Urban Policy Brief August 1996 Number 3 Promoting Self-Sufficiency in Public Housing Introduction America's public housing system has embarked on a period of fundamental change. Some of the most dangerous and dilapidated urban public housing projects are being replaced; HUD is intervening to improve the operation of chronically mismanaged public housing authorities (PHAs); the framework of regulations that govern public housing is being overhauled and streamlined to provide new flexibility for PHAs and new opportunities for residents. A primary goal of these far-reaching reforms is to ensure that, in the words of HUD Secretary Henry G. Cisneros, "public housing will no longer be a permanent residence, but a platform for families and individuals . . . to achieve self-sufficiency." A number of factors have made active measures to help large numbers of public housing residents become less dependent on public assistance both a political and a practical necessity. Provisions of recently enacted Federal welfare reform that impose work requirements on able-bodied adults and time limits on welfare benefits will affect most public housing families: more than 60 percent of non-elderly public housing residents receive Aid for Families with Dependent Children (AFDC); for approximately 46 percent of residents, it is their primary source of income. By contrast, only 35 percent of public housing residents derived their primary income from employment in 1994. To the extent that public housing families are unable to obtain employment before their benefits are exhausted, the consequences could be serious not only in human terms, but in the damage to the fiscal stability of public housing system, where rent levels are directly tied to residents' income. Any shortfall in PHAs' rental income is not likely to be replaced from Federal funds: seemingly inevitable reductions in public housing subsidies loom on the horizon as the Nation moves toward a balanced budget. In this atmosphere of reduced operating subsidies and deregulation, PHAs must find ways to help large numbers of residents reenter the economic mainstream if they are to remain viable as providers of affordable low-income housing. In the years ahead, self-sufficiency initiatives which provide low-income persons with an integrated array of education, training, employment, and supportive services designed to enable them to obtain jobs and, ultimately, leave the welfare rolls will necessarily become a critical element of public housing operations. Self-sufficiency strategies that boost residents' incomes are also attractive to many policymakers because they contribute significantly to the social mission of public housing infusing new economic diversity into public housing developments marked by concentrated poverty and nurturing role models in communities where few are employed. Achieving the social and economic objectives of self-sufficiency programs will be no easy task. The characteristics of the public housing population suggest that many face multiple, serious barriers to employment and independence. Public housing families are among the poorest residents of America's poorest urban neighbor-hoods household income in public housing averages only 17 percent of the area median. In many of the Nation's larger housing authorities, more than 80 per-cent of nonelderly families are headed by a single female with children. A growing share of public housing residents have a long history of dependency although the median length of public housing residence is 4 years, 29 percent of public housing residents remain for 10 years or more. Perhaps most serious, however, is that public housing is located disproportionately in areas of concentrated poverty frequently plagued by social ills such as crime and drugs, teen pregnancy, high dropout rates, and chronic unemployment. This Urban Policy Brief provides an introduction to HUD-sponsored self-sufficiency initiatives and reviews evidence regarding the impact of these and other programs on the ability of very low-income families to obtain employment and "graduate" from welfare dependency. Federal Programs For many years, HUD has provided assistance to PHAs in coordinating the delivery of education, training, and supportive services to their residents. Since the mid-1980s, HUD has mounted a series of initiatives designed to target an integrated array of services and incentives to assisted families. Although these housing-based self-sufficiency programs have primarily served Section 8 recipients, the similar characteristics of the public housing population suggests that lessons from these programs would be applicable to future efforts targeted to public housing residents. * Project Self-Sufficiency. HUD initiated its first self-sufficiency program in 1984. Under Project Self-Sufficiency, HUD provided a special allocation of almost 10,000 Section 8 certificates to 155 communities that agreed to arrange services such as education, job training, child care, transportation, counseling, and job placement assistance for low-income, single-parent households selected from Section 8 waiting lists. Once chosen for the program, participants received top priority in obtaining Section 8 certificates. * Operation Bootstrap. After the Project Self-Sufficiency demonstration ended, HUD created the similarly structured Operation Bootstrap in 1989 to widen eligibility to include two-parent families from Section 8 waiting lists. Despite this change, enrollment remained predominantly single mothers. * Family Self-Sufficiency. In 1990 Congress expanded the scope of housing-based self-sufficiency by creating the Family Self-Sufficiency program. Although PHA participation was initially voluntary, in FY 1993 Congress began requiring all PHAs receiving funds for new Section 8 or public housing units to operate a Family Self-Sufficiency program, with some exceptions. Only current residents of public and assisted housing are eligible for Family Self-Sufficiency. For the first time, HUD placed a time limit on self-sufficiency program participation: Family Self-Sufficiency participants enter service contracts of up to 5 years (which can be extended for good cause), during which the head of each family must seek employment and the PHA must coordinate support services for them. PHAs consider families to have graduated from Family Self-Sufficiency when they leave welfare or when 30 percent of their income exceeds the fair market rent for their housing unit. Administrative Models. HUD-sponsored self-sufficiency initiatives have been designed to give PHAs broad flexibility in administering their programs. Researchers documenting Operation Bootstrap suggested three categories that continue to encompass most housing-related self-sufficiency programs. Under the PHA-centered model, core program functions are entrusted to PHA staff. In the PHA-contract model, PHAs enter agreements with outside agencies that provide assessment, referral, and case management. Or PHAs might choose to use a pass-through model, entering agreements with an existing service provider to provide Section 8 assistance to eligible participants in that program. Screening Participants. Each of HUD's self-sufficiency programs has employed some type of participant screening to ensure participants are motivated to work toward self-sufficiency. Both Project Self-Sufficiency and Operation Bootstrap sponsors considered evidence of previous employment history, educational attainment, participation in job training programs, and other factors in selecting participants. In designing Family Self-Sufficiency, HUD ended the practice of allowing PHAs to limit enrollment by education level or employment history to ensure that local programs would not simply enroll those eligible families most likely to become self-sufficient on their own. Under Family Self-Sufficiency, PHAs may reserve up to half their slots for applicants already en-rolled in a self-sufficiency program, but are otherwise limited to indirect means of ensuring participant motivation, such as requiring applicants to attend orientation classes or to locate child care in advance. Incentives and Disincentives. In Project Self-Sufficiency and Operation Bootstrap, the Section 8 assistance was the primary incentive for participation. It was an effective inducement HUD's documentation of Operation Bootstrap acknowledged that the promise of quick housing assistance was the predominant motive for applicants. With Family Self-Sufficiency, HUD ended the effective use of housing assistance as an incentive by limiting eligibility to current Section 8 or public housing residents. Instead, Family Self-Sufficiency uses escrow accounts as incentives for participants to complete their service plans. Any increases that participants pay in rent as their incomes grow are put into an interest-bearing escrow account that may be tapped only for program-related expenses such as tuition until participants complete their service contracts and leave welfare. Families still on welfare at the end of their contract period forfeit the proceeds of their escrow account. Before Family Self-Sufficiency, PHAs had no "stick" to balance against the "carrot" of housing assistance participants expelled for non-performance could not have their rental assistance withdrawn for that reason. Family Self-Sufficiency participants who do not comply with their service contracts may forfeit their escrow account and/or have their Section 8 assistance but not public housing assistance terminated. The Gateway Program One of the most innovative experiments in public housing self-sufficiency to be undertaken in recent years is the Gateway Transitional Families Program, conceived by the Charlotte (North Carolina) Housing Authority and authorized by Congress in 1987. Participants spend their first 2 years in a "remedial" phase, receiving support services that help them prepare to enter the job market. Families then spend up to 5 years in a "transitional" phase, during which they work and receive ser-vices designed to help them buy and maintain a home. The Charlotte Housing Authority has chosen not to enroll families with annual incomes above $12,500 a separate homeownership program exists for higher income residents or who appear to need more than 2 years of services to enable participants to obtain jobs that would make homeownership affordable. Applicants undergo a screening process that includes reading and occupational preference tests and checks of criminal records and rental and credit histories. The experience of Gateway points out one of the most difficult problems facing urban PHAs that screen applicants in this way: it can be difficult to locate people who are both interested in and qualified for the program. Housing authority staff screened 663 applicants to select 167 participants. Current public housing residents were particularly hard to recruit for three reasons: over half had less than a high school education; some applicants had a history of drug use, criminal behavior, or late rent payments; and a number of applicants simply did not follow through with the lengthy application process. Only about 3 percent of existing public housing residents qualified for Gateway when it started as a result, slightly over half of the 130 participants surveyed by researcher William Rohe in his preliminary assessment were chosen from the waiting list. Gateway also illustrates another important feature of some self-sufficiency initiatives using housing assistance to create a residential "campus" for participants. This concept is based on the belief that housing participants together in a single development offers unique advantages, such as fostering a "community of purpose" that would encourage learning and work. In contrast to programs in which participants or service locations are geographically dispersed, this strategy also creates efficiencies in service delivery and reduces barriers to participation through co-location. Finally, a residential setting is thought to make it easier for staff to help residents address personal and family problems. However, Gateway may not have fully realized some of these presumed benefits because the development selected for clustering participants, located in one of Charlotte's most distressed neighborhoods, also housed non-participants and Gateway dropouts whom the housing authority did not relocate creating a less than ideal atmosphere for pursuing self-sufficiency goals. Like Family Self-Sufficiency, the Gateway Program also uses escrow accounts as an incentive for participants to pursue the program's ultimate goal of homeownership. The Charlotte Housing Authority caps participants' rents during the remedial phase, allowing them to rise once again during the transitional phase. However, the housing authority places in an escrow account the difference between the participant's rent payment and the average operating expense for a public housing unit. Participants who graduate from the program and pursue homeowner-ship may access their accounts, but unlike Family Self-Sufficiency escrow accounts, participants must use their proceeds for homeownership expenses. Progress Toward Self-Sufficiency Self-sufficiency programs have defined "success" differently, but overall, the national policy objectives of these initiatives have remained constant to help public and assisted housing residents achieve a level of personal and financial responsibility that would permit them to support their families without welfare and perhaps, ultimately, without housing assistance. Although the programs reviewed in this Brief produced a modest positive impact on participants' job readiness and earnings in the short term, this was rarely enough by itself to bridge the gap between welfare and independence or between assisted and market-rate housing. HUD's 1988 evaluation of Project Self-Sufficiency found that 42 percent of participants from all sites had either obtained full-time employment or were enrolled in 2- or 4-year college degree programs both encouraging out-comes. The goal of the program was to help participants move into entry-level jobs that had advancement potential; therefore it is not surprising that among the participants who were employed full-time, the average wage was only $5.00 per hour. A survey of almost half of the Operation Bootstrap sites revealed several statistically significant changes in participant characteristics between the 6 months prior to program entry and the end of the 25-30 month follow up period. Employment increased from 40 to 49 percent and the number of unemployed participants looking for work increased 8 percent. However, among those working, fewer than half were earning $4.25 per hour or more. A mere 20 percent were in jobs that provided health care benefits. The most common problem Operation Bootstrap administrators faced in moving participants into employment was a lack of job opportunities that were not low-paying, clerical positions. Despite the mainly promising outcomes of Operation Bootstrap, participants receiving welfare decreased by only 2 percentage points and receipt of food stamps actually increased during the evaluation period. Only about 10 percent of participants had surrendered their Section 8 certificate by the follow up period. Operation Bootstrap researchers, however, did not feel that these were necessarily undesirable outcomes, because many participants were pursuing activities that might lead to self-sufficiency in the long-term. These modest employment and income outcomes are consistent with research on welfare-to-work initiatives, which has found that increases in participants' earnings were related to increases in the number of hours worked rather than in wage levels and that their new earnings were not enough to significantly reduce welfare receipt. Although no income and employment data are available on Gateway participants, Rohe's preliminary evaluation reveals a significant attrition problem. Only 45 percent of the 187 families accepted into the program by September 1993 were active participants. Most active enrollees were in the remedial stage, through which many participants progressed more slowly than the 2 years anticipated by the program's designers. Rohe has identified family responsibilities and the prerequisites of basic vocational course work as among the factors impeding participant progress. This finding points up the intensive, relatively long-term assistance that severely disadvantaged people may need to make up the basic skills deficits that would enable them to seek any but the most menial employment. Sixteen percent of Gateway participants had"graduated." Significantly, most graduates chose to move out of public housing as soon as their incomes permitted and were not willing to remain in public housing to save for homeownership. Most troubling of all, over 15 percent of participants had withdrawn voluntarily by September 1993, and another 23 percent had been terminated for illegal activities, lease violations, or failure to comply with their service plans. Several factors appear to account for the high dropout/termination rates. Some families who were initially chosen from the CHA waiting list had joined the program in order to get housing more quickly. Some people were not interested in the type of education offered through the program, or in the nontraditional careers for women that were being encouraged. Barriers to Large-Scale Programs Self-sufficiency programs such as those described above have served only a tiny percentage of the estimated 4 million families living in public and assisted housing. The limited evidence on the challenges faced by housing-related self-sufficiency programs such as the characteristics of participants, the institutional capacity available to coordinate and provide necessary support ser-vices, the influence of external factors, and participant motivation may shed some light on the issues that must be addressed if such initiatives are to move larger numbers to work in the future. Participant Characteristics. As noted above, public housing residents are particularly likely to have characteristics single parenthood, evidence of long-term welfare dependency, residence in areas of concentrated poverty that would be expected to make progress toward self-sufficiency more difficult. Limited data available from HUD-sponsored self-sufficiency initiatives show participants shared most of these characteristics. However, participant screening per-formed by program sponsors resulted in the admission of enrollees with relatively high levels of educational attainment. At least three-fourths of participants in each of the self-sufficiency initiatives discussed here (there are no data on Family Self-Sufficiency participation) were high school graduates, compared with approximately 44 percent of all public housing residents. Institutional Capacity. HUD's assessment of Operation Bootstrap notes that PHAs regardless of their commitment to encouraging self-sufficiency struggled to reconcile their new role as service coordinators with their traditional work as property managers. Nonetheless, Federal policy relies on PHAs to either provide supportive and vocational services directly or, more likely, forge partnerships with local service providers. Neither strategy is easy. Few PHAs have the size or fiscal and staff resources for direct service provision to be a practicable option. The most active PHAs generally use core staff to perform administrative, and perhaps, case management functions, while leaving more specialized service delivery to outside agencies. Researcher Anne Shlay has commented that there is a tendency for service providers participating in self-sufficiency efforts to regard themselves simply as "vendors" without any real stake in the program's success. However, HUD re-ports that Project Self-Sufficiency service providers, many of whom participated on their PHA's Coordinating Committee, worked well to promote program goals. PHAs in Operation Bootstrap reported that providing housing assistance to clients of existing self-sufficiency programs encouraged strong partnerships with local ser-vice providers. Under Family Self-Sufficiency, PHAs can exercise similar leverage by establishing admission preferences for participants in non-PHA self-sufficiency programs or services in return for the participation of those service providers in Family Self-Sufficiency activities. In some rural areas and small cities, the local social ser-vice delivery system simply may not have the capacity to respond to critical needs of public housing residents. For example, a 1995 U.S. General Accounting Office (GAO) study found that the availability of affordable child care was a decisive factor above the availability of education, training, and transportation in the decisions of low-income mothers to seek and maintain employment. Yet HUD's 1988 report on Project Self-Sufficiency showed that PHAs found child care and transportation services the most difficult to arrange, because local resources tended to be scarce or unaffordable. Child care shortages already limit mandatory participation in Job Training Partnership Act (JTPA) and Job Opportunities and Basic Skills (JOBS) programs the principal sources of education, job training, and employment services for self-sufficiency programs. External Factors. The capacity of public and nonprofit social service agencies is only one possible external constraint on the outcomes of self-sufficiency programs. It is important to note that results may be influenced by factors outside the control of program administrators or participants, such as the structure and characteristics of local labor markets. Unemployment rates in central cities, where the need for public housing self-sufficiency programs is perhaps most intense, are generally much higher than in suburban areas, where the growth in low-skill and entry-level jobs is typically concentrated. Moreover, the wages that most self-sufficiency participants command cannot lift a family out of poverty or off welfare. The employment income of a single parent with two children working full-time at a minimum wage job fell $3,400 below the Federal poverty line in 1995. Even if the minimum wage rose to $5.15 per hour, a family of three would still be more than $1,500 below the poverty threshold. Such families would continue to need significant income assistance. Participant Motivation. The design of the initiatives dis-cussed here typically lasting from 1-7 years reflect a concern with ensuring that participants are truly committed to enduring the rigors of a self-sufficiency program. However, the means used to ensure motivation can have unanticipated consequences. According to HUD's evaluation of Project Self-Sufficiency, "communities that did not screen participants for motivation tended to enroll a higher percentage of participants who were more interested in obtaining a Section 8 certificate than in receiving training that might lead to a job." The Gateway program responded to this problem by requiring that unassisted families remain on the public housing waiting list for 6 months before becoming eligible for the program. HUD's decision to bar screening for education or employment history in Family Self-Sufficiency drew sharp criticism from PHAs, who expressed concern that ser-vice providers might not accept unscreened participants into their programs not a frivolous concern, in light of PHAs' reliance on cultivating a network of support service providers. PHAs also feared that this change would force them to spend more time in recruiting, monitoring, and sanctioning unscreened participants. In addition, the apparent willingness of even successful Gateway participants to abandon their escrow accounts raises some question about the effectiveness of such a deferred reward as an incentive particularly when the use of escrow proceeds are limited to an even more distant goal such as homeownership. Despite these caveats, the active use of screening and incentives implies that the public and assisted housing residents participating in these programs were among the most likely to attain self-sufficiency, and thus that the modest progress reported here represent something approaching a "best case" outcome for broader self-sufficiency initiatives using similar rules and tools. Current Federal Policy HUD Secretary Henry G. Cisneros has launched a comprehensive reform effort designed to "change the negative social dynamic of public housing" and make self-sufficiency an integral goal of the public housing system. HUD has been working with Congress to infuse public housing with a blend of opportunities and responsibilities that will encourage progress toward self-sufficiency. At the same time, HUD is launching initiatives designed to encourage local PHAs to develop new ways of integrating housing and supportive services. Infusing Incentives and Responsibilities into Public Housing. Arguably, one of the greatest systemic barriers to self-sufficiency for public housing residents has been Federal rent rules that raise residents' rents in lock-step with income. Such regulations have been characterized as a demoralizing surtax that siphons off 30 cents of every new dollar of income earned by families struggling to become self-sufficient. However, Congress recently changed these rules to hold down rents for employed residents, allowing PHAs to disregard newly earned in-come or medical insurance payments in calculating the income from which a resident's rent is determined. HUD also is urging PHAs to make access to the opportunities created through self-sufficiency efforts even, under certain circumstances, continued residence in public or assisted housing conditioned on responsible behavior by residents. Pioneering self-sufficiency initiatives such as Gateway and Cleveland's Miracle Village have turned to enforceable lease terms and contracts that clearly define residents' obligations to obey the rules and work toward self-sufficiency goals. Creating Environments for Self-Sufficiency. Clinton Administration policies envision a public housing system that not only provides shelter, but is also a springboard to opportunity and independence for low-income families. HUD is sponsoring several initiatives that help PHAs create such service-enriched environments. Promoting self-sufficiency is a key element of HUD's ongoing effort to replace some of the most distressed urban public housing developments through the HOPE VI program. In addition to creating safer, socially and economically integrated living environments more conducive to achieving self-sufficiency, HOPE VI emphasizes integration of supportive services into the new neighbor-hoods and provides funding for this purpose. At HOPE VI sites such as Earle Village in Charlotte, the revitalized community will contain a semi-autonomous section re-served for families enrolled in self-sufficiency programs such as Gateway. At the Hillside Terrace redevelopment in Milwaukee, a consortium of service providers is offering job training and supportive services to all residents as part of Wisconsin's welfare reform initiative. HUD is also promoting residential self-sufficiency pro-grams in its new "Campus of Learners" initiative, under which innovative partnerships between HUD, housing authorities, other local institutions, and private businesses will transform 12-15 public housing developments into comprehensive learning and living centers, where residents can use computer-based learning and other educational and training opportunities in a mutually supportive environment to develop highly market-able career skills. It is hoped that these high-tech resources, combined with life skills training and supportive services, will enable residents to emerge from their time-limited residence prepared to move into secure jobs and private housing. In addition, HUD is sponsoring a new demonstration program called Moving to Work, through which up to 30 PHAs will test various approaches to moving residents into work. PHAs will be able to combine public housing operating subsidies, modernization funding, and Section 8 assistance to design the most effective blend of housing and supportive services for very low-income families. A HUD-sponsored research initiative called Jobs-Plus, undertaken in conjunction with this demonstration, will saturate selected developments in each of 6 10 urban PHAs with state-of-the-art employment services and incentives. Researchers will assess the effectiveness of various strategies including financial incentives to work and linkages with private employers for dramatically in-creasing employment rates in these developments and transforming them into places that support and encourage work. Conclusions More than a decade after the first HUD-sponsored self-sufficiency program was launched, it is unclear to what extent such initiatives can offer public housing residents a path toward the self-sufficiency their names promise. True independence from welfare is a difficult and, at best, uncertain odyssey for these families a journey longer than many people acknowledge, and clearly too long to be captured by the limited evaluation research available on housing-related self-sufficiency programs. The evidence discussed here indicates that an integrated array of educational, vocational, and supportive services can help families receiving Federal housing assistance take concrete steps toward employment. But the distance between employment and self-sufficiency remains as wide as the gap between the minimum wage and a living wage most of those who succeed by the standards of these programs will continue to need income and housing assistance for some time. Nor is it clear whether the programs discussed here though small relative to the need are equal to the challenge of helping large numbers of public housing residents move toward self-sufficiency. However, HUD has committed itself to finding strategies to meet the challenge ahead spreading successful self-sufficiency models and exploring new ones, even as it continues to implement systemic changes that hold out the promise of making public housing a true "platform to self-sufficiency" for its residents. Additional Readings Bloom, Howard S., et al. The National JTPA Study: Title IIA Impacts on Earning and Employment at 18 Months. Bethesda, MD: Abt Associates, Inc., 1993. Bryson, David B. and Roberta L. Youmans. Passage from Poverty: Self-Sufficiency Policies and the Housing Programs. Washington, DC: National Low Income Housing Coalition, 1992. Gueron, Judith M. and Edward Pauly. From Welfare to Work: Summary. New York: Manpower Research Corp-oration, 1991. National Association of Housing and Redevelopment Officials and American Public Welfare Association Family Self-Sufficiency: Linking Housing, Public Welfare and Human Services. Washington, DC: NAHRO, 1991. Newman, Sandra J. "The Implication of Current Welfare Reform Proposals for the Housing Assistance System." Fordham Urban Law Journal 22 (1995): 1231-47. Rohe, William. "Assisting Residents of Public Housing to Achieve Self-Sufficiency: An Evaluation of Charlotte's Gateway Families Program." Journal of Architectural and Planning Research 12 (1995): 259-77. Shlay, Anne B. "Family Self-Sufficiency and Housing." Housing Policy Debate 4 (1993): 457-495. U.S. Department of Housing and Urban Development Office of Policy Development and Research. Operation Bootstrap (3 volumes). Washington, DC: HUD, 1994. _______. Project Self-Sufficiency: A Summary. Washington, DC: HUD, 1988. _______. Project Self-Sufficiency: Interim Report on Progress and Performance. Washington, DC: HUD, 1988. _______. Public Housing That Works: The Transformation of America's Public Housing. Washington, DC: HUD, 1996. U.S. General Accounting Office. Public and Assisted Housing: Linking Housing and Supportive Services to Promote Self-Sufficiency. GAO/RCED-92-142, 1992. _______. Self-Sufficiency: Opportunities and Disincentives on the Road to Economic Independence. GAO/HRD-93-23, August 1993. _______. Welfare to Work: Child Care Assistance Limited; Welfare Reform May expand Needs. GAO/HEHS-95-220, September 1995.