V. The Impact of Welfare Reform on Tenants

Welfare reform will have impacts on residents of public housing that will differ depending upon their progress through the various stages of welfare reform. For example, during the early stage of most welfare reform programs, before assistance terminates, recipients are required to participate in activities related to work preparation and sanctions are applied when requirements are not met. These usually take the form of grant reductions rather than a complete withdrawal of assistance. Assistance recipients, however, do face termination of benefits when welfare reform time limits are reached. The potential consequences of this loss are much greater than those experienced under sanctions. When time limits are reached, the only way for residents to replace income is through employment. This section of the study explores variations in tenant income losses resulting from welfare reform and describes some potential unexpected changes in the composition of public housing authority tenancies.

A. Income Changes Due To Sanctions

Sanctions will affect a smaller portion of the income of mandated residents than the loss they will suffer if they cannot replace their welfare income with wages. Based upon previous program experience, a minority, though not an insignificant number, of residents might be expected to find themselves sanctioned for failure to comply with program rules.

During the initial three-year period in Virginia when mandated residents are still entitled to assistance, sanctions, not the termination of benefits, will be the main cause of income reductions. In Virginia, able-bodied parents receiving assistance are required to participate in work activities within 90 days after initial receipt of assistance. If they fail to show up for an assessment or attend a job readiness class, they receive a series of graduated sanctions. The first would be the loss of one month, followed by the loss of three months, followed by the loss of six months of benefits. Recipients can also be sanctioned if they fail to cooperate in identifying the fathers of children for whom assistance is provided, fail to see that children are attending school on a regular basis, or fail to have children immunized. Sanctions for truancy can lead to the removal of the child who is truant from the welfare grant. Failure to get a child immunized can lead to a $50 fine for the first child and a $25 fine for the next. Failure to cooperate in establishing paternity can lead to a 25 percent reduction in grant amount or the removal of the caretaker from the grant.

It is still too early to know how many households will end up being sanctioned although RRHA's Director of Social Services estimates that as many as one-third of mandated households might be subject to sanctions. The JOBS program provides another source of information on the prevalence of sanctions. Similar to VIEW requirements, enrollees were required to participate in job search or placement, job readiness, education, or work training activities. In Norfolk one-quarter of program enrollees were sanctioned because of some failure to meet program requirements and in Richmond one-fifth of enrollees were so sanctioned.⁷⁸ These numbers are significant considering the fact that VIEW work participation requirements cover a broader population than the population covered by the JOBS program where selection criteria were stricter. Thus, under VIEW an even higher proportion of households might be expected to be sanctioned. On the other hand, RRHA reports that sanctions for failing to identify fathers, to have children immunized, or to comply with school attendance requirements have affected only a tiny fraction of those already enrolled in the VIEW program.

For the near term, NRHA resembles RRHA in that sanctions will be the major threat to the income of mandated residents. DSS will be aggressive in imposing sanctions if a client does not comply with the employability plan, for truancy and for failure to cooperate in establishing paternity, with a portion of the assistance grant deducted according to TANF rules.⁷⁹ The Housing Authority estimates that between 5 and 15 percent of mandated households with school age children might end up receiving sanctions on the basis of school attendance and that another 2 to 5 percent could be sanctioned for other forms of non-compliance.⁸⁰ In the past, DSS has found that some households don't respond to sanctions. These cases are referred to the Agency's fraud units because it is assumed that a person who does not protest loss of income could have some other unreported income source.⁸¹

B. Income Changes From Required Work Participation

Among mandated residents, as few as forty percent in Richmond and over 90 percent in Cleveland and Toledo could lose almost all cash income when their TANF assistance terminates and they are unable to find jobs, according to the more conservative estimates. Among all Norfolk and Richmond public housing residents, the growth rate of indigents will exceed the growth rate of working households and this could be true not only in Norfolk and Richmond, but in the other HAs studied here. In Los Angeles, 30 percent of all housing authority residents are estimated to end up with hardly any cash income, and Toledo is not far behind with 26 percent. Because of special job accessibility and availability obstacles, mandated residents living in particular neighborhoods could end up especially disadvantaged. In the Cleveland neighborhood where the greatest concentration of mandated residents live, virtually none are estimated to find employment. In the comparable Toledo neighborhood, the situation is not much better. In these cases, there could be a wholesale loss of cash income to mandated neighborhood residents.

After the welfare reform clock runs out, the major income loss will come when income from assistance is not replaced by wages. Prior to welfare reform, even after paying rent, assisted residents have been able to retain the greater portion of their cash income. However, under a worst case scenario in which welfare income is not replaced after the clock has run out, RRHA residents not now working would lose $2,840 annually in cash income that they had left over after paying rent. Collectively, these households stand to lose over to $1.5 million in income that they have been receiving from welfare assistance. In Norfolk, the collective tenant losses would amount to over $460,000 in after-rent income. The income lost as a result of termination of benefits, however, represents only a portion of the income available to some mandated households. According to the experiences of the Housing Authorities and the State Department of Social Services, there are strong indications that many mandated residents have unreported sources of income.

Assuming that their incomes would approximate those of residents who are currently working, mandated Richmond and Norfolk residents who are successful in their job search should find themselves with at least twice as much after rent cash income than they had as TANF recipients although those who are successful in Richmond could be earning several thousand more than their counterparts in Norfolk.⁸² Furthermore, their earnings will be enhanced as a result of the Earned Income Tax Credit which could add substantially to their household income. Nevertheless, most of them will probably fall below the poverty line.⁸³ And their out of pocket expenses for child care and transportation could consume a large share of their disposable income.

On the other hand, both mandated residents who do find jobs and those who do not are likely to have continued access to shelter, an advantage they maintain over TANF recipients not receiving any housing subsidy. Even those recipients in public housing whose incomes are reduced to zero because they could not find jobs but still find ways to make minimum rent payments -- $50 in Richmond and $25 in Norfolk -- will maintain this advantage.

Although RRHA and NRHA, like many other housing authorities, are interested in establishing a greater income balance among residents, welfare reform may result in greater representation of residents at both the higher and lower end of the income range (see Table 9). When TANF assistance time limits are reached, employed housing authority residents will increase as a group because previously unemployed TANF participants who are successful in finding jobs will be added to the ranks of TANF and non-TANF residents who are already working. But even as this group grows, the group of those with hardly any or no income will grow even more relative to its current size, as residents who until now have had assistance income, loose it. Hence, housing authorities may end up providing shelter not only to a larger group of working households but to a larger group of households who have been reduced to the status of long-term indigents. Prior to TANF, Housing Authority households at the bottom of the income scale were primarily those who had at least welfare income as well as a much smaller group of households, including the formerly homeless, who had not yet been signed up for AFDC, disability, or other benefits. In the Post-TANF environment, very-low income households will be replaced by households without any cash income and without much prospect of obtaining cash income.

Although an increasing proportion of housing authority residents may end up with little or no cash income, more and more units could also be occupied by relatively better off, wage earning households. Just as the goal of achieving an income balance and shoring up rent revenues may be affected by the possibility that housing authorities will house a larger proportion of residents who have become indigent, so their ability to provide housing of last resort may also be affected by welfare reform. If wage earning households do not move on as their incomes rise, the units they occupy would not be available to low-income households. But, as welfare reform takes hold, there may be even more households in the future who will be unable to afford housing in the private housing market. Housing authority waiting lists could swell. Even if housing authorities wanted to recruit such households, they would have fewer resources for serving their needs.