consider what types of new approaches and priorities are going to be important, not just today and tomorrow, but for the long haul.”



  1. Interview with Derek R.B. Douglas, January 2011.
  2. Interview with Nancy O. Andrews, January 2011.
  3. Interview with Andrea Levere, March 2011.
  4. Youngmi Kim and Michael Sherraden. 2011. “Do parental assets matter for children’s educational attainment? Evidence from mediation tests,” Children and Youth Services Review, 33:6, 969–79.
  5. Trina Williams Shanks, Youngmi Kim, Vernon Loke, and Mesmin Destin. 2009. “Assets and Child Well-Being in Developed Countries,” Working Paper 09–66, Center for Social Development at Washington University in St. Louis.
  6. Kim and Sherraden.
  7. For further evidence of the relationship between net worth and economic mobility, consult the Pew Economic Mobility Project, which showed that among students in the bottom quintile for income, holding a college degree increased the chance of moving up economically.
  8. U.S. Department of Housing and Urban Development, Office of Policy Development and Research. 2011. Evaluation of the Family Self-Sufficiency Program: Prospective Study, ix.
  9. Interview with Rosanne Haggerty, March 2011.
  10. Substance Abuse Policy Research Program, “Housing for Homeless Alcoholics Can Reduce Costs to Taxpayers,” press release, 31 March 2009.
  11. Dennis P. Culhane, Stephen Metraux, and Trevor Hadley. 2002. “Public Service Reductions Associated with Placement of Homeless Persons with Severe Mental Illness in Supportive Housing,” University of Pennsylvania School of Social Policy Departmental Papers.
  12. In its potentially universal application, Haggerty’s notion of supportive housing echoes the rental housing concept offered by Larry Summers, former director of the National Economic Council, who gave the keynote speech: at some point in our lives, all of us will need rental housing.

 

Evidence Matters Home              Next Article

HUD USER footer
PD&R Mission Adobe Acrobat Reader Download Privacy Statement

HUD USER footer

HUD USER
P.O. Box 23268, Washington, DC 20026-3268
Toll Free: 1-800-245-2691    TDD: 1-800-927-7589
Local: 1-202-708-3178    Fax: 1-202-708-9981

The U.S. Department of Housing and Urban Development WhiteHouse.gov, Welcome to the White House The U.S. Governments Official Web Portal Fair Housing