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88–413 PDF 2003

S. HRG. 107–952

TANF REAUTHORIZATION AND

FEDERAL HOUSING POLICY

HEARING

BEFORE THE

SUBCOMMITTEE ON HOUSING AND TRANSPORTATION

OF THE

COMMITTEE ON

BANKING, HOUSING, AND URBAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

ON

THE HOUSING PROBLEMS OF FAMILIES CURRENTLY ON TANF AND

THOSE LEAVING TANF FOR EMPLOYMENT, AND PROPOSALS THAT

SHOULD BE CONSIDERED TO INCREASE THE EFFECTIVENESS OF

FEDERAL HOUSING ASSISTANCE AS A TOOL FOR HELPING MOVE

PEOPLE TO EMPLOYMENT

MAY 1, 2002

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

(

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

PAUL S. SARBANES, Maryland, Chairman

CHRISTOPHER J. DODD, Connecticut

TIM JOHNSON, South Dakota

JACK REED, Rhode Island

CHARLES E. SCHUMER, New York

EVAN BAYH, Indiana

ZELL MILLER, Georgia

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JON S. CORZINE, New Jersey

DANIEL K. AKAKA, Hawaii

PHIL GRAMM, Texas

RICHARD C. SHELBY, Alabama

ROBERT F. BENNETT, Utah

WAYNE ALLARD, Colorado

MICHAEL B. ENZI, Wyoming

CHUCK HAGEL, Nebraska

RICK SANTORUM, Pennsylvania

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

JOHN ENSIGN, Nevada

STEVEN B. HARRIS, Staff Director and Chief Counsel

WAYNE A. ABERNATHY, Republican Staff Director

MARTIN J. GRUENBERG, Senior Counsel

SHERRY E. LITTLE, Republican Legislative Assistant

MARK A. CALABRIA, Republican Economist

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator

GEORGE E. WHITTLE, Editor

SUBCOMMITTEE ON HOUSING AND TRANSPORTATION

JACK REED, Rhode Island, Chairman

WAYNE ALLARD, Colorado, Ranking Member

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JON S. CORZINE, New Jersey

CHRISTOPHER J. DODD, Connecticut

CHARLES E. SCHUMER, New York

DANIEL K. AKAKA, Hawaii

RICK SANTORUM, Pennsylvania

JOHN ENSIGN, Nevada

RICHARD C. SHELBY, Alabama

MICHAEL B. ENZI, Wyoming

CHUCK HAGEL, Nebraska

KARA M. STEIN, Staff Director

TEWANA WILKERSON, Republican Staff Director

(II)

CONTENTS

MAY 1, 2002

Page

Opening statement of Senator Reed ...................................................................... 1

Opening statements, comments, or prepared statements of:

Senator Corzine ................................................................................................ 2

Senator Kerry ................................................................................................... 21

WITNESSES

Michael O’Keefe, Commissioner, Minnesota Department of Human Services ... 5

Prepared statement .......................................................................................... 22

Barbara Sard, Director of Housing Policy, Center on Budget and

Policy Priorities .................................................................................................... 7

Prepared statement .......................................................................................... 26

Robert Rector, Senior Research Fellow, The Heritage Foundation ..................... 9

Prepared statement .......................................................................................... 39

(III)

(1)

TANF REAUTHORIZATION AND

FEDERAL HOUSING POLICY

WEDNESDAY, MAY 1, 2002

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, SUBCOMMITTEE ON HOUSING AND TRANSPORTATION, Washington, DC.

The Subcommittee met at 2:30 p.m., in room SD–538 of the

Dirksen Senate Office Building, Senator Jack Reed (Chairman of

the Subcommittee) presiding.

OPENING STATEMENT OF SENATOR JACK REED

Senator REED. Let me call the hearing to order, and welcome all

of our witnesses and everyone who is here this afternoon. This is

a hearing by the Housing and Transportation Subcommittee on the

issue of TANF Reauthorization and Federal Housing Policy. This

Subcommittee is very concerned about the housing affordability crisis facing many regions of our country. Statistics show a growing

gap between income and housing costs in almost every State. It is

not surprising that this affordable housing crisis is affecting lowincome families the most severely. According to the National Housing Conference, the number of working families in the United

States with critical housing needs grew from 3 million to 3.7 million between 1997 and 1999. About eight out of 10 families pay

more than half of their income for housing.

Nowhere in this country does the minimum wage work of one

person come close to paying the rent according to the most recent

National Low Income Housing Coalition report.

Not surprisingly, housing is a real problem both for families receiving Temporary Assistance to Needy Families, TANF, benefits,

and those who have moved from Welfare to Work. In only three

States—Alaska, West Virginia, and Wisconsin—do families receive

TANF benefits high enough to obtain modest housing with less

than their entire TANF grant. High housing costs often leave families with insufficient income for basic necessities or expenses, such

as funding for child care, work, clothing, transportation, and many

other things.

We also know that families who pay too much of their income for

housing, or live in severely inadequate or overcrowded housing,

move more frequently. Such moves interrupt work schedules, jeopardize employment, and adversely affect the educational progress

of children. A lack of affordable housing can also prevent families

from making moves to areas with greater employment opportunities or safer neighborhoods or better commutes.

2

Affordable housing is clearly important and worthy of support. I

believe that we need to enable States to better respond to critical

housing needs of working families. It would seem self-evident that

if one goes to work every day and collects a regular paycheck that

this should be enough to secure a reasonable place to live and take

care of one’s family.

It is my hope that today’s hearing will allow us to explore how

Federal housing policy can be used to help strengthen our Nation’s

welfare policy and better support families moving from Welfare to

Work.

Today, we will hear from two panels of witnesses. The first panel

will consist of my colleague, Jon S. Corzine, U.S. Senator from New

Jersey. On our second panel we will hear from Mr. Michael

O’Keefe, Commissioner of the Minnesota Department of Human

Services; Ms. Barbara Sard, Director of Housing Policy, Center on

Budget and Policy Priorities; and Mr. Robert Rector, Senior Research Fellow of The Heritage Foundation. Each of our witnesses

have been asked to discuss the interconnections between Federal

housing policy and welfare policy, what can be done to encourage

States to consider housing needs and TANF planning and implementation, and any recommendations for increasing the effectiveness of Federal housing programs as a tool for helping people move

from Welfare to Work.

Before we begin, I would also like to thank each of you for your

written testimony, which has been shared with all of the Members

of the Senate Banking Committee, and I would ask that you keep

your oral comments to within a reasonable amount of time.

Thank you.

When my colleague and good friend, the Ranking Member, Senator Allard arrives we will ask him to make his opening comments.

But Senator Corzine, we are delighted that you are here. You are

a Member of the Senate Banking Committee. We welcome you to

the Subcommittee.

STATEMENT OF SENATOR JON S. CORZINE

Senator CORZINE. Thank you, Mr. Chairman. I hope that wasn’t

an admonition that I was going to enter a filibuster here. I must

say that if I just said ditto to what you had in your opening statement, I really would embrace most of those themes. I appreciate

this opportunity. I think this is a very important topic for us to be

addressing as we go through this effort on TANF reauthorization,

Welfare to Work. Providing access to affordable housing I think is

a fundamental part, as you have expressed, of making sure lowincome working families have a real shot at making that a reality,

Welfare to Work, and it should be looked at in the context of reducing poverty, not just getting to work.

While welfare reform has succeeded in moving thousands of families off of welfare, it has condemned many to low-wage jobs that

keep them trapped in poverty, and that is actually one of the concerns that I will be expressing in a bill that Senator Wellstone and

I will be talking about later in another hearing.

Mr. Chairman, a lack of affordable housing is one of the main obstacles facing families trying to leave welfare, as you have suggested. Even for those families who do succeed, a lack of affordable

3

housing can mean a return to the welfare rolls. And for those who

have reached State or Federal welfare time limits, it can sadly lead

to homelessness.

Since 1997, welfare reform has encouraged 60 percent of New

Jersey’s welfare families to leave welfare for work. Despite that,

these families are now earning wages that are two to three times

the modest cash benefits of TANF, and that is a good thing. Families in New Jersey and across the country still struggle to afford

housing. For example, in the year 2000, 44 percent of all renters

in New Jersey were unable to afford the Fair Market Rent for a

two-bedroom unit, which is just shy of $1,000. An individual working 40 hours a week and earning minimum wage in New Jersey

earns about $824 a month. So, you see the juxtaposition of $1,000

rental requirement for a fair market for a two-bedroom, and $824

a month in earnings. That just doesn’t work. And I think it raises

the specter of where we have a real problem.

New Jersey is not alone. As you mentioned, they are one of nine

States that actually works with TANF dollars to maintain efforts,

but it just doesn’t cut it for these low-income working families, and

we are condemning them, I think, to a life of poverty. New Jersey uses $2 million of its Federal TANF block grant to

provide emergency housing assistance to working families with income up to 250 percent of Federal poverty level. However, because

Federal law limits housing assistance to 4 months, the State is

forced to stop its assistance after that, even if the family is still at

risk of becoming homeless. And that is actually a reality in a lot

of people’s lives.

New Jersey has also embarked on several innovative low-income

housing initiatives aimed at encouraging work and improving selfsufficiency. New Jersey Housing Assistance Program, for instance,

provides temporary housing subsidies to eligible welfare recipients

transitioning to work. Recipient families receive a housing subsidy

that is reduced as their income increases. Savings from the reduced

subsidy are placed in an escrow account the family may access to

purchase a home, pay for educational expenses, or for emergency

purposes.

Despite the fact that the New Jersey Housing Assistance Program encourages work and creates savings, I think the sad part is

that this only works for 350 low-income families in New Jersey.

New Jersey cannot use its Federal TANF fund to expand this program because the money is not there.

New Jersey has allocated $4 million of the block grant to help

low-income working families utilize Section 8 housing vouchers.

That is another positive initiative. These one-time funds can be

used for security deposits and moving expenses. It can also be used

for payments to landlords while repairs are being made to rental

units to bring Section 8 standards to bear in some of the housing.

This can make a modest difference and it is a helpful initiative

that we support and certainly think we need to make sure our

TANF funds are made available to expand these programs.

Next week, Senator Wellstone and I will be introducing comprehensive TANF reauthorization legislation that, in addition to increasing access to education, job training, child care, substance

abuse, and mental health counseling, will give States tools to do a

4

better job to address the housing needs of low-income working families, many like the ones that we have in New Jersey, ones though

that are inadequate because of inadequate funding.

Specifically, I think that the Wellstone–Corzine bill clarifies that

States can use Federal TANF dollars to provide supplemental

housing benefits, minor housing rehabilitation, and emergency

housing assistance to families transitioning from Welfare to Work,

without requiring them to remain on welfare in order to receive

these benefits.

Our legislation also requires States to address housing needs in

their State welfare plans. Under current law, Public Housing Agencies are required to enter into cooperation agreements with welfare

agencies; however, there is no requirement that those agencies

enter into these agreements. Wellstone–Corzine would require

agencies to work with Public Housing Agencies to coordinate workpromoting services, implement earnings disregards, and improve

employment outcomes for all public housing residents. Earnings

disregards allow TANF recipients who receiving housing assistance

to receive this assistance for up to 2 years, regardless of increases

in income. These are the kinds of programs that encourage rather

than penalize work.

The Wellstone–Corzine bill also creates a $50 million demonstration project to create supportive housing for TANF families with

multiple barriers to work, including both mental and physical disabilities. Supportive housing which integrates employment services

and rehabilitative services has succeeded in helping many homeless adults find employment and permanent housing. These programs hold similar promise for TANF families with significant barriers to work.

Mr. Chairman, as we reauthorize the TANF Program, we must

recognize the role affordable housing plays in helping low-income

families transition from Welfare to Work, become self-sufficient,

and provide a stable, nurturing environment for families. I know

you feel this way and I certainly urge my colleagues to join in the

effort to ensure that working families have stable homes. We need

to pack these kinds of initiatives into our welfare program.

Mr. Chairman and Members of the Committee, I look forward to

working with you to make this a reality.

Senator REED. Thank you very much, Senator Corzine.

We also look forward to working with you with respect to your

initiative along with Senator Wellstone. Thank you for your testimony today and both your knowledge and your concern about a

very important issue.

Let me call forward the second panel, Mr. O’Keefe, Ms. Sard, and

Mr. Rector. Again, welcome to the Committee.

Mr. Michael O’Keefe is Commissioner of Minnesota’s Department

of Human Services. It is Minnesota’s largest Department with an annual budget of more than $6 billion and 6,700 employees. Prior

to joining the Department of Human Services in 1999, Mr. O’Keefe

served as Executive Vice President and Chief Executive Officer of

the McKnight Foundation in Minneapolis.

Ms. Barbara Sard is the Director of Housing Policy at the Center

on Budget and Policy Priorities in Washington, DC, where she has

worked since 1997. Barbara Sard is a leading expert on tenantVerDate 11-MAY-2000 08:00 Aug 21, 2003 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 88413.TXT SBANK4 PsN: SBANK4
5

based rental assistance and issues concerning admissions to subsidize housing programs and the intersection of housing and welfare policy.

Mr. Robert Rector is a Senior Research Fellow at The Heritage

Foundation where he focuses on a range of issues related to welfare

reform.

Once again let me thank you for your written statements which

are incorporated within the record and I would ask if you could

maintain a 5-minute time limit on your oral testimony.

Mr. O’Keefe, would you begin please?

STATEMENT OF MICHAEL O’KEEFE, COMMISSIONER

MINNESOTA DEPARTMENT OF HUMAN SERVICES

Mr. O’KEEFE. Thank you, Mr. Chairman and Members of the

Committee. It is a pleasure to be here today. I have submitted my

written remarks for the record. I would like to associate myself

with your opening remarks and those of Senator Corzine regarding

the crisis that we face and the need to address affordable housing

as a part of our strategy to make welfare reform successful.

Minnesota is a national model for welfare reform and one reason

we have been successful is because we have had the flexibility to

be able to shape the program in ways that meet the needs of our

citizens.

Over a 3-year period of time, 75 percent of families have left the

program to go to work or engage in other activities. These are good

jobs, more than $9 an hour. The average income of people leaving

welfare in Minnesota is about 175 percent of poverty and we have

been at the top or next to the top among all 50 States in salary

levels, as well as persistence in that job for people off of welfare.

Minnesota has focused on self-sufficiency through work as the

goal of its program not work as the ultimate goal.

The most dramatic finding from Minnesota’s pilot program,

which was one of the early pilots authorized by the Federal Government, were increased marriage rates by single parents. There

was a dramatic increase in family stability, remaining married, on

the part of two-parent families. There was a decrease in domestic

violence, higher rates of school attendance among kids, higher performance among kids and, interestingly enough, for two-parent

families increased homeownership.

Our program has been outstandingly successful against the goals

the State has set for it. And frankly, the reasons are straightforward. Give a family basic financial stability and ensure that

that stability can be relied upon, and that family will be stable.

How have we done this? We worked with individuals, preparing

individualized work plans, strategies for moving people into work,

and we have put in place a comprehensive set of supports, including child care, affordable housing, transportation, on-the-job support, pregnancy prevention, tax credits, et cetera. We have a total

package and a comprehensive strategy for dealing with poverty.

We have been able to do this, in part, because the TANF money

has been flexible. And that is what is critical to us in maintaining

the success of this program.

Housing has been a challenge. You all are far more familiar with

the issues. I would simply say that those are echoed in Minnesota

6

in terms of the number of families who cannot afford housing, recent leavers from welfare who cannot afford housing. We have addressed housing as part of our comprehensive strategy.

The governor created a Cabinet Task Force which I Chair, which

includes six other departments, to create a strategy across job

training, child care, economic development, housing. The Department of Corrections is even represented on that panel. And we

have put together a comprehensive strategy drawing on both State

and Federal TANF dollars.

I would like to mention some of the places where we have in- vested TANF dollars in the State of Minnesota. We put $54 million

into a program that is called the Minnesota Families Affordable

Rental Investment Fund, which provides incentives for the development of low- and moderate-income rental units. Funds are used to

write down the monthly rental rates to a level of typically about

$350 to $400 a month, to a level which welfare families can afford.

We have also expanded the supply of single-family housing by in- vesting $20 million of the TANF reserve in the Habitat for Humanity Program in which, in combination with the free labor and the

donated materials that are part of that program, will build roughly

5,000 homes, single-family homes. This is roughly $4,000 per home

to greatly expand the supply of affordable housing. We have also invested almost $6 million in transitional housing

for families who have been homeless or have a very unstable housing history. We have also taken about $2.7 million of that TANF

money and put it toward family homelessness prevention and assistance. We have created a modest $3 million supportive housing

pilot in which we are testing a supportive housing model for our

welfare families in which a variety of services are available in the

housing setting.

Beyond this, using State dollars, we also have an emergency assistance program which is available to families once in a 12-month

period to help with housing-related crises. We spend nearly $20

million a year on this assistance. This involves, for example, helping with late rent, helping with deposits, avoiding utility shutoffs

and making critical repairs and so on. This program serves about

14,000 families per year.

For us to continue the success that Minnesota has had, we need

more, not less flexibility in the use of TANF dollars. For example,

we would like to be able to invest TANF in the production of additional rental housing for families. For your reauthorization of

TANF, my message is very simple: Maintain the flexibility that we

now have and give us additional flexibility with respect to housing.

Also, we need flexibility to change the definition of short-term

assistance so we can provide housing support. Counting housing

dollars as cash assistance and counting that assistance against the

60-month limit for a family flies in the face of reason, given the ongoing need for subsidized housing by many families. Removing that

constraint would be a great help.

In addition, we would like to use a portion of the TANF block

grant, let’s say up to 10 percent, to do housing production. The simple shortage of affordable housing stock is a critical issue in our

State. And it is a one-time investment so a very appropriate use

of TANF. The ongoing operating costs of that housing can be borne

7

by other programs. As I indicated, we have used some of the TANF

money with Habitat for Humanity to create more housing. We have

had to do this, though, indirectly by substituting the TANF dollars

for other TANF-eligible expenditures now covered by State money

and then reallocating that State money in turn to housing programs. We have in essence refinanced Federal TANF dollars in

order to give ourselves the capacity to implement our comprehensive strategies.

To summarize, our program has been extraordinarily successful

because we have had the flexibility to tailor services to individual

families and to offer a comprehensive package of supports. It is a

misconception that welfare is a cash support program. It is a mix

of many forms of support. I ask that you allow States such as Minnesota to continue with this kind of flexibility.

Thank you, Mr. Chairman and the Committee.

Senator REED. Thank you, Mr. O’Keefe.

Ms. Sard.

STATEMENT OF BARBARA SARD

DIRECTOR OF HOUSING POLICY

CENTER ON BUDGET AND POLICY PRIORITIES

Ms. SARD. Thank you for holding this very important hearing

and thank you for inviting me to testify.

As you reviewed, evidence shows that most families that manage

to get a job and leave welfare still do not earn enough to afford decent quality housing. In addition, most do not receive housing assistance. Nationally, only about 30 percent of families on welfare

receive housing assistance, so the vast majority are left to make do

on their wages.

Not surprisingly, as you reviewed, the combination of low earnings and scarce housing assistance results in housing problems. I

will not belabor you with them again, but it is important to note

that the housing problems among even employed welfare leavers

appear to be getting worse.

One issue that housing policy needs to focus on much more in the

future than it has in the past is the growing mismatch between

where job growth is occurring and where affordable housing, public

or private unsubsidized, tends to be located. My testimony includes

data on the unfortunate nonperformance of the tax credit and the

HOME programs in this area. Welfare policy similarly fails to pay

attention to the fact that where people live can be a hindrance to

their getting a job, and we have to pay more attention to that.

At the same time, recent evidence has shown that actually having housing subsidies, particularly mobile subsidies that help people overcome this job/housing mismatch, can lead to better results,

can lead to more families getting off the welfare rolls and that

when they get off they tend to stay off. As Mr. O’Keefe said, they

tend to retain employment for longer. And I think most importantly for State welfare agencies, welfare interventions that States

do initiate tend to be more effective. The impressive results that

Mr. O’Keefe just related concerning the MFIP demonstration were

shown to be almost entirely attributable to gains made by families

with housing assistance. If you look separately at the families without housing assistance, you would have seen almost no change.

8

That is why it is so important to consider both the changes in

TANF legislation that Senator Corzine reviewed and that are also

contained in S. 2116 that was filed several weeks ago by Senator

Kerry and also to consider some parallel changes in housing legislation. Mr. O’Keefe has already explained why it is so important to

classify TANF funds used as supplemental housing benefits as nonassistance so that the time clock doesn’t run.

I want to support his remarks. I also want to highlight for you

the demonstration proposal that Senator Corzine mentioned. It is,

in fact, very similar to the $3 million program that Mr. O’Keefe described that Minnesota is now implementing, with an important

difference for national policy. It would be structured with an evaluation so that we would actually learn and be able to model future

policy on the combination of housing and services that may work

best, assuming it is shown to work in helping families with multiple barriers move to self-sufficiency.

There are a number of proposals to improve the housing programs that are contained in a draft bill that Senator Sarbanes has

circulated, and there are also some additional proposals that I have

included in my testimony. I want to highlight the proposal to give

a 5-year authorization to Welfare to Work vouchers. Experience

with the allocation of Welfare to Work vouchers in fiscal year 1999

when 50,000 vouchers were appropriated suggests that this type of

targeted housing assistance can benefit families and provide positive incentives for interagency collaboration.

I think that the proposed legislation goes one better than the

program in the past because it would reward those housing agencies that have either committed their own resources, their turnover

vouchers, to a Welfare to Work use in collaboration with welfare

agencies or are using State funds, like in Minnesota and in New

Jersey, to provide housing assistance for families moving to Welfare to Work. It would create an incentive for States to make these

decisions to put their resources into housing and for the PHA’s to

do the same while also creating an additional source of funding, assuming the appropriators agree to provide this essential housing

assistance.

I think that it is an extremely important initiative and I also

think it is exactly the type of incentive we need to do in contrast

to the so-called super-waiver proposal that is contained in the Administration’s welfare plan. That is a proposal that is not yet incorporated in the House legislation but the Administration has

proposed including housing and homelessness programs in the

super-waiver. Our information leads us to expect that it will be included and the proposal would make drastic changes in the balance

between Congress and the Executive Branch potentially leading to

State authority to overrule local decisionmaking, overriding resident participation requirements, undoing the carefully balanced

laws and regulations that this Committee has set up for dealing

with difficult decisions, like when to demolish public housing or

when a waiver of targeting requirements could be made. So, we

should not go there.

I have included in my testimony two proposals to promote family

formation in the assisted housing programs. You may be surprised

to hear that I happen to agree with Mr. Rector that this is a probVerDate 11-MAY-2000 08:00 Aug 21, 2003 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 88413.TXT SBANK4 PsN: SBANK4
9

lem, that there are too few two-parent families in the assisted

housing programs and new research shows that there are probably

fewer two-parent families proportionately in these assisted housing

programs among comparable poor families. That makes one think

that the rules of the Federal housing programs may be contributing

to this problem.

We actually have one quite similar proposal which is to create

a rent incentive to have a second working parent in a household.

I would suggest to you that my proposal is less expensive than Mr.

Rector’s. I think this is a record.

With that, I would like to conclude my testimony.

Thank you.

Senator REED. Thank you, Ms. Sard.

Mr. Rector.

STATEMENT OF ROBERT RECTOR

SENIOR RESEARCH FELLOW

THE HERITAGE FOUNDATION

Mr. RECTOR. Thank you very much for the opportunity to come

here and testify today.

You may not be surprised that I see these issues in a somewhat

different light. Let me outline what I regard as the central lessons

from welfare reform and how they might apply to public housing.

In 1996, the Congress reformed the Aid to Families with Dependent Children Program and replaced it with a new program called

Temporary Assistance to Needy Families. When we did that, there

was a universal prediction from what might be called the left side

of the political spectrum that this was a disastrous bill which

would throw millions of additional children into poverty even in

good economic times. The reality is that everything that was said

about that Act and all the predictions that were made have been

completely overturned by events, and the Act has been, in a totally

unprecedented way, successful in reducing poverty. We might want

to review why that was accomplished and what that might mean

for housing programs.

The pre-reform Aid to Families with Dependent Children Program, the essential element of that program was that it gave aid

unconditionally. If you were in need and you walked into the office,

we gave you assistance, cash assistance. There was no requirement

that the individual undertake any type of activity in order to get

that aid.

The key to the 1996 reform was national requirements that said

this aid will no longer be unconditional. We want to give people

assistance but we are essentially going to require that when a recipient comes to get assistance, we will require, as a condition of

receiving that aid, that they have to undertake some type of constructive activity leading toward self-sufficiency, whether it is supervised job search training or community service work. As a result

of that change, you have seen absolutely dramatic response in

human behavior.

The AFDC and TANF case load has dropped by 50 percent. The

employment rate of single mothers, particularly the most disadvantaged single mothers, has increased by 50 to 100 percent. Absolutely unprecedented changes. Nothing like that has ever happened

10

in any kind of recorded data that we have. But more importantly,

if you look at the chart which I have provided here, this is black

child poverty. The percentage of black children that live in poverty

from 1970 up to the present time, you can see on this chart that

black child poverty from 1970 to about the mid-1990’s actually

went up slightly. It goes up and down a little bit with recessions,

but the overall trend is either flat or rising slightly. All of a sudden, in the mid-1990’s, something dramatic happens. The black

child poverty rate, for the first time in U.S. history, drops by a

third, and is now at the lowest point ever in U.S. recorded history,

ever in history. I have a similar chart for poverty among single

mothers, it looks exactly like this. So the least that we can conclude is that something rather positive seems to have happened

there in the mid-1990’s. The only thing unusual that happened

there was welfare reform.

Changing aid from an unconditional aid system to one that basically brings out the better angels in people’s natures says we want

to aid you but we are going to require that you also take steps to

aid yourself.

Now the problem that I see in assisted housing is that assisted

housing is basically stuck in the mode that AFDC was in before reform. It is completely unreformed by these principles. Aid remains

almost totally unconditional and the population receiving aid very

closely resembles the pre-reform AFDC population. Half the households in assisted housing are families with children, and of those

families with children, 87 percent are single-parent families. It

looks an awful like old AFDC.

Moreover, if you look at the chart that I provided in my testimony, you can see that although there is slightly more employment

in assisted housing than there was in the old AFDC program, still

a third of families with children that are getting assisted housing

perform no work at all, no employment during the course of a year,

and half of them are working less than a thousand hours during

the course of a year. Only about a quarter of them are working full

time, full year. Clearly, if we are interested in raising these families’ incomes above poverty or in increasing their ability to afford

housing, one of the most important things we have to do is get the

hours of work up because they are simply too low.

The type of reform we have in TANF has been dramatically successful in increasing the hours of work, and I think if you applied

the same thing in housing, you would get similar results.

Again the key to TANF was requiring that able-bodied recipients

consistently undertake constructive activities, job search training,

or community service work as a condition for getting aid. This has

been widely misunderstood. People think that we have insisted

that people get private jobs and if they could not get a private sector job, we threw them off. No one did that in TANF. We said if

you cannot find a private sector job, that is okay, but we want you

to be engaged 30 or so, 40 or so hours a week in some type of activity. When you do that, the case load moves very rapidly off and into

employment. This has been a huge success in TANF and there is

no reason that we shouldn’t apply the same principle into public

housing.

11

The overwhelming importance of marriage to the well-being of

children. Some 80 percent of long-term child poverty in the United

States occurs in broken or never-married families. Seventy-five percent of total means-tested Aid to Families with Children goes to

single-parent families, and children that are raised without a father in the home are multiply disadvantaged in terms of all sorts

of outcome, virtually every outcome that we in this room would be

concerned with. For example, a child raised without a father is

three times more likely to end up in jail as an adult.

Unfortunately, the means-tested aid programs including housing

programs profoundly discriminate against marriage. How do they

do that? It is in the very nature of the means test itself. A meanstested program says if you have zero earnings in this household,

we give you fairly high benefits. The more earnings you have, the

more the benefit comes down. That is not just in housing, it is

in food stamps, it is still in TANF, it is in the earned income tax

credit. When you take these programs, and most beneficiaries get

more than one program, what you have is a fairly profound set of

financial messages that say, the best way to get a lot of welfare is

to have little earnings in this household. And what is the best way

to have little earnings in the household? It is certainly to not have

an employed husband in the household. When you look at mothers

that have children out of wedlock and look at the fathers of those

children, 75 percent of those men are employed and their average

earning is around $17,000 a year. What that means is that if the

mother married that father, she would lose most of her public

housing assistance or TANF assistance, her Medicaid assistance,

and so forth. This is really not a very good incentive system.

What we should do is find a way to begin to adjust these policies

so that that very severe bite against marriage is reduced. I think

we can all conclude that the children would be better off if we did.

I think that what we have here, looking at welfare reform in

1996, is a fundamental change in the nature of which aid was

given and that the principles that we have now put in place in

TANF also belong in all the other programs that we use to assist

families with children.

Thank you.

Senator REED. Thank you, Mr. Rector.

I am one who supported the Welfare Reform Act. Nice to hear

you applaud President Clinton’s bold initiative. Thank you very

much, unexpected perhaps, thank you very much.

Mr. O’Keefe, you are actually responsible for implementing the

TANF. It strikes me that one of the factors, in addition to requiring

individuals to work, was the significant flexibility to the States, a

significant increase in resources and child care and support as you

have and for housing assistance, a whole array of services, that

might be just as dispositive of the success of TANF. What is your

view?

Mr. O’KEEFE. Certainly, Mr. Chairman. That is certainly our

view as well. I don’t need to rerun the 1996 debate about whether

AFDC works or not. We had 20 years of understanding that it was

not working well. What we need to do is celebrate the success of

welfare reform. My message to you is we should not screw it up.

Rather, we have to build on our success. It is the package of supVerDate 11-MAY-2000 08:00 Aug 21, 2003 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 88413.TXT SBANK4 PsN: SBANK4
12

port that works. If you add up the total package of support for a

very low-income family, it includes cash support, food stamps, Medicaid assistance, child care subsidies, housing subsidies, as well as

the earned income tax credit; in Minnesota we have both Federal,

as well as a State tax credit. Within the total package, the cash

portion is not huge. Minnesota, for example, part of the child care

subsidy is linked to the individual’s participation in a work program, in a work training program, through their cooperation with

MFIP, our welfare program. That combination in Minnesota seems

to be doing the job. I do not understand the need to link all other

elements with requirements that you do x,y,z, a,b,c if we are already doing the job with the package that has been assembled.

To us, it is the ability to assemble this package, to target the

package and to include in it not only job training but also chemical

dependency treatment, mental health treatment, whatever is an

issue for the recipient. The goal is to package a set of services in

a way that meets the needs of the individual and moves that individual off of welfare into a job, part-time or full-time, as that individual is capable. That, to our mind, is the core of the success.

Senator REED. Mr. O’Keefe, you have been looking at some of the

results of your housing program, which in your testimony indicates

that it has produced increases in steady employment. And you attribute that, I assume from your testimony, to the fact that you

have stated that having access to a home, a rental unit, or even

a house, over time, helps with the issue of employment. Can you

comment on that?

Mr. O’KEEFE. Mr. Chairman, Ms. Sard helped me with that point

when she noted that our evaluation of our pilot program, to which

I referred on the marriage issue, also very powerfully suggested

that a stable housing situation is a key to success.

Senator REED. Some of this is the classic chicken-and-egg, which

comes first, a stable living arrangement, support, training, and a

job, or a job and all those other things?

Let me ask you a question which is prompted by one of our hearings held in Minnesota. We were up there about 2 weeks ago, Senator Wellstone and I, and we had a witness, Emanuel Lane, who

was a very impressive individual. He had served in the U.S. Marine Corps for 3 years, he works more than 40 hours a week, he

drives a bus. He celebrated the birth of his fifth child, his first son,

just a few days before we arrived, coincidentally, and he is living

in a homeless shelter with his family for many of the reasons that

Ms. Sard alluded to. Out in the country where they could live with

their relatives, there were no jobs; where the jobs were, there was

no housing. He was in a rental situation.

Here is someone who is certainly working, does not have a home

of his own, and his family is being helped along, but again, it is

the issue of what comes first. I do not know if you want to elaborate on that, but I was particularly impressed about Mr. Lane,

since you would think that in a country like this, if you have

served in the military and you have a family and you are married,

and you are husband and wife together, you should at least be able

to get a home. And he is getting about minimum wage.

I guess the other way to look at this problem is, if we simply took

away all of the support systems, which are extensive, and just

13

asked and required people to work at minimum wage, do you think

they would be able to find homes in Minnesota?

Mr. O’KEEFE. Mr. Chairman, they would not be able to find

homes in our metropolitan area. As you suggested, in some rural

communities, they would be able to, but the dilemma they would

face there is that they wouldn’t be able to find a job. So that is absolutely correct; you cannot put together a package of supports at

a minimum wage.

Senator REED. Ms. Sard, in your work, you have been dealing

with this whole issue of how to make TANF work better. I guess,

just on the general point, your advice with respect to housing and

the whole issue of the work requirement, or whatever, please?

Ms. SARD. I would like to address the points that Mr. Rector

made about work requirements. My central message is that there

are very few people in Federally-assisted housing who are neither

working nor on TANF nor elderly or disabled. I used HUD data,

and HUD data shows that there are only about 11 percent of HUDassisted households in all three of the major rental assistance programs that fall outside of those categories.

You might say, oh, why do I say 11 percent and he says 30 percent? These are some of the differences, I think, in our numbers:

First is that Mr. Rector is using Current Population Survey numbers, not HUD numbers. My advisers, the data experts—I am no

expert on the Current Population Survey, but I would suggest that

there is probably a lot of inaccuracy in trying to project from Current Population Survey answers about ‘‘I am not working this

month,’’ to ‘‘I have not worked for an entire year.’’ It certainly

doesn’t tell you what they are going to do the following year.

Second is that the 30 percent in Mr. Rector’s chart includes

households with children that are headed by an elderly or disabled

person. I know that this is surprising and somewhat counterintuitive to many people, but about 10 percent of the families with children in HUD-assisted households have an elderly or disabled head

of household, so we wouldn’t expect those people to be working.

Third, many of these families—probably most—that aren’t either

elderly or disabled are already on TANF, and they are subject to

TANF work requirements, and I think Mr. Rector said he is not

trying to add different requirements than TANF. He was, I think,

trying to target other people. Those are the same people.

Finally, some of these people are potentially the second parent

in a HUD-assisted household, so one parent might be working,

while the second parent is not.

Yes, there are some people in Federally-assisted housing that are

probably not working as much as we would like to see them work,

as they would probably like to see themselves work.

Is a work requirement the right answer? I think it is not the

right answer, at least at this point in our knowledge. We know that

many of these people have multiple disabilities—not formal disabilities—I should say barriers to work. The evidence we have from a

few studies cited in my testimony is that HUD-assisted households

tend to have more personal barriers to work than other welfare

families.

That means that if you are going to help them work, it is going

to cost money; it is going to take skill, and if you are going to reVerDate 11-MAY-2000 08:00 Aug 21, 2003 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 88413.TXT SBANK4 PsN: SBANK4
14

quire them to work 35 hours a week, it is going to cost a great deal

for child care.

And you are going to be taking the scarce resources of housing

programs to do that, unless you find some other money, or you are

going to be taking the time of housing agency staff, and I think you

would be undermining other housing program goals in very significant ways.

There are positive incentives that we could try instead. There is

some interesting evidence in some recent studies by the Manpower

Demonstration Research Corporation, that suggests that families in

assisted housing feel that the rent increase they would experience

is a significant disincentive to work, particularly to move from

part-time to full-time work, which is part of the problem that Mr.

Rector is underlining.

We could fund the earned income disregard for Section 8 families

in order to help overcome that, and we could make sure that housing authorities implement the disregard for public housing tenants,

which has already been enacted, but is, as evidence shows, not

being implemented very well.

One of the provisions that Senator Corzine mentioned in his bill

would help get welfare and housing agencies together to collaborate

in the implementation of that requirement.

Senator REED. If you would allow me, I would like to ask one

question of Mr. Rector. Mr. Rector, part of your testimony is the

suggestion that perhaps, at least for the sake of encouraging more

marriage, that we overlook means testing in terms of access to public housing. I guess Ms. Sard’s comments, too, about the disregard

for income, so that people do not have a disincentive to limit their

hours of work or work part-time rather than full-time, that would,

I presume, lead to a significant increase in cost to the Federal

budget and to local housing authorities, et cetera.

Mr. RECTOR. It doesn’t automatically, because this is not an entitlement program. But the general principle of what you are saying

is, yes, correct. Therefore, I do not think you could do it just flat

out across the board.

What I think you should do is probably experiment with it and

see what effect it has. Really, you are right; in order to remove the

marriage penalty that exists in the means-tested welfare system,

you would effectively have to say that any mother can get married

and she will get the same benefits, irrespective of the earnings of

her husband.

Now, you have a neutral system. Well, boy, that is about $100

billion in that sentence right there, so you cannot just do that flat

off. But I do think that we can look at and try to find ways to

change at the margin or ways to change in the experiments, and

see what results would occur.

And it is not just in housing; it is even worse in Medicaid. In

Medicaid, as I said, half these mothers are actually cohabiting with

the father at the time of birth. They are romantically involved; the

guys have jobs, but Medicaid pays for 90 percent of those out-ofwedlock births, and if the guy marries the mother, most likely he

does not have medical insurance. So, we have a very nice wedding

present; they are going to lose the Medicaid, and we are going to

hand them about a $6,000 bill.

15

We need to look and find the places where the system is most

anti-marriage, and try to reduce those penalties there.

Senator REED. Thank you, Mr. Rector.

Let me now yield to Senator Corzine.

Senator CORZINE. Thank you, Mr. Chairman.

This has been very interesting testimony. One of the things that

I thought I heard Mr. O’Keefe say is that you really had to substitute, gerrymander the books, essentially, to get housing benefits

to your TANF recipients. You had to use monies from other areas

of the State budget to fund the housing elements of your comprehensive program at the exclusion of using your welfare block

grants or TANF block grants. Did I hear that right?

Mr. O’KEEFE. Senator Corzine, in Minnesota, we do not gerrymander the books.

Senator REED. We are from Rhode Island and New Jersey.

Senator CORZINE. You obviously do not understand New Jersey

politics.

Mr. O’KEEFE. What is allowed is what is called supplantation, in

which the Federal TANF dollars can be used to pay for eligible existing State services that are currently funded with State dollars.

By refinancing those legitimate State services with TANF dollars,

we can free up, for example, State child care monies. We can then,

in turn, allocate those State dollars to housing, to our activity for

which we could not use the TANF money directly. That is how we

have managed this.

Other States have done this as well, some solely to relieve their

budgets, and not put that freed-up money into a self-sufficiency

strategy. We have kept it within our self-sufficiency strategy.

Senator CORZINE. Mr. Rector, do you accept the premise that

housing is one of those issues that does work to get to the self-sufficiency objective of the 1996 welfare reform efforts?

Mr. RECTOR. No, I wouldn’t. I would say that housing programs,

as they are currently structured, work in the opposite way in the

sense that they, like the AFDC, give a reward for nonworking, and

that the aggregate effect of them is probably to reduce work effort,

rather than increase it, just as that was the case with AFDC.

Senator CORZINE. So, you and Mr. O’Keefe have a different view

about whether this is a part of the foundation that has led to the

kinds of—— Mr. RECTOR. I would agree. I guess I disagree with him very

strongly. In essence, when you look at, for example, never-married

mothers, where employment has surged by 100 percent in the last

5 years, what was the change there? Was it in housing programs?

Was it in food stamps? No.

The change was in the nature of the welfare program that most

of those mothers were getting, where we said we want to aid you,

but we are going to require that you engage in some kind of activity on a daily basis from here on in. The firmer you are with that

principle, the more mothers get up and get into the labor force,

which is ultimately very good for them economically.

Senator CORZINE. Would you feel the same way with regard to

child support, Medicaid?

Mr. RECTOR. Child support is paid.

Senator CORZINE. Excuse me. Child care.

16

Mr. RECTOR. Most mothers using child care would be using the

child care because they are engaged in some type of constructive

activity. I do think that the next stage of welfare reform is essentially to take the principles that we have in TANF and apply them

to very similar programs, of which I would say assisted housing is

one and food stamps is another.

Medicaid is a much dicier question, because you are running a

substantial risk that the family will not be on Medicaid then if you

do that, and I do not think we should try that at this time. But

vis-a`-vis food stamps and public housing, all the objections that you

would have to work requirements in those programs are the same

ones that were raised against work requirements in AFDC, and

they were wrong.

It is a challenge. I mean, I am clearly asking you to do something

dramatically different in these programs, but the lessons that we

have over in cash assistance show that when you are asking and

demanding that the recipient make the best efforts themselves,

they have a lot more to deliver that people imagine.

It is not enough to say that a lot of these people are working.

If you work 100 hours a year, guess what? You are going to be

very, very poor.

Part of the reform is not just to get people nominally working,

but get the number of hours of work during the year up a lot. That

is the best way out of poverty.

Senator CORZINE. Would either of the other witnesses want to

comment on, particularly, the housing issue, since that is the focus

of our efforts here today, and how that relates to whether one

moves from not only welfare, but also to a self-sufficient stage of

how an individual might operate in the economy.

Ms. SARD. Just a few points, thank you.

Contrary to Mr. Rector’s assumption, the actual studies that we

have show that families with housing assistance who leave welfare

are employed at a higher rate and remain employed more steadily

when they have housing assistance. So the evidence, I think is not

conclusive; it is not absolutely definitive, but it is there, it is recent

studies. He may not be familiar with them. I suggest that he look

them over.

It is true that for families remaining on welfare, housing assistance can appear to be pulling them back and keeping them there.

But when what social scientists call regression analyses are done

that control for families’ personal barriers to work, because their

demographic characteristics show generally lower education, less

work experience, et cetera, you neutralize the role that housing assistance is playing as a causal factor.

So, I do not think the evidence suggests at all that housing assistance is contributing to a problem. I think it shows that housing

assistance is contributing to the solution, so you don’t need to impose work requirements on housing programs.

Under the TANF block grant, there was the good fortune of an

excellent economy, which, I would suggest, cannot be disentangled

from work requirements, leaving a lot of extra money around to

provide these additional supports that help families work.

Nobody is identifying a source of these additional supports to

help the individuals work, who may not be working sufficiently in

17

the housing programs. There is also the HUD data I referred to

earlier on the relatively few individuals not working who could be

expected to work. Again, I do not know that we should try to make

policy from Mr. Rector’s data that I do not think is terribly reliable.

HUD’s data show that for families that are working at all, 1

hour, their average annual earnings are above full-time minimum

wage. The figures are about $11,000–$12,000 a year. That wasn’t

in my testimony, and I would be happy to submit that if the Committee would like.

Mr. O’KEEFE. Senator, just one brief comment. In Minnesota, we

package the food stamps with the cash assistance, under a waiver

we have from the Department. These supports are a package and

we in effect deal with families across programs. The Chairman referred to this as one of those chicken-and-egg questions and it truly

is. It is a question on which gentlemen and women can disagree.

But it strikes me that if you actually spent some time working with

welfare families, with a woman with a couple of children, that her

ability to interview for a job, her ability to find, to be prepared, her

ability to attend to her own education and training is tremendously

undercut by the fact that she doesn’t know where she and her children are sleeping every night. Without a whole lot of research, that

strikes me as a fundamental.

The evidence from our pilot evaluations suggests that, indeed, for

those families that have financial stability, which includes housing

stability as part of that package, single parents have had increased

marriage rates, two-parent families have stayed married at a much

higher rate than the AFDC control group. Kids have done better

in school, and so forth. It is obvious that if you stabilize a family

unit then it is capable of taking care of itself and moving forward.

Senator REED. Thank you, Senator Corzine.

Just a few comments or questions. It seems to me listening to

you particularly, Mr. O’Keefe, that you have been using TANF

money which we all envisioned as welfare family support money to

build houses, to subsidize rents, to do things that should properly

be in housing programs. It seems to me we have to concentrate on

TANF reauthorization but we also cannot lose sight of the fact that

we are under funding traditional housing subsidy programs. Again,

is that an accurate impression based on the Minnesota experience?

Mr. O’KEEFE. That is accurate. We have been able to use TANF

money for a whole range of flexible, fill-in kinds of investments.

For example, for a rural family, if they either do not possess a car

or their car breaks down, they are stuck. The mother cannot get

her children to child care, cannot get to the community college,

cannot get to a job, and drops out of the program. We have used

some of that money to give counties flexible money to create a loan

fund, for example, to allow welfare families to purchase a car, obtain loan funds so when the car breaks down, they get some money,

they are lent some money to repair the car and then they can get

back on their feet.

So, yes, we have used flexibility to create a broad set of strategies toward self-sufficiency because it is self-sufficiency that we believe are the goal of the program.

18

There are quite inadequate housing resources available. You are

absolutely right that we have a crisis with respect to affordable

housing for welfare recipients, as well as for the working poor.

Senator REED. This follows from your comment. If you did not

have to devote these resources to housing, there are many other

issues that you could deal with in the context of bringing more people in for better education. You probably have a list of things you

want to do that you think would be very helpful in getting people

to work even, but you have to devote resources to housing. Is that

accurate also?

Mr. O’KEEFE. Mr. Chairman, we are not a greedy State looking

for more resources but we could free up those dollars, we could use

additional investments in child care; we are very short on child

care. Let me underline that the President’s proposal to increase the

work requirement is going to cause a concomitant increase in the

need for child care, and there is no proposal to help increase those

funds. That is another severe shortage.

Transportation, affordable housing, and child care are the weak

links, in my mind, in welfare reform.

Senator REED. Ms. Sard, any comments?

Ms. SARD. I completely agree. That is why I wanted to emphasize

I think the tangible thing in front of you that can possibly get done

this year, as well as building toward others is for Congress to enact

the authorization for Welfare to Work vouchers, so that structure

is in place. And for the appropriators who hopefully will be funding

some number of new vouchers, the Administration proposed 34,000

new vouchers in their budget. If about a third of those were set

aside as Welfare to Work vouchers and the legislation—the Sarbanes bill—were enacted, you would see some additional housing

resources and the change that allows TANF funds to be used for

rental assistance more easily. You would see some more resources

going for housing assistance. And you would see some more program cooperation happening at the local level between housing and

welfare agencies.

Senator REED. Thank you.

Mr. Rector, your comments with respect to putting a work condition on specific to TANF, what relation in your mind does this have

to increased resources for housing programs in general of more resources for public housing, more resources for subsidies, separating

the two issues?

Mr. RECTOR. I do not think they separate. I would make a couple

points here. One is that when we did the TANF reform, we were

told by the Center of Budget and Policy Priorities and a lot of other

people that it would cost a lot more money to do that, but the reality is that the reform itself generates so much earnings that it

effectively pays for itself. So what has happened in TANF reform,

for example, over the last 5 years is as the need for cash assistance

has gone down, that has more than paid for all the day care that

you need.

Similar things, although I wouldn’t predict it would be exactly

the same, you would expect a similar response within housing. If

you put a work requirement forward, you are going to have higher

earnings, rental payments will go up, that will generate some kind

of surplus that can be used for ancillary services. That is essenVerDate 11-MAY-2000 08:00 Aug 21, 2003 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 88413.TXT SBANK4 PsN: SBANK4
19

tially what has happened within TANF and that is what would

happen under the President’s projected work requirements as well.

I cannot tell you exactly down to the decimal point, and it would

be silly to make that prediction, but you have to generally recognize that that role is valid, if somewhat flexible. Also, I just want

to say in terms of the gentleman from Minnesota, that he certainly

has big plans for Federal tax dollars. I simply make the overall

point here that as a Nation, we spend $430 billion on means-tested

assistance for low-income people; that is cash, food, housing, and

medical care. Of that assistance, 75 percent is Federally-funded.

But the State contribution is almost totally limited to Medicaid.

When you set Medicaid aside, this system of aiding poor people is

85 percent Federally-funded. So when I listened to his long laundry

list of things he would like to do, I would just ask him whether he

is going to Governor Ventura and ask him for a tax increase in

Minnesota to pay for all those things. Or whether he simply wants

you to pay for them from the Federal Government.

Senator REED. The last time I checked, we authorized him to

spend all this money. We gave them and told him to do it because

they are American citizens, as well as Minnesota citizens.

Ms. Sard, you have a comment.

Ms. SARD. If I may, I would like to respond to Mr. Rector’s earlier remark. I think that his point about savings due to increased

earnings is one of the many ways in which it is inaccurate to extrapolate from TANF to housing. Usually it is true that families

have some increase in earnings, but stay in the housing programs.

Then there would be some savings. But if you really succeed and

the families make enough that they move out, which is what you

hope will really happen, because we are only providing housing assistance to one out of four eligible families, then another family

fills that slot. It is not like welfare where it is an entitlement. People work, the case load goes down.

We are not going to see, I hope, a reduction in the number of

Federal housing units or vouchers. So if we succeed at this process,

we, in fact, maintain our costs because we bring into the housing

program a family that needs the rent subsidy, and which hopefully

can use the rent subsidy to stabilize, increase their income and

move on.

We are not going to get the subsidies, the savings internal to the

program to pay the kind of costs that the support services are

likely to entail that would be needed for these households.

Another point I should make, HUD’s data indicate that the group

that we should perhaps be the most concerned about—those households with zero income—which is about two-thirds of the 11 percent I mentioned, that they actually have the shortest stay in the

assisted housing programs of any group of households. They are up

and out on their own in a little over 2 years. I do not know why

that happens. I do not know if those are people who are evicted,

or what happens but we know they are not there for a long time.

So it is a question whether it is worth a whole lot of retooling

of how housing programs operate to deal with a problem that is

somewhat ephemeral on an individual level.

Senator REED. Thank you all very much. This has been a very

interesting hearing. One hope I have is that it certainly made us

20

aware is an important part of TANF’s reauthorization although it

might not be a very explicit discrete article within the bill. Unless

we think constructively and creatively about housing, we are not

going to advance our goals of getting people off welfare into jobs

and keeping them there.

We will keep the record open for 10 days. If there are additional

questions for the witnesses, I would ask my colleagues to submit

them before Monday, May 6, and the record will remain open for

10 days.

With that I thank the witnesses and the hearing is adjourned.

[Whereupon, at 4:20 p.m., the hearing was adjourned.]

[Prepared statements submitted for the record follow:]

21

PREPARED STATEMENT OF SENATOR JOHN F. KERRY

Mr Chairman, I want to take this opportunity to thank you for holding this important hearing on Temporary Assistance for Needy Families (TANF) reauthorization

and Federal housing policy. You have been a leader in the Senate on housing issues,

and I look forward to working with you on this critical issue. I very much appreciate

the opportunity to discuss the Welfare Reform and Housing Act (S. 2116) that I introduced earlier this year. The bill contains measures for States to help improve

access to adequate and affordable housing for families eligible for TANF benefits.

I am very pleased that Senators Corzine and Wellstone have included provisions

from my legislation in their overall TANF reauthorization bill and look forward to

working with them to enact this legislation during the 107th Congress.

It is essential that low-income families struggling to make the transition from

Welfare to Work have access to affordable, quality housing. Families with housing

affordability problems are often forced to move frequently, which disrupts work

schedules and jeopardizes employment. Many of the affordable housing options are

located in areas that have limited employment opportunities and are located far

from centers of job growth. Furthermore, high housing costs can rob low-wage workers of a majority of their income, leaving insufficient funds for child care, food,

transportation, and other basic necessities.

Maintaining stable and affordable housing is critically important to holding down

a job, yet an alarming number of low-income families do not have access to affordable housing. The data from Massachusetts is shocking: In order to afford a twobedroom unit at the fair-market rent established by the Department of Housing and

Urban Development (HUD), a minimum-wage worker would have to work 105 hours

per week; in 1995, 2,900 poor families used private homeless shelters, while in 2000

the number grew to 43,000—with a majority of these families being low-wage workers who had once been on welfare. Lack of affordable housing is not a problem exclusive to Massachusetts. The Brookings Institution found that nearly three-fifths

of poor renting families nationwide pay more than half of their income for rent or

live in seriously substandard housing. Nationwide, there are only 39 affordable

housing units available for rent for every 100 low-income families needing housing.

And for the fourth year in a row, rents have increased faster than inflation. We

must address the issue of affordable housing during reauthorization of the welfare

law because many low-income families have hit this formidable roadblock on their

path to employment.

Though access to affordable housing is often left out of the discussion of welfare

reform, it is crucial that we address this issue during our reauthorization of the welfare reform law this year. The welfare reform legislation will not allocate considerable new funds to increase affordable housing opportunities; however, modifications

to the TANF statute can be made to address the problem by other means. That is

why I introduced the Welfare Reform and Housing Act. This legislation will address

the housing issue in the context of welfare reform in six major ways:

First, the measure will make it simpler for States to use TANF funds to provide

ongoing housing assistance. TANF-funded housing subsidies provided for more than

4 months would be considered ‘‘non-assistance’’ instead of ‘‘assistance.’’ By considering these subsidies as non-assistance, States that want to implement housing assistance programs using TANF funds will not have to work within the constraints

of current Health and Human Services rules surrounding assistance subsidies.

Second, the bill would encourage States to consider housing needs as a factor in

TANF planning and implementation. My legislation would direct the Department of

Health and Human Services to work with the Department of Housing and Urban

Development to gather increased and improved data on the housing status of families receiving TANF and the location of places of employment in relation to families’

housing. States will be required to consider the housing status of TANF recipients

and former recipients in TANF planning.

Third, the legislation would allow States to determine what constitutes minor rehabilitation costs payable with TANF funds. It is now permissible to use TANF

funds for minor rehabilitation but there is no guidance from HHS on what types

or cost of repairs are allowable, making it difficult for States to determine the extent

to which using TANF funds in this area is permissible. By allowing States to define

what constitutes ‘‘minor rehabilitation,’’ more States with similar needs will follow

suit. A recent study of the health of current and former welfare recipients found

that nonworking TANF recipients were nearly 50 percent more likely than working

former recipients to have two or more problems with their housing conditions. Research has shown that poor housing conditions often can cause or exacerbate health

problems.

22

Fourth, the bill would encourage cooperation among welfare agencies and agencies

that administer Federal housing subsidies. By improving the dialogue between Public Housing Agencies and State welfare agencies, the two groups will be able to

enter into agreements on how to promote the economic stability of public housing

residents who are receiving or have received TANF benefits.

Fifth, the legislation would authorize HHS and HUD to conduct a joint demonstration to explore the effectiveness of a variety of service-enriched and supportive

housing models for TANF families with multiple employment barriers, including

homeless families.

Finally, the bill would clarify that legal immigrant victims of domestic violence

eligible for TANF and other welfare-related benefits are also eligible for housing

benefits. The proposal would ensure that abused immigrant women seeking protection under the 1994 Violence Against Women Act that are also eligible for other

Federal benefit programs have access to Federal housing programs under Section

214 of the Housing and Community Development Act.

Recent proposals made by the Administration and some Members of Congress aim

to increase work requirements for families receiving TANF funds. Therefore, it is

important that we are committed to ensuring that low-income families have a fair

chance at employment. We have made progress addressing many barriers to work

for low-income families such as child care, job training, and transportation. But, in

order to fully support families make the transition to work, we must address the

shortage of adequate, affordable housing. The Welfare Reform and Housing Act

brings housing into the welfare reform dialogue and aims to help ameliorate the

housing problem so that low-income families leaving welfare have a chance to succeed in the workforce.

Mr. Chairman, I look forward to working with you, Senators Corzine and

Wellstone, and the Members of the Senate Finance Committee to include this legislation in the TANF reauthorization bill that is expected later this year. Mr. Chairman, thank you again for the opportunity to testify at this hearing today.

—————

PREPARED STATEMENT OF MICHAEL O’KEEFE

COMMISSIONER, MINNESOTA DEPARTMENT OF HUMAN SERVICES

MAY 1, 2002

Chairman Reed and Members of the Subcommittee, I am Michael O’Keefe, Commissioner of the Minnesota Department of Human Services. We oversee programs

that address the health and welfare needs of Minnesotans, including the Temporary

Assistance for Needy Families (TANF) Program. I also Chair the Self-Sufficiency

Cabinet Task Force for Governor Ventura; this is the primary vehicle the Administration has used to develop strategies and policies aimed at helping low-income Minnesotans become self-sufficient, looking at job training, tax credits, child care, and

affordable housing, as well as welfare.

My remarks today will be focused on how we in Minnesota see the relationship

between welfare reform and housing, and the success we have had in working on

these two issues together.

Minnesota is a National Model for Welfare Reform Because

We Have Used the Flexibility in TANF to Build a Comprehensive

Set of Supports that Help Working Families Escape Poverty

Minnesota has one of the most successful welfare reform efforts in the country.

Our program, the Minnesota Family Investment Program (MFIP), is aimed not just

at moving families off welfare, but moving them out of poverty. The evaluation of

our welfare pilot program drew national attention for improvements in earnings, income, poverty, and child and family well-being. The Federal Government has twice

cited Minnesota as a leader among the States in job retention and advancement.

We have carefully evaluated our efforts and tracked how families are faring under

welfare reform in Minnesota. We measure our success not by case loads going

down—which they have—but by people going to work and becoming self-sufficient.

Some evidence of our success:

• GOING TO WORK: Over a 3-year period, three-quarters of families on welfare either

left welfare or went to work.

• GETTING GOOD JOBS: Those families that left welfare for work were working 40

hours a week and earning over $9 an hour.

• GETTING OUT OF POVERTY: Working families off welfare have incomes 75 percent

above the Federal poverty level.

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• IMPROVING FAMILY AND CHILD WELL-BEING: The independent evaluation of the

MFIP pilot found several important impacts on family and child well-being—A decrease in domestic violence; fewer behavioral problems among children; better

school performance and engagement by children; increased marriage by single

parents and a large increase in marital stability by two-parent families.

Our success is the result of well over a decade of planning, researching, and hard

work by some very visionary and dedicated people in Minnesota. But our vision of

welfare reform may have never come to fruition without the flexibility provided in

the Federal welfare reform legislation in 1996. That law allowed us to take the program we had been piloting and expand it statewide, to put in place our idea of how

to reform welfare in Minnesota.

Minnesota has used this flexibility to pursue our goal of moving families into work

and out of poverty. We do this by working individually with each family to get them

prepared for work, by focusing on moving people into jobs that will pay them a decent wage, and by providing a comprehensive set of supports for working families.

We are particularly proud of the supports for working families we have put in place

using the flexible TANF funds, including:

• Expanding tax credits for low-income working families.

• Expanding child care assistance.

• Funding innovative transportation initiatives, particularly subsidized loan programs to help working families buy cars.

• Funding for local areas to target public health nurse home visiting to teen parents

and TANF participants who might benefit from this alternative intervention.

• Flexible funding for counties to use to meet the needs of the hardest to employ

participants, including intensive case management efforts, projects focusing on

participants with mental illness, and on comprehensive, multidisciplinary assessments.

Most germane to the topic of today’s hearing, we have used the flexibility provided

under TANF to invest in housing strategies to help families making the transition

from Welfare to Work.

Housing is a Critically Important Need for Families Making the

Transition from Welfare to Work

I Chair a cabinet-level Task Force on Self-Sufficiency for Governor Ventura, representing his strong commitment to helping all Minnesotans become self-sufficient.

The purpose of this group is to ensure that we focus broadly on self-sufficiency for

families, not narrowly on specific programs or services, and that we work across

agencies and programs in considering all the many ways that Government impacts

low-income families.

When we started our work in 1999, we decided to get out and talk to people in

the field—the front-line workers who work directly with participants—to learn from

them the issues and problems we should address. We found that lack of affordable

housing was an issue brought up over and over again. Job counselors, staff in community agencies, wherever I would go and whoever I would listen to, would talk

about how housing problems were impacting the families they were working with.

Homeless families who could not look for work because they were in a full-time

search for an apartment they could afford. Families who moved frequently or were

doubled up with others. Parents who had gone to work but could not make ends

meet because the cost of a decent apartment had skyrocketed. Suburban areas and

communities in greater Minnesota that had good jobs available but no place to

house the needed workers.

We surveyed families on welfare and asked about their housing situations. We

found that many pay more than they can afford, move frequently, and some are concerned about the quality of their housing. Specifically:

• Over half (52 percent) paid more than 30 percent of their income for housing; 22

percent paid more than two-thirds.

• Over half (53 percent) moved at least once in the last year; 19 percent had moved

multiple times.

• Twenty-two percent (22 percent) did not think their housing was suitable due to

overcrowding or safety concerns.

• Thirty-six percent (36 percent) shared housing with others.

Subsidized housing can be a solution to these problems, but subsidies are in short

supply. Only 40 percent of single-parent families on welfare in Minnesota have a

housing subsidy, and only about a quarter of those who have left assistance have

a subsidy. This is unfortunate, because we also learned from the evaluation of the

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MFIP pilot that families living in subsidized housing had much stronger employment and earnings outcomes than families that lived in unsubsidized housing. This

is an important finding because housing subsidy programs are generally considered

to have disincentives to work built in to them: When you go to work your rent goes

up. The evaluation results suggest some interaction of the economic incentives in

MFIP and the housing programs—perhaps the MFIP work incentives offsetting the

disincentive to work in housing programs—created the right incentive for these families. Perhaps more important, the researchers found that the families in subsidized

housing moved less often, for example, were more stable in their housing. This stability—the confidence that they have a place to live that they can afford—may go

a long way toward building the confidence needed to succeed in the workplace.

Minnesota Has Used the Flexibility in TANF to Address the

Affordable Housing Crisis

We concluded, looking across the broad range of needs for low-income families,

that housing was one of the most critical unmet needs. It also presented some of

the biggest challenges for us in how to address the problem. First, housing has historically been the purview of the Federal Government. Over the last 20 years, the

Federal Government’s investment in the production of new housing is significantly

less compared to 30 years ago. The historical Federal role leaves some State policymakers unwilling to take on the potentially costly solutions to this problem. Second,

this is a multifaceted problem requiring multiple solutions. While more subsidies

would certainly help, it doesn’t solve every problem. Supply of low- and moderateincome housing is also a problem that needs a direct response, and homeless families and those families with multiple and complex barriers to employment also require more creative interventions.

Given our high priority on housing and our belief that the problem requires multiple solutions, we have used TANF funds for several key investments:

Rental Housing Production

We invested $54 million into the Minnesota Families Affordable Rental Investment Fund (MARIF) to provide incentives for the development of low- and moderate-income rental units. The MARIF Program is producing two types of housing:

Supportive housing for families facing the greatest barriers to self-sufficiency and

mixed-income housing near transit and other services in suburban communities experiencing job growth and in nonconcentrated neighborhoods in central cities. The

MARIF funds are used to write down monthly rents to the lowest possible level,

typically $350 to $400, affordable for families leaving welfare. In a number of

projects, local housing agencies have assigned project-based Section 8 vouchers to

the development, creating extremely affordable housing and enabling families to pay

only 30 percent of their income for rent. In mixed-income projects, between 10 percent and 20 percent of the units are MARIF units. Three State agencies, the Housing Finance Agency, the Department of Human Services, and the Department of

Economic Security work together to assist developers of MARIF projects in making

connections with employment and training service providers, local social services

agencies, county welfare offices, and other organizations that provide assistance to

MFIP families. The strategy to invest in increasing rental housing makes sense

given the one-time nature of the TANF reserve funds we had available; we were

able to leverage these funds for the long-term benefit of low-income families in

Minnesota.

Expanding Supply of Affordable Single-Family Homes

We invested $20 million of TANF reserve in Habitat for Humanity, to support—

in combination with the volunteer work and donated materials that are the hallmark of Habitat for Humanity—the building of approximately 5,000 homes for current or recent MFIP families and families at risk of coming on welfare. Like the

investment in rental supply, this strategy gives Minnesota a lasting benefit from a

one-time investment.

Targeted Subsidies for Families Making the Transition from Welfare to Work

We invested an additional $250,000 of TANF in subsidies for families on welfare

and making the effort to transition to work. This was provided through the Rental

Assistance for Family Stability (RAFS) Program, which provides a subsidy of $250

a month for each family. RAFS was begun in the 1990’s as a response to the growing concern about affordable housing for families trying to make the transition off

of welfare.

25

Transitional Housing

We invested $5.8 million in transitional housing for families who have been homeless or have an unstable housing history. This funding provides up to 4 months of

transitional housing and case management supports to help the family stabilize and

move into permanent housing. State funds are regularly used to provide capital

funding for transitional housing.

Family Homeless Prevention and Assistance Program (FHPAP)

We have used $2.7 million in TANF for homelessness prevention activities and

services to homeless families. These services are delivered by community-based

agencies and counties.

Supportive Housing Pilot

We are using $3 million in TANF to test a supportive housing model for MFIP

families with multiple barriers to employment. The concept is to use a housing site

as the focal point for integrating services for families. Two sites are testing this approach, one in St. Paul and the other in Mankato. The program is for families who

are homeless and who have one of the following conditions: Mental health problems,

chemical health problems, or HIV/AIDS.

In addition to these special investments, Minnesota makes emergency assistance

available to low-income families once in 12 months to help with housing related crises. We spend nearly $20 million a year on emergency assistance. Payments are

made to help families avoid evictions, pay first and last months rent, avoid utility

shut-offs, make critical repairs, etc., for over 14,000 families a year.

Minnesota Needs More—Not Less—Flexibility in TANF and

More Production of Rental Housing for Families with Children

The evidence is that Minnesota’s welfare reform has been very successful. We

want to keep it that way and make it even more successful. Minnesota’s strategy

with respect to housing and family self-sufficiency is consistent with the growing

body of evidence that a family’s success in moving out of poverty and sustaining

employment may depend on stable, affordable housing. Building on our success in

Minnesota requires help from the Federal Government in two areas: TANF reauthorization and housing programs.

For TANF reauthorization, my basic message is simple: Maintain and expand the

State flexibility provided in the 1996 Federal law. This flexibility has been the key

element of the success of welfare reform. The flexibility to use TANF funding for

supports for low-income working families has resulted in a revolution in our

national policy for low-income families. As I have said, it has helped Minnesota in

our effort to create a comprehensive set of supports for working families, and particularly important in our efforts to address the affordable housing gap and how it

impacts families making the transition to work.

There are three specific areas of TANF flexibility that relate to our work on housing issues:

• OVERALL FLEXIBILITY TO KEEP MINNESOTA’S ANTIPOVERTY PROGRAM ON TRACK:

We are very concerned that proposals to dramatically increase the TANF work

participation rates will force Minnesota to abandon our successful approach to reform. The proposal moving through the House of Representatives would require

States to push most families into work very quickly, and require us to divert funding into work experience or subsidized work programs. This would dramatically

change what we have done in Minnesota. Why does this matter in the context of

housing issues? Because one of the best ways to address the affordable housing

crunch is to help families increase their income so they can afford suitable housing for their family. As I said earlier, Minnesota has focused on moving families

into good jobs and has demonstrated success at increasing income and decreasing

poverty. We can see the results in housing for families. At a baseline measurement of families on MFIP, over half spent more than 30 percent of their income

on housing. Two years later, only about one-third spent that much of their income

on housing. This was not because more were getting subsidies or sharing housing;

it was because families went to work and increased their income.

• FLEXIBILITY TO EXTEND THE DEFINITION SHORT-TERM ASSISTANCE TO PROVIDE

HOUSING SUPPORTS THAT STABILIZE FAMILIES: TANF regulations make it difficult

to provide ongoing housing support to working families. All housing supports that

extend beyond 4 months are considered ‘‘assistance’’ under TANF regulations,

even if the family is working and not receiving TANF cash benefits. The ‘‘assistance’’ label means the 60-month time limit clock runs on the family and that

States must collect detailed information on every family every month. These rules

act as a disincentive for States to use TANF funds for housing. TANF policy needs

26

to recognize that helping families stabilize their living situations often takes more

than 4 months. States should have the flexibility to fund programs that seek to

stabilize housing for families making the transition to work without being limited

to 4 months.

• FLEXIBILITY TO USE A PORTION OF THE TANF BLOCK GRANT FOR HOUSING PRODUCTION: States should be allowed to use a portion of their TANF block grant—

say up to 10 percent—on housing development. Current TANF law prohibits use

of TANF funds for building of any sort. We believe that increasing the supply of

low- and moderate-income housing is critical to the success of welfare reform, and

States should have the option of using the flexible TANF funds to help in this

effort.

Because of inflexible rules around ‘‘assistance’’ and the prohibition on housing development, Minnesota has had to indirectly fund some of its housing initiatives

using TANF to supplant State funding in other areas. When we began to consider

how to invest our TANF reserve, the Ventura Administration established a principle

that we would supplant when the State funds were going to be redirected to additional services or supports for the TANF target population—low-income families.

If our recommendations above were taken we would not need to supplant to fund

our housing initiatives. If that kind of flexibility is not granted, we would be concerned about proposals to restrict supplantation that did not take into account the

differing ways States have used supplantation. I certainly understand and support

those in Congress who have criticized States that have used TANF to fund areas

unrelated to the purpose of TANF. However, I hope that in the effort to stop this

kind of misuse of funds, you will consider leaving enough flexibility for States like

Minnesota to continue to address critical housing needs using TANF funds.

As for Federal housing policy, there is renewed attention in Congress to the problems of housing families with very low and extremely low incomes. A number of bills

have been introduced which, using different approaches, create a new rental production program for the lowest-income households.

In the face of a worsening housing problem in the 1990’s, the State of Minnesota

significantly increased its investment in affordable housing production and homeless

prevention and assistance efforts. Congress too took a critical step to respond to the

crisis when it increased the caps on housing bonds and credits in 2000.

However, the most difficult developments to fund are the ones serving the lowestincome families and individuals, whether they are supportive housing projects,

mixed-income developments, or family tax credit projects. The scarcest and most

critical resources are the subsidy funding needed to write down rents to affordable

levels and the operating subsidy needed to serve households with incomes under

$15,000. A new Federal rental production program for extremely low-income families is the single most important housing initiative Congress could take to support

families moving from Welfare to Work.

Thank you, Mr. Chairman and Members, for the opportunity to bring Minnesota’s

views to this important topic today.

—————

PREPARED STATEMENT OF BARBARA SARD

DIRECTOR OF HOUSING POLICY, CENTER ON BUDGET AND POLICY PRIORITIES

MAY 1, 2002

I appreciate the invitation to testify today. I am Barbara Sard, Director of Housing Policy for the Center on Budget and Policy Priorities. The Center is a nonprofit

policy institute in Washington that specializes both in fiscal policy and in programs

and policies affecting low- and moderate-income families.

Reauthorization of the Temporary Assistance to Needy Families (TANF) Program

this year provides an important opportunity to focus on the role that housing strategies can play in strengthening welfare reform policy and supporting working families. Housing-related issues too often are ignored when TANF-related policies are

discussed. Yet unstable or inadequate housing is frequently a significant barrier to

employment, and the high cost of housing can impose a serious burden on lowincome families struggling to transition from Welfare to Work. While the connection

between affordable housing subsidies, housing location and employment has not

been adequately studied, there is a growing body of research suggesting that welfare

reform successes are greater among families with assisted housing than among

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1For details on the research findings, including those discussed later in this testimony, see

Barbara Sard and Margy Waller, Housing Strategies to Strengthen Welfare Policy and Support

Working Families, Center on Budget and Policy Priorities and The Brookings Institution Center

on Urban & Metropolitan Policy, April 12, 2002, available on the internet at: http://www.

cbpp.org/4-15-02hous.pdf. 2The median total income of welfare-leaver households is based on 1999 data from the National Survey of American Families, adjusted for inflation to 2002, and includes earnings and

benefits for all household members in households with at least one employed member. See

Pamela Loprest, How Are Families That Left Welfare Doing? A Comparison of Early and Recent

Welfare Leavers, Urban Institute, April 2001. 3The housing cost used in this calculation ($727 per month) is the estimated median fiscal

year 2002 two-bedroom national Fair Market Rent (FMR), as calculated by the National Low

Income Housing Coalition, Out of Reach, 2001. It is based on HUD’s 2002 FMR’s weighted by

the number of renter households reported by the 2000 Census. The Fair Market Rent is the

estimate issued annually by the Department of Housing and Urban Development of the cost of

decent, modest housing in each area. 4These percentages are based on median wages of employed welfare leavers, derived from median quarterly earnings in the last quarter of the first year after leaving welfare, as reported

in studies financed by the U.S. Department of Health and Human Services (found at http://

aspe.os.dhhs.gov/hsp/welf-ref-outcomes01/appb.htm). These median earnings figures are adjusted for inflation to 2002, and compared with the 2002 State FMR’s calculated as discussed

in note 3 above. The calculations assume that families pay no more than 30 percent of income

for rent and have no income other than the earnings of the welfare leaver.

other low-income families.1 These findings suggest both that welfare policy should

include housing assistance as a strategy for success and that housing policy should

better promote successful employment outcomes.

This testimony will cover the following areas:

• What we know about the housing problems of families that leave welfare.

• How the lack of affordable housing in areas with access to jobs compounds these

problems.

• Effects of housing problems on children.

• Evidence that housing assistance and location can support welfare policy goals.

• Current policy proposals for housing strategies to strengthen welfare reform policy

and support working families, including: S. 2116, which would make a number of

modest housing-related changes in the TANF statute. Senator Sarbanes’ draft ‘‘Housing Voucher Improvement Bill of 2002,’’ which includes a number of changes

in housing law to promote work. Appropriations issues. Whether work requirements on assisted housing residents would be helpful. Proposals to promote twoparent families in assisted housing. The Administration’s ‘‘superwaiver’’ proposal.

Families Leaving Welfare for Work Still Experience Housing Problems

Housing affordability is a real problem for families currently receiving TANF benefits, as well as for families that have recently moved from Welfare to Work. In only

three States are TANF benefits high enough for families to obtain modest housing

with less than their entire TANF grant. (The three States are Alaska, West Virginia, and Wisconsin.) In every other State, modest rental housing costs—as re- flected in HUD’s Fair Market Rents—exceed the entire monthly TANF grant.

Most families that leave welfare for work do not earn enough to afford decentquality housing and do not receive housing assistance. Studies indicate that the average total monthly income of households that previously received welfare benefits

and have at least one working member is $1,261 (in 2002 dollars), which falls below

the Federal poverty level for a family of three.2 A family with this income would

have to pay 58 percent of its total income to rent a two-bedroom unit at the Fair

Market Rent in jurisdictions with rental costs at the national median.3 In the 14

jurisdictions with Federally-financed studies on the earnings of recent welfare leavers, modest housing costs would consume 52 to 129 percent of estimated average

monthly earnings.4 (See Appendix A.) Housing subsidies can help families leaving

welfare for work close the gap between what they earn and the cost of rent and

other necessities.

Nationally, only about 30 percent of families receiving monthly income from the

Temporary Assistance to Needy Families (TANF) Program also receive Federal

housing assistance. This percentage varies across States from about 12 percent to

50 percent. (Federal housing assistance usually allows families to pay 30 percent of

their income for rent and utilities, with the remaining cost paid by the Government

subsidy.) Relatively few TANF families receive housing assistance because Federal

housing programs serve only about one-quarter of eligible households and because

few States invest significant resources in low-income housing programs.

Not surprisingly, the combination of low earnings and scarce housing assistance

results in housing problems. Nearly three-fifths of working poor renters with chilVerDate 11-MAY-2000 08:00 Aug 21, 2003 Jkt 000000 PO 00000 Frm 00031 Fmt 6621 Sfmt 6621 88413.TXT SBANK4 PsN: SBANK4
28

5 As used here, a family is characterized as ‘‘working poor’’ if it has annual earnings of at least $2,575 (equivalent to quarter-time year-round work at the minimum wage) and total income

below the Federal poverty line. 6Loprest, n. 2 above.

7The term ‘‘poor households,’’ as used here, actually refers to households considered to be ‘‘ex- tremely low-income’’ as that term is defined in Federal housing programs. These are households

with incomes at or below 30 percent of the area median income, as adjusted by HUD. This income level is roughly equivalent to the Federal poverty line. Nearly all TANF recipients and

most leavers have incomes below this level. 8 Nelson, Kathryn P., Office of Policy Development and Research, HUD, Testimony before the

House Committee on Finance Services Subcommittee on Housing and Community Opportunity,

May 3, 2001. Units were considered ‘‘available’’ if they were vacant and available for rent or

occupied by poor families. Affordable units occupied by higher-income families were considered

unavailable.

dren who do not receive housing assistance face serious housing problems—that is,

they pay more than 50 percent of their income for housing or live in seriously substandard housing, or both.5 Among unsubsidized poor renter families with at least

full-time, year-round minimum-wage earnings in 1999, some 36 percent spent more

than half of their income on housing.

Housing Problems of Welfare Leavers Appear to be Getting Worse

There is some evidence that the housing problems of families leaving welfare are

getting worse. An Urban Institute study found that families that left welfare between 1997 and 1999 were more likely to report an inability to pay a mortgage,

rent, or utility bill than families leaving welfare between 1995 and 1997. Of the

more recent group of welfare leavers, nearly 1 in 10 reported being forced to double

up with others because of an inability to afford the cost of housing.6

One reason housing problems may be getting worse for welfare leavers is that the

number of rental units affordable to poor families (defined as requiring the family

to pay no more than 30 percent of its income for housing costs) has declined, from

85 units for every 100 poor families in 1987 to 75 units for every 100 such families

in 1999.7 The number of units that are both affordable to these households and

available for them to rent is even lower: In 1999, there were only 39 such units for

every 100 poor renters.8 The situation likely has not improved much since 1999. In

2000, rents increased faster than inflation for the fourth consecutive year, and the

recent brief recession is unlikely to have reduced rent levels significantly.

Private market forces are mostly responsible for the reduction in the number of

affordable rental units, but Federal housing policy has contributed as well. Between

1995 and 1998, the number of households receiving Federal rent subsidies declined

as a result of the demolition of public housing, the expiration of Federal subsidy

contracts for more than 120,000 privately-owned units, and the lack of Federal funding for any new housing vouchers. While the Low Income Housing Tax Credit

(LIHTC) and the HOME block grant—the two current Federal subsidies for the production and rehabilitation of rental housing—add more than 100,000 units of decent-quality rental housing per year, households with incomes below about 45 percent of the area median income generally cannot afford these units unless they have

additional rental subsidies such as vouchers. (Note: In late 2000, Congress enacted

a 40 percent increase in LIHTC funding.)

Congress did fund about 213,000 new housing vouchers for the 4 years from

1999–2002, including 50,000 vouchers for Welfare to Work rental housing assistance

in 1999. The number of new vouchers being funded declined in fiscal year 2002,

however, and is lower this year than the number funded in any year between 1983

and 1994.

Lack of Affordable Housing with Access to Jobs Compounds the Problem

Lack of housing subsidies or other assistance can prevent families from moving

in some circumstances when doing so could improve their economic prospects. Such

circumstances include moves to areas with greater employment opportunities, as

well as moves to areas where parents feel safe enough to go to work and leave older

children unattended or to return from work at night on public transportation. Studies of the Chicago, Cleveland, Detroit, Milwaukee, and Los Angeles metropolitan

areas have found that welfare recipients who live closer to employment opportunities are more likely to be employed. Living in lower-poverty, less-disadvantaged

neighborhoods also may improve the chances of being employed, due to better information about job opportunities or other factors.

A growing share of employment opportunities are located not in cities, where

TANF recipients are increasingly concentrated, but in the suburbs. Between 1992

and 1997, job growth in the suburbs of the largest central cities was more than double that in the cities themselves. In about a quarter of the cities, the number of jobs

29

9Finkle, Meryl and Larry Buron, Study on Section 8 Voucher Success Rates, U.S. Department

of Housing and Urban Development, November 2001. 10The Urban Institute, Expanding The Nation’s Supply of Affordable Housing: An Evaluation

of the HOME Investment Partnership Program, U.S. Department of Housing and Urban Development, Office of Policy Development and Research, March 1999. Based on 1998, 40 percent of

all public housing units, 22 percent of HOME-assisted rental units, 15 percent of project-based

Section 8 units, and 9 percent of Section 8 certificate and vouchers were located in census tracts

that were more than 40 percent poor according to the 1990 census. By comparison, 15 percent

of all unassisted renters with incomes below the poverty line lived in such high-poverty areas.

Jill Khadduri, Mark Shroder, and Barry Steffen, Can Housing Assistance Support Welfare Reform, Fannie Mae Foundation, forthcoming.

fell while the number of jobs in the surrounding suburbs increased. This decentralization of employment affects cities in all parts of the country, although about

20 percent of cities have bucked the trend. Cities with some of the most slowly

declining TANF caseloads in the Nation—Los Angeles, Richmond, Hartford, and

Washington, DC—actually lost jobs from 1992–1997. Unfortunately, a number of

factors—including lack of affordable housing, discrimination, and inadequate public

transportation—can make suburbs largely inaccessible to low-income families in

central cities or rural areas.

Rental housing vacancy rates are lowest in the portions of metropolitan areas outside of the core central cities. In every region of the country in 1999, suburbs had

lower vacancy rates for units with rents affordable to families with housing vouchers than cities or rural areas did. Not surprisingly, a recent study by Abt Associates

found that the tighter the housing market, the lower the percentage of families that

succeeded in renting housing with vouchers, and the longer the successful families

took to find housing. In the fall of 2000, some 61 percent of the families that received vouchers in very tight housing markets succeeded in finding a unit to rent,

compared to 80 percent in loose markets.9

Thus, there is a need for additional rental housing that is located in job-growth

areas and is affordable to working poor families, or at least affordable to those fortunate enough to have housing vouchers. Yet, our current housing production programs are doing little to meet this need, in part due to Federal law and in part

due to State and local decisionmaking. A substantial majority of units developed

with Low Income Housing Tax Credits are built in central cities or rural areas and

not in the metropolitan suburbs where most job growth is occurring and where half

of the population now lives. An analysis of the location of family sized tax credit

units in comparison with job opportunities in 12 metropolitan areas shows that tax

credit units are poorly located in relation to centers of job growth. In addition,

HOME-assisted rental units are more likely than Section 8 vouchers, but less likely

than public housing units, to be located in high-poverty neighborhoods.10

Lack of Decent, Affordable Housing is Harmful to Families

There is no question that the demand for affordable housing far exceeds the supply and that much of the current stock of affordable housing is concentrated in

areas at a distance from the centers of job growth. As a result, many families may

face a Catch–22 situation. If they live in housing they can better afford, they may

not be able to get or keep a job; but if they move closer to work, their housing costs

may rise to the point where they have difficulties affording necessities, including

work-related expenses.

In addition, families that pay too much of their income for housing or live in severely inadequate or overcrowded housing may have to move frequently. A recent

study in Ohio found that 42 percent of families that had recently left welfare and

paid more than half of their income for housing moved in the 6-month period after

leaving welfare. (Some 38 percent of the recent welfare leavers in the study paid

more than half their income for housing.) In contrast, roughly 8 percent of the general population moves in a 6-month period. Frequent moves may interrupt work

schedules and jeopardize employment.

Lack of stable housing also can have other negative consequences:

Children may be affected adversely. A number of the studies demonstrate that

frequent moves can undermine school performance, reduce skill development, and

increase the risk of dropping out. Inadequate housing also has been linked to increased rates of asthma and respiratory disease, lead poisoning, and poor nutrition,

which can retard a child’s physical and intellectual development. Conversely, housing assistance that helps families move from high-poverty to low-poverty neighborhoods can have positive impacts on children. Some studies indicate it can contribute

to improved educational outcomes, eventual increases in employment, and reduced

involvement in violent crime as victim or perpetrator.

30

11Zedlewski, Sheila Rafferty, The Importance of Housing Benefits to Welfare Success, The

Brookings Institution Center on Urban & Metropolitan Policy and The Urban Institute, April

2002. The survey was limited to families with incomes below 200 percent of the Federal poverty

level. The education and mental health status of leavers with housing assistance was lower, on

average, than of leavers without housing assistance, but the differences were not significant.

Comparing families with incomes below 100 percent of the poverty level, leavers with housing

assistance faced significantly higher personal challenges to employment—such as low-education

levels, poor mental or physical health, and lack of recent work experience—yet also were more

likely to be employed than leavers without housing assistance (58 percent compared with 52 percent). The difference in employment levels, however, was not statistically significant for this

lower-income group.

Health can be affected adversely. A recent study by the Manpower Demonstration

Research Corporation indicated that poor housing conditions can cause or exacerbate welfare recipients’ health problems. In addition, the Task Force on Community

Preventive Services of the Centers for Disease Control recently recommended housing voucher programs as a public health strategy to improve household safety by

enabling families to move to less violent neighborhoods.

Housing Assistance and Location Can Support Welfare Reform Goals

There is a growing, although not conclusive, body of evidence that housing assistance, particularly housing vouchers that enable families to choose where they live,

can help families stay off welfare once they leave the rolls. A number of studies also

suggest that housing assistance can help welfare recipients become and remain

employed, often outweighing other potentially detrimental factors in families’ lives.

While under Federal housing programs, families’ rents generally increase if their

incomes rise, well-designed welfare programs can offset this financial disincentive

to work by disregarding part or all of a family’s increased earnings. This research

suggests that as policymakers struggle to find the tools to improve job retention,

they should give more attention to housing strategies.

HOUSING VOUCHERS MAY HELP FAMILIES LEAVE AND REMAIN OFF

THE WELFARE ROLLS

Among families that left welfare in Cuyahoga County, Ohio (Cleveland) in 1996,

households with housing voucher assistance were 16 percent less likely to return to

the welfare rolls in the following year than families without housing assistance.

Based on detailed analysis of actual residential and job locations, the researchers

attributed this result to the fact that families with housing vouchers were more

likely to be employed closer to their homes and to have shorter and more direct commutes; they also had access to more job openings than families without housing assistance or that lived in public or project-based Section 8 housing. In the Moving

to Opportunity Demonstration in Baltimore, families that used vouchers to move to

low-poverty areas were only one-third as likely to be receiving welfare 3 years later

as families that remained in high-poverty areas. (Interim data from the other four

sites in the Moving to Opportunity Demonstration have not replicated this finding.)

Analysis of data from a program in Chicago found that families using vouchers to

move to areas with a greater number of educated residents were about one-third

less likely to receive welfare than similar families that used vouchers to move to

areas with fewer educated residents.

FORMER WELFARE RECIPIENTS APPEAR MORE LIKELY TO SUCCEED IN THE

WORKPLACE IF THEY HAVE HOUSING ASSISTANCE

This is an important issue, since only about 75 percent of welfare leavers are employed in the year after leaving welfare. Of a national sample of families that left

welfare in 1997–1999 and were interviewed in 1999, leavers with housing assistance

were significantly more likely to be working than their counterparts without housing assistance (68 percent compared with 58 percent).11 Employment among recent

welfare leavers in Massachusetts was higher among families with housing subsidies

than among those without housing assistance, even though the former group had

greater barriers to work. (They generally had been on welfare longer, had larger

families, and were almost twice as likely to be minorities.) A study of welfare leavers in Los Angeles County found that families with housing assistance were more

likely to be employed in each quarter in the first year after leaving welfare than

families without housing assistance. Families with vouchers were somewhat more

likely to remain employed than families with other kinds of housing assistance, as

well as families that did not receive housing assistance. Families with vouchers that

stayed off welfare also had higher average earnings.

One study that covered a period prior to the recent changes in the welfare system

also found a substantially higher rate of employment among Chicago families that

31

12 Connecticut, Kentucky, Maryland, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Virginia, and the counties of Denver, Los Angeles, and San Mateo have committed

TANF or State matching funds to provide housing assistance to low-income families for periods

of 9 months or longer. See The Increasing Use of TANF and State Matching Funds to Provide

Continued

used vouchers to move to low-poverty suburbs than among Chicago families that

used vouchers to move within the city. After 5 years, 64 percent of the families in

the study that moved to the suburbs were working, compared with 51 percent of

those using their vouchers to move within the city of Chicago. It is not yet clear

whether these results will be replicated in other ongoing demonstrations.

WELFARE INTERVENTIONS ARE MORE EFFECTIVE WHEN COMBINED

WITH HOUSING ASSISTANCE

An evaluation of the Minnesota Family Investment Program (MFIP), widely considered to be one of the country’s most comprehensive welfare reform strategies,

found the greatest positive impacts occurred among families that received housing

assistance in addition to other welfare benefits and services. This study is significant because, taken as a whole, the gains it found—including reductions in poverty,

increases in employment and earnings, and even increases in marriage—are among

the strongest ever documented for a welfare reform undertaking in the United

States. Most of MFIP’s success was due to the substantial increases in employment

and earnings it generated among families receiving housing assistance (primarily

Section 8 vouchers); families without housing assistance had little or no gains.

Eligibility for full MFIP services (including generous financial incentives) boosted

the employment rates of long-term welfare recipients living in public or subsidized

housing by 18 percentage points. This was more than double the gain in employment rates for long-term welfare recipients not living in public or subsidized housing who were eligible for the same services and financial incentives. In fact, nearly

all of the gain in earnings that MFIP produced occurred among families living in

public or subsidized housing. Quarterly earnings increased an average of 25 percent

among the families eligible for full MFIP services that lived in public or subsidized

housing. Earnings increased only 2 percent, an amount that was not statistically

significant, among families eligible for full MFIP services that did not live in public

or subsidized housing.

In addition, the National Evaluation of Welfare to Work Strategies (a comparison

of human capital development and quick labor market attachment programs in

seven sites) found that families with housing assistance were more successful in

sustaining employment than other recipients who received the same services but did

not have housing assistance. Unlike the Minnesota demonstration, the different approaches to employment tested in these seven sites did not include additional financial incentives. While the better outcomes for families with housing assistance were

not as significant as the MFIP results, the NEWWS demonstrations further substantiate that housing assistance may enhance the success of welfare interventions.

Current Policy Proposals for Housing Strategies to Strengthen Welfare

Policies and Support Working Families

While TANF reauthorization legislation is not primarily about housing, there are

a number of ways to modify the TANF statute to make it easier to address the housing needs of families with children and to encourage States to consider addressing

housing-related barriers to work. It also is important to increase the work promoting services available to low-income families that receive housing assistance;

many of these families face greater barriers to work than other families that receive

TANF assistance. Helping these families make a successful transition to work furthers States’ welfare reform goals while also advancing HUD’s strategic objectives.

(Families whose employment and earnings levels rise generally pay more for rent

and are more likely to give up their Federal housing subsidies, making scarce resources available to other needy families.)

HOUSING-RELATED CHANGES IN THE TANF STATUTE

S. 2116, the Welfare Reform and Housing Act recently introduced by Senator

Kerry, contains six provisions that would make modest but important changes in

the TANF statute and (in one respect) in housing law. The bill would:

• Make it simpler for States to use TANF funds to provide supplemental rental assistance by considering these housing subsidies ‘‘nonassistance.’’ Nine States and

several counties in two additional States have committed Federal TANF and/or

State maintenance-of-effort funds to provide housing subsidies principally to families moving from Welfare to Work.12 Many of these jurisdictions were unable to

32

Housing Assistance to Families Moving from Welfare to Work and the 2001 Supplement, available at: http://www.cbpp.org/2-17-00hous.pdf and http://www.cbpp.org/12-3-01hous.htm.

implement the types of housing programs they wanted—particularly the ongoing

rental assistance to working-poor families—due to HHS rules that consider any

TANF-funded housing subsidy that is not short-term as ‘‘assistance,’’ even if families are working and not receiving TANF cash benefits. Any form of ‘‘assistance,’’ including a TANF-funded housing subsidy provided for more than 4 months,

counts against the family’s Federal lifetime TANF time limit and also triggers

various data-gathering and reporting requirements, as well as the obligation of

families to assign their right to child support to the State. Thus, ongoing receipt

of rental subsidies by a poor family that has worked its way off cash welfare benefits can threaten the family’s ability to receive cash assistance at a future point

if the family subsequently loses its job (perhaps in a recession) and falls on hard

times. TANF-funded supplemental housing benefits for families not receiving cash

welfare benefits should be categorized as ‘‘nonassistance’’ to facilitate States’ use of TANF funds to serve working families. (At a minimum, States should have the

option to categorize such benefits as ‘‘nonassistance.’’)

• Allow States to determine what constitutes ‘‘minor rehabilitation’’ costs payable

with TANF funds. It is now permissible to use TANF funds for ‘‘minor rehabilitation’’ but there is no HHS guidance on what types or cost of repairs is allowable,

making it difficult for States to determine the extent to which using TANF funds

in this area is permissible. Several States have recently allocated TANF funds to

rehabilitate rental housing for TANF-eligible families, focusing particularly on

mitigating lead paint hazards in housing with children under six and on handicap

accessibility. By allowing States to define what constitutes ‘‘minor rehabilitation,’’ more States with similar needs are likely to follow suit. (An alternative approach

would be to direct HHS and HUD to issue guidance on what constitutes ‘‘minor

rehabilitation’’ and is a permissible use of TANF funds.)

• Provide funds to HHS to conduct a joint HHS/HUD demonstration project for

families with multiple barriers to work that combines housing assistance with

services. Such a project would explore the effectiveness of a variety of models for

combining housing with services for TANF families that have multiple barriers to

work, including homeless families. A portion of the funds could be used for noncustodial parents of children receiving TANF benefits, such as homeless fathers

or those recently released from prison. Funds could be used to provide not only

housing assistance, but also employment services designed to increase parents’ earnings and help support their children. This is an important component of efforts to determine the most effective strategies for the hardest-to-serve families.

• Clarify that legal immigrant victims of domestic violence eligible for TANF and

other welfare-related benefits are also eligible for housing benefits. This proposal

would ensure that abused immigrant women seeking protection under the 1994

Violence Against Women Act (VAWA) that are eligible for other Federal benefit

programs also have access to Federal housing programs.

• Encourage States to consider housing needs in TANF planning and implementation, and improve data collection on families’ housing status. States would identify

whether families’ living arrangements (such as doubling up or homelessness),

housing costs and housing locations pose barriers to work as part of an effort to

address the primary housing-related problems experienced by TANF families. To

assist States in planning and implementing policies that take into account families’ housing situations, States need better data on the housing status of families

receiving TANF than most States currently have, as well as on the location of

places of employment in relation to families’ housing. This proposal also would direct HHS to work with HUD to develop a procedure for interagency data matching or other uniform data collection protocol to determine the housing status of

families receiving cash benefits.

• Encourage cooperation among welfare agencies and agencies that administer Federal housing subsidies. As a parallel to the current requirement in Section 12(d)(7)

of the U.S. Housing Act (42 U.S.C. § 1437j(d)(7)) that Public Housing Agencies

(PHA’s) seek to enter into cooperation agreements with welfare agencies, this provision would direct States to cooperate, directly or through counties, with PHA’s

to promote the economic self-sufficiency of public housing residents and voucher

program participants that currently or recently received TANF benefits. Some

PHA’s have reported that despite their attempts to collaborate with welfare agencies to improve services to families assisted by both agencies, welfare agencies

often did not respond to their overtures. Efforts to spur more productive interagency collaboration could be helpful.

33

13 As the title of the bill implies, the primary role of the draft bill is to increase voucher utilization and success rates and enhance the mobility potential of housing vouchers, through provisions not discussed in this testimony. Such measures also are likely to promote employment

among families with children.

For States to take full advantage of any enhanced flexibility to address the housing needs of families moving from Welfare to Work, they will need to have sufficient

resources. The Administration has proposed freezing funding for the TANF block

grant over the next 5 years, and it has also suggested imposing stringent new work

requirements that would force States to devote substantially more resources to

costly workfare programs. If States’ resources get consumed by the costs of running

workfare programs on a greatly expanded scale, they have less left to provide work

supports, including housing assistance, for low-income working families that are no

longer receiving cash assistance and are struggling to get by on low wages. Congress

should be sure to provide additional funding for TANF above a freeze level (as well

as resources needed to meet any additional work requirements), if it expects States

to continue innovating and providing a wide range of work supports to ensure that

families succeed in moving from Welfare to Work and then stay employed and off

welfare.

PROPOSALS TO REVISE HOUSING PROGRAMS TO SUPPORT WORKING FAMILIES

Senator Paul Sarbanes has circulated a draft bill entitled ‘‘The Housing Voucher

Improvement Act of 2002’’ that contains several provisions designed to promote employment.13 The bill includes the following work-related provisions.

• Authorization of Welfare to Work Vouchers. In the fiscal year 1999 VA–HUD Appropriations Act, Congress funded 50,000 Welfare to Work vouchers for current

and recent TANF recipients for whom the lack of affordable housing or housing

location is a barrier to work. The program has never been authorized and new

vouchers have not been allocated beyond the initial 50,000. Experience with this

program suggests that such targeted housing assistance can benefit families and

provide positive incentives for interagency collaboration. In addition to facilitating

appropriations for additional target end vouchers, the proposed program authorization would give preference to receive the new vouchers to PHA’s that have committed their own resources to an interagency Welfare to Work Program or that

are collaborating with welfare or workforce investment agencies in operating a

State- or locally-funded program. As a result, this provision would encourage

PHA’s to allocate a portion of existing vouchers that become available through

turnover to families leaving welfare for work and also would provide an incentive

to States to allocate TANF or other funds for this purpose. In addition, the provision would strengthen requirements that PHA’s, welfare and workforce investment agencies collaborate in program implementation.

• Expansion of the Family Self-Sufficiency Program. The Family Self-Sufficiency

(FSS) Program is a HUD-administered employment and savings incentive program for low-income families that have housing vouchers or live in public housing.

FSS promotes the goals of welfare reform, but fewer than 1.5 percent of the families that currently receive income from TANF and are potentially eligible for FSS

are participating in the program. The number of public housing families enrolled

in FSS is particularly low, only 7,000. In addition, families living in units with

project-based Section 8 subsidies are not eligible for FSS. This proposal would

clarify that HUD may provide funding for multiple FSS coordinators to PHA’s with large public housing FSS programs (as HUD now does for PHA’s with large

voucher FSS programs), and amend the FSS statute to make families with

project-based Section 8 subsidies eligible. Many nonprofit owners as well as some

for-profit owners are interested in offering this asset-building program to their

tenants. But since not every owner will choose to set up an FSS program, the statute would be amended to allow families in project-based Section 8 housing to participate in a local PHA’s Section 8 FSS program, at the PHA’s discretion. While

these changes will have some cost, it should be modest.

• Flexibility to Use Resident Opportunities and Self-Sufficiency (ROSS) Funds to

Serve Section 8 Families. ROSS is currently the single largest HUD competitive

grant program to promote the self-sufficiency of HUD-assisted tenants. ROSS

funds, however, may not be used to assist Section 8 families, despite the fact that

more than twice as many families with children live in housing assisted under

the tenant-based or project-based components of the Section 8 program as live in

public housing. Until fiscal year 2001, grantees under ROSS and its predecessor,

the Economic Development and Supportive Services (EDSS) Program, could

choose to use up to one-fourth of their grant funds to serve Section 8 families.

ROSS funds now are restricted to use only for public housing tenants and resiVerDate 11-MAY-2000 08:00 Aug 21, 2003 Jkt 000000 PO 00000 Frm 00037 Fmt 6621 Sfmt 6621 88413.TXT SBANK4 PsN: SBANK4
34

dents of housing assisted under the Native American Housing Assistance and

Self-Determination Act of 1996 (NAHASDA). HUD has restricted the use of these

funds pursuant to Section 34 of the U.S. Housing Act, adopted as part of the

Quality Housing and Work Responsibility Act of 1998. (EDSS never had statutory

authorization.) Section 34 authorizes grants only to serve public housing tenants

and residents of housing assisted under NAHASDA. It is not clear why Congress

made this change, and it may have been simply an oversight. This proposal would

amend Section 34 to allow ROSS grantees to serve Section 8 families.

• A Requirement that States and Counties, in Planning Areas to Target for Housing

Production Using Federal Housing Block Grant Funds, Consider Parents’ Access

to Employment and Consult with Social Service Agencies. Housing opportunities

close to areas of employment opportunities and public transportation are important to enhancing the prospects of low-income people to find and to retain employment. This provision would require that jurisdictions, in awarding Federal

housing block grant funds for housing development, consider housing location in

relation to employment opportunities for current and recent TANF recipients. In

addition, the provision would require States and counties to solicit comments from

agencies that administer TANF and workforce development programs to inform

their housing planning, and to submit these agencies’ comments and their responses along with their proposed Consolidated Plans to HUD.

• Authority to Receive Earmarked Grants from Other Sources to Offset Rent Increases for Section 8 Families Due to Earnings and for Working Spouses or Parents that Join Tenant Households. The 1998 housing law authorized a 2-year

phased disregard of increases in earnings in calculating rents for families that

have vouchers or live in units with project-based Section 8 subsidies and that previously were unemployed or recently received TANF benefits. No funds have been

provided through the appropriations process for this purpose, however, so this

earnings disregard for Section 8 recipients has not been implemented. Only public

housing residents and disabled voucher tenants receive the benefit of the disregard in calculating their rent. Similarly, if a working adult joins a family, the

family’s rent is increased because all of the additional income is counted. Just as

the lack of an earnings disregard for Section 8 families may be a disincentive to

work, the lack of any disregard of the income of a reuniting parent or spouse may

discourage family formation. This proposal would amend the U.S. Housing Act to

allow PHA’s and owners administering project-based Section 8 subsidies to receive

other funds—including TANF funds—to provide an optional disregard for increases in earnings in calculating the rent of Section 8 families. It also would create an optional disregard of a household’s increased earned income in calculating

rent of public housing or Section 8 tenants when spouses or parents rejoin these

households. PHA’s and owners that received funds from TANF or other public or

private entities to cover the costs of these disregards would be allowed to provide

the disregards.

IMPLICATIONS FOR HUD APPROPRIATIONS

Realizing positive results from these work-related amendments to the housing

statutes generally will require additional appropriations. More funding for vouchers

will be needed. (Note: A portion of incremental vouchers could be earmarked for use

as Welfare to Work vouchers; it may make sense to set aside about a third of new

vouchers for this purpose, which would ensure that other new vouchers are available for PHA’s to serve elderly, homeless, or disabled individuals on their waiting

lists, as well as working families without prior history of welfare receipt.) In addition, Congress should increase the amounts allotted for FSS coordinators within the

overall appropriations for the public housing operating subsidy and the Section 8

Certificate Fund, and make any necessary adjustment in the total amounts appropriated for each of these accounts in anticipation of additional families participating

in the escrow savings feature of the FSS program. The appropriation for ROSS,

which has generally been a set-aside within a larger account such as the Community Development Block Grant or the Public Housing Capital Fund, should be

increased so services to public housing families are not reduced in order to serve

Section 8 families. (In the last few years Congress has appropriated $55 million for

ROSS.)

Finally, fiscal year 2003 VA–HUD Appropriations Act should fund the alreadyauthorized earnings disregard for Section 8 families. Public housing residents who

were previously unemployed or recently received TANF benefits do not face an immediate rent increase when they go to work and increase their income. For a 2-year

period, their increase in earnings is disregarded when their rent obligation is calculated. (In the second year, half the earnings increase is disregarded.) Congress

authorized this earnings disregard for families that have vouchers or live in units

35

14 In a study of perceived barriers to work among public housing families, nearly half cited

a rent increase as their major concern, more than were concerned about child care, safety, loss

of other benefits or any other problem. Cynthia Miller and James A. Riccio, Making Work Pay

for Public Housing Residents: Financial-Incentive Designs at Six Jobs-Plus Demonstration Sites,

Manpower Demonstration Research Corporation, January 2002.

with project-based Section 8 subsidies in QHWRA, but never funded it, despite the

fact that 70 percent of families that receive both welfare and housing assistance are

served by these housing programs rather than by public housing. The lack of an

earnings disregard for these housing assistance recipients may weaken welfare reform efforts and also may diminish the impact of TANF-funded earnings disregards.14

Should Work Requirements Be Imposed on Families Living in

Public or Section 8-Assisted Housing?

Some may argue that rather than authorizing and funding these improvements

in Federal housing programs to promote work, Congress should simply impose work

requirements on assisted tenants. For the reasons explained below, a proposal imposing work requirements on assisted tenants would create administrative burdens

far out of proportion to the gain to be achieved, as there are few able-bodied heads

of households receiving housing assistance who are not already working or subject

to work requirements in another program such as TANF. Furthermore, if the goal

is actually to promote work rather than to terminate housing assistance to vulnerable families and individuals—some of whom may then slip into homelessness—

the proposal would be quite costly to implement and would be likely to interfere

significantly with effective implementation of other housing program requirements

and goals.

Based on HUD data from the fall of 2000, some 89 percent of the heads of households receiving HUD-funded housing assistance are either elderly, disabled, working

or subject to work requirements under TANF. Many of the remaining 11 percent

of HUD-assisted families with a nonelderly, nondisabled head of household who are

neither working nor receiving TANF are likely to face severe barriers to work, such

as poor physical and mental health, limited literacy or work experience, or a history

of substance abuse or involvement in the criminal justice system. Overcoming these

barriers will be neither easy nor cheap and will require comprehensive services

skillfully delivered. Few housing agencies currently have the in-house expertise or

existing partnerships with other service providers to help such individuals enter and

remain in the workforce. To impose work requirements on such individuals without

funding to provide the services they need would be ineffective. It also could cause

many of them to become homeless. To require PHA’s to divert already inadequate

resources from housing maintenance, eligibility, and rent determination or other

essential functions to enforce work requirements for this relatively small number of

households would undermine the primary mission of the housing programs.

Imposing work requirements on housing assistance recipients is impractical for

another reason as well. The majority of the small fraction of such households who

report having no current income live either in private units rented with the help

of a Section 8 voucher or in a development that receives a Section 8 project-based

subsidy. It is unlikely that Congress would, or legally could, impose obligations on

private owners with existing project-based Section 8 contracts to administer work

requirements. While Congress could require owners to agree to administer work requirements as a condition of renewing their project-based Section 8 contracts, such

a requirement would likely discourage many owners from continuing to administer

Section 8 subsidies. Similarly, while Congress could impose the obligation to enforce

work requirements on PHA’s administering voucher programs, such requirements

also would be likely to discourage owner participation. Assuming that work requirements would have to be enforced through reduction or termination of the housing

subsidy, such requirements would put owners at risk of increased turnover in their

units. Increased turnover imposes additional uncompensated maintenance and tenant selection costs and reduces rent payments while units are vacant. At a time

when about 30 percent of households receiving new vouchers are unable to use

them, imposing new Federal requirements that would further reduce owner participation in the voucher program would be counterproductive. This suggests that the

current practice of imposing work requirements and the obligation to deliver workrelated services through TANF and related programs, rather than expecting housing

programs to take on this new role, is the appropriate course of action.

36

Family Formation Issues in the HUD-Assisted Housing Programs

Perhaps to a greater extent than is true of other poor families, families with children in HUD-assisted housing tend to have only one parent in the home. It would

often be better for children to live with both parents. There are certain Federal admissions and rent policies that discourage two-parent families in Federally-assisted

housing. The two policy changes recommended below could increase the proportion

of children in assisted housing that live with both parents (or a parent and spouse)

without substantially interfering with other housing policy objectives.

• Reduce the Financial Disincentive to Having a Working Spouse or Parent Join a

Family in Federally-Assisted Housing. In Federal housing programs, rent is generally based on income. If a household’s income increases, its rent increases as

well. Tenants generally pay at least 30 percent of their ‘‘adjusted’’ income for rent.

(Families in the voucher program may pay more.) There is no ‘‘adjustment’’ to income for an additional adult in a household; each adult’s gross income is counted,

with rare exceptions. Currently, PHA’s are permitted to adopt policies that disregard income of public housing tenants in particular situations, but they do not

receive Federal reimbursement for the costs of such optional disregard policies. No

optional income disregards are permitted in the Section 8 programs.

These rent policies create a financial disincentive to add a working parent or

spouse to a tenant family. To reduce this financial disincentive, Federal law could

require a PHA or owner to disregard some or all of the income of a newly admitted spouse or parent for a limited period of time in determining the family’s rent.

Alternatively, Federal law could make such a policy optional in the Section 8 program like it now is in the public housing program, and provide reimbursement

to agencies for the additional costs. It is possible that over time such a policy

would increase total household income and rent payments, and therefore would

not require additional Federal funding.

• Promote Sensible Policies on Exclusion of a Second Parent from Federal Housing.

To reduce the barriers to married and two-parent families in Federally-assisted

housing programs, Federal law could be changed to alter how agencies review

criminal history and subsequent behavior, in order to balance safety concerns

with consideration of the best interests of the children. PHA’s and private owners

that administer HUD subsidies are allowed to screen out any applicants with a

history of drug-related or violent criminal activity or other nonviolent criminal activity that would adversely affect other residents or employees, regardless of how

long ago the criminal activity occurred or the applicant’s subsequent behavior.

Current Federal policy makes no distinction in screening policies based on marital

or parental status. If a spouse or parent of the children was not part of the household when the family initially received housing assistance, due to incarceration

or other reason, that spouse or parent is subject to the same screening process

as a new applicant if he or she seeks to join the household. Given the substantial

level of past involvement with the criminal justice system among the poor, particularly among African-American males, this pro-safety policy has a broad exclusionary effect. PHA’s and private owners of HUD-assisted housing could be

directed to consider subsequent behavior, participation in formal rehabilitation

programs, and other evidence of mitigating circumstances before deciding whether

to admit or deny admission to a spouse or parent of a current resident. (Such consideration is now permitted but not required.) If, after this more thorough screening process, a PHA or owner decides that a parent or spouse seeking to join a

tenant household would be likely to pose a risk to other tenants or agency employees, it could and should deny admission. The minor amount of additional work

entailed is appropriate to enable more children to live with two parents.

The Administration’s ‘‘Superwaiver’’ Proposal is Not the Appropriate

Response to the Need for Better Coordination Between Welfare and

Housing Programs and May Reduce the Housing Resources Available to

Families Moving from Welfare to Work

A final important issue concerning housing policy and welfare reform is raised by

the ‘‘superwaiver’’ proposal in the Administration’s welfare reauthorization plan.

The ‘‘superwaiver’’ would constitute an unprecedented transfer of authority from

Congress to the Executive Branch to establish funding priorities, set funding levels,

and fix program parameters, and could diminish the housing resources available to

families moving from Welfare to Work.

The Administration’s ‘‘superwaiver’’ proposal would grant sweeping authority to

the Executive Branch to waive, at a governor’s request, most provisions of authorization and appropriations laws related to a range of low-income and other domestic

37

15 Housing and homelessness programs are listed among the covered programs in the Administration’s plan, but are not referenced in the versions of the superwaiver proposal included in

comparison welfare reauthorization bills approved on April 18 by subcommittees of the House

Ways and Means Committee and the House Education and the Workforce Committee. The

programs included in the current House bills all fall under the jurisdictions of the two House

subcommittees that have acted on the TANF reauthorization legislation. When the legislation

moves to the House Rules Committee—where the Ways and Means Committee and the Education and the Workforce Committee bills will be combined and other changes can be made—

programs outside the jurisdiction of these two committees are expected to be added.

programs, including Federal housing and homeless programs.15 Executive Branch

officials could override nearly all provisions of law governing how these programs

operate. They also could override Congressional appropriations decisions by redirecting funds that Congress appropriated for one or more of these programs to

other covered programs, including programs in other Federal departments. Of particular relevance to housing programs, Executive Branch officials could move Federal funds and program control from the local agencies or elected officials in whom

Congress has invested such authority to the governors.

The potential inclusion of low-income housing programs under the superwaiver

poses a thorny set of issues, since States generally do not operate the principal

housing programs. Inclusion of these programs in the superwaiver thus could enable

a governor to seek to gain control over Federal housing resources currently directed

to local public housing authorities and to alter the uses of these funds. A State

might, for example, seek to sell off a public housing project located in what has become prime real estate and use the proceeds from the sale to launch or expand

homeownership assistance programs geared more toward moderate- or middleincome constituencies.

Alternatively, a State could seek to take and redirect a portion of the resources

used to support rental housing vouchers that are ‘‘turning over.’’ (‘‘Turn-over’’ vouchers are vouchers that become available when a current voucher-holder leaves the

program. Currently, when a voucher becomes available, the public housing authority

reissues the voucher to a poor family or individual who has been on the local waiting list for a voucher.) A State could seek to take control of a portion of the resources that become available when vouchers turn over and to transfer these resources to programs providing employment- or marriage-related services. The State

might seek to use the transferred resources to substitute for State funds being provided for such services. Or the State could seek to use some of these Federal housing resources to substitute for State funds being used for homeownership or rental

assistance programs or for community-based residential services for severely disabled people. Other types of waivers involving the housing programs might entail

overriding Federal statutory requirements that target a substantial majority of

housing vouchers on families with incomes below 30 percent of the area median income (which is roughly equivalent to the poverty line) and shifting more of the

vouchers to families at higher-income levels.

A loss of public housing units, a reduction in the overall number of housing vouchers, or a shift in rental housing resources toward higher-income families would increase the shortage of affordable housing for families moving from Welfare to Work.

In addition, the superwaiver proposal is not likely to be effective in accomplishing

these modest goals, and threatens to disrupt the overall framework and local governance of housing programs and to diminish scarce housing resources available to

poor families.

This kind of far-reaching authority is not what is needed to improve the housing

situation of families transitioning from Welfare to Work. Rather, what is suggested

here are more modest changes in the TANF statute and in housing programs that

can be accomplished through the Federal legislative process. These include incentives such as authorization of a new Welfare to Work Housing Voucher Program

that would encourage housing and welfare agencies to collaborate in comprehensive

efforts to assist families to get jobs and remain employed, in order to qualify for

additional targeted Federal housing resources. Housing, welfare, and workforce

agencies also would be encouraged to consult with each other in better-coordinated

planning efforts at the State and local levels.

38

39

PREPARED STATEMENT OF ROBERT RECTOR

SENIOR RESEARCH FELLOW, THE HERITAGE FOUNDATION

MAY 1, 2002

Introduction

Before I begin, let me first thank the Committee for the opportunity to speak

before you today. While I serve as Senior Research Fellow on Welfare and Family

Issues at The Heritage Foundation, I must stress that the views I express are

entirely my own, and should not be construed as representing the position of The

Heritage Foundation.

The traditional War on Poverty was launched in the mid-1960’s. War on Poverty

Programs (cash and food and housing) focused on providing material support and

largely ignored the behavioral causes behind poverty. The welfare reform of 1996

recognized that this old style welfare system had failed. The reform changed the nature of cash aid: In the future welfare would continue to provide material support

but it would also seek to transform behavior in a positive way.

To understand the lessons of welfare reform for assisted housing programs, six

points are critical:

1. The pre-reform Aid to Families with Dependent Children (AFDC) Program

gave aid permissively and unconditionally. Those in need of aid were given material

support and little was required of them.

2. When the Temporary Assistance to Needy Families (TANF) Program replaced

AFDC, aid became conditional: Recipients were required to undertake constructive

activities leading to self-sufficiency as a condition of receiving assistance.

3. Because of this change, welfare reform has resulted in unprecedented drops in

dependency and child poverty.

4. Public housing remains unreformed. Current housing programs are very similar to the old AFDC program. Some 87 percent of families with children receiving

housing aid are single-parent families. Aid is given to able-bodied individuals unconditionally; there is no requirement that the recipient undertake constructive activities leading toward self-sufficiency and prosperity.

5. Requiring able-bodied recipients to work or undertake constructive activities

has been the key to the success of the TANF Program. The same principle should

be applied to housing programs.

6. Finally, marriage is critical to the well-being of children. Like all means-tested

aid programs, assisted housing programs impose strong financial penalties on lowincome parents who marry. This is a foolish policy: Such antimarriage penalties

should be reduced.

Lessons from Welfare Reform

Nearly 6 years ago, President Bill Clinton signed legislation overhauling part of

the Nation’s welfare system. The Personal Responsibility and Work Opportunity

Reconciliation Act of 1996 (P.L. 104–193) replaced the failed social program known

as Aid to Families with Dependent Children (AFDC) with a new program called

Temporary Assistance to Needy Families (TANF). The reform legislation had three

goals: (1) to reduce welfare dependence and increase employment; (2) to reduce child

poverty; and (3) to reduce illegitimacy and strengthen marriage.

At the time of its enactment, advocacy groups passionately denounced the welfare

reform legislation, predicting that it would result in substantial increases in poverty, hunger, and other social ills. Contrary to these alarming forecasts, welfare

reform has been effective in meeting each of its goals.

• While critics of welfare reform unanimously predicted that the reform would

throw at least one million additional children into poverty, in fact, 2.3 million

fewer children live in poverty today than in 1996.

• Decreases in poverty have been greatest among black children. Black child poverty has declined by a third and is now at the lowest point in U.S. history.

• Poverty among single mothers has also been cut by a third and is now at the

lowest point in U.S. history.

• The employment rate of single mothers has increased dramatically. The employment rate of never-married mothers is up nearly 50 percent. Employment among

single mothers who are high school dropouts is up by two-thirds, while employment among young mothers (aged 18 to 24) has nearly doubled.

• Hunger among children has been almost cut in half. According to the U.S. Department of Agriculture (USDA), there are nearly 2 million fewer hungry children

today than at the time welfare reform was enacted.

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1 Robert E. Rector and Sarah E. Youssef, ‘‘The Determinants of Welfare Caseload Decline,’’

The Heritage Foundation, Center for Data Analysis Report, CDA99–04 May 11, 1999. 2 June E. O’Neill and M. Anne Hill, ‘‘Gaining Ground? Measuring the Impact of Welfare Reform on Welfare and Work,’’ Manhattan Institute Civic Report, No. 17, July 2001.

• Welfare caseloads have been cut nearly in half.

• The explosive growth of out-of-wedlock childbearing has come to a virtual halt.

The share of children living in single-mother families has fallen, and the share

living in married-couple families has increased, especially among black families.

Who Gets Credit: Welfare Reform or the Economy?

Some would argue that the positive effects noted above are the product of the robust economy during the 1990’s, rather than the results of welfare reform. However,

the evidence supporting an economic interpretation of these changes is not strong.

Historically, periods of economic growth have not resulted in lower-welfare caseloads. From 1950 to 1990, there were eight periods of economic expansion, yet none

of these periods of growth led to a significant drop in AFDC caseload. Indeed, during

two previous economic expansions (the late 1960’s and the early 1970’s), the welfare

caseload grew substantially. Only during the expansion of the 1990’s does the caseload drop appreciably. How was the period of expansion during the 1990’s different

from the eight prior expansions? Clearly, the answer is welfare reform.

Another way to disentangle the effects of welfare policies and economic factors on

declining caseloads is to examine the differences in State performance. The rate of

caseload decline varies enormously among the 50 States. If improving economic conditions were the main factor driving caseloads down, then the variation in State reduction rates should be linked to variation in State economic conditions. On the

other hand, if welfare polices are the key factor behind falling dependence, then the

differences in reduction rates should be linked to specific State welfare policies.

A Heritage Foundation paper, ‘‘The Determinants of Welfare Caseload Decline’’ examined the impact of economic factors and welfare policies on falling caseloads

in the States.1 This analysis showed that differences in State welfare reform policies

were highly successful in explaining the rapid rates of caseload decline. By contrast,

the relative vigor of State economies, as measured by unemployment rates, changes

in unemployment, or State job growth, had no statistically significant effect on caseload decline.

A recent paper by Dr. June O’Neill, former Director of the Congressional Budget

Office, reaches similar conclusions.2 Dr. O’Neill examined changes in welfare caseload and employment from 1983 to 1999. Her analysis shows that in the period after

the enactment of welfare reform, policy changes accounted for roughly three-quarters of the increase in employment and decrease in dependence. By contrast, economic conditions explained only about one-quarter of the changes in employment

and dependence. Substantial employment increases, in turn, have led to large drops

in child poverty.

The economic boom of the 1980’s was long and sustained, but did not result in

substantial or enduring declines in poverty among single mothers or black children.

But since the mid-1990’s there has been a sustained and unprecedented drop in the

poverty rates for these two groups. Clearly, the difference has been welfare reform.

Overall, it is true that the health of the U.S. economy has been a positive background factor contributing to the changes in welfare dependence, employment, and

poverty. It is very unlikely, for example, that dramatic drops in dependence and increases in employment would have occurred during a prolonged recession. However,

it is also certain that good economic conditions alone would not have produced the

striking changes that occurred in the late 1990’s. It is only when welfare reform was

coupled with a growing economy that these dramatic positive changes occurred.

Unfortunate Similarities Between Aid to Families with

Dependent Children and Subsidized Housing

Prior to welfare reform, the old AFDC Program provided aid predominantly to single mothers with children. AFDC provided one way hand-outs: Recipients were not

required to engage in any significant activities in order to receive aid. It was widely

recognized that this system promoted idleness, single parenthood, and poverty. Consequently, the AFDC system was radically reformed and replaced with the new

TANF Program. Under TANF, recipients would be required to engage in constructive activities aimed toward self-sufficiency as a condition of receiving aid. These

activities could include: Supervised job search, training and community service

work. As the new ‘‘constructive activity’’ requirement took effect, welfare caseloads

plummeted, employment of single parent soared, and child poverty fell in an unprecedented manner.

41

In many respects, current Government housing programs closely resemble the

pre-reform Aid to Families with Dependent Children Program. Nearly half of the

households in subsidized housing are families with children. Some 87 percent of the

subsidized households with children are single-parent households. As with prereform AFDC system, aid is generally given as an unconditional, one-way handout;

recipients are not required to engage constructive activities as a condition of receiving assistance.

Thus, current housing programs replicate most of the elements that led to failure

in the pre-reform AFDC system. Housing programs are permissive rather than expectant and demanding. Housing gives a ‘‘hand out’’ rather than a ‘‘hand up’’. In

order to help recipients to help themselves the highly successful principles of the

TANF reform should now be applied to subsidized housing.

Applying Work or Activity Requirements to Housing Programs

The key to the success of welfare reform has been the establishment of work or

activity requirements for TANF recipients. As recipients have worked more, their

incomes have risen and more have escaped poverty.

The lessons from TANF are applicable to public housing. While parents in subsidized housing do maintain higher levels of employment than parents in the prereform AFDC system, these employment levels are still far lower than they should

be. The Census Bureau’s Current Population Survey for 2000 indicates that 30 percent of householders with children receiving housing aid did not work at all during

the course of the year. Over half worked less than 1,000 hours during the year.

Overall, only a quarter of parents worked full-time through the year (2,000 hours).

An important element in reducing poverty and increasing family income must be to

increase the amount of work performed in these families.

Applying the lessons from welfare reform, ‘‘work requirements’’ should be established in housing assistance programs. However, it is important to clarify here a

common misunderstandings about work requirements in TANF. The TANF Program

does not directly demand that recipients obtain formal employment in the private

sector or government, and TANF does not penalize those who fail to obtain employment. Instead, the TANF Program encourages recipients to obtain employment;

those recipients who claim they cannot find employment are required to undertake

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other constructive activities: Supervised job search, training, or community service.

Once a recipient obtains real employment the other required activities are proportionally reduced.

The impact of this system on employment is profound. Once recipients are

required to be continuously active rather than idle, they have a strong incentive to

obtain employment. The indirect result is a surge in actual employment and a drop

in poverty.

This principle should now be incorporated into housing programs. As a general

rule, able bodied, nonelderly recipients in public housing and project-based Section

8 housing should be required to work a substantial number of hours per week. Recipients who are unable or otherwise fail to maintain the required level of formal

employment should be required to participate in job training, supervised job search,

or community service work. Those who are employed for only a few hours each week

should supplement their employment with participation in these other constructive

activities. Participation in work activities under the Temporary Assistance to Needy

Families (TANF) Program should be countable toward the housing work requirements and the TANF and housing work programs should be closely coordinated.

Specific Work Promotion Policies in Subsidized Housing

However, housing programs are often more decentralized than TANF. Also, it is

not desirable to evict housing tenants every time a shortfall in an activity requirement occurs. These differences mean that the rule of ‘‘requiring employment or constructive activities’’ will need to be applied somewhat more flexibly in housing than

is TANF. With this caveat in mind, the following requirements should be established for able-bodied, nonelderly recipients in Section 8 and public housing.

• In selecting new able-bodied, nonelderly heads of household for entry into the Section 8 and public housing programs, priority should be given to those with the

best record of prior employment. Specifically, within those income ranges currently selected for participation in the housing programs, priority should be given

to those able-bodied applicants that have the strongest record of prior employment. This rule would mean that housing programs, in general, would reward

work. (The requirement would apply to able-bodied, nonelderly applicants only;

disabled and elderly individuals should be exempt from this requirement and

should not have their participation in housing programs reduced because the new

work requirement.)

• Able-bodied nonelderly heads of household who reside in Section 8 and public

housing should be required to engage in employment, supervised job search, training or community service work for a minimum of 35 hours per week. The various

activities could be combined to meet the 35-hour requirement. Recipient who had

been employed and then lost employment would be expected to immediately engage in supervised job search, training, or community service; this would create

a strong impetus to regain employment as soon as possible.

• When undergoing annual recertification, residence by current tenants should not

be automatically extended. Instead, able-bodied, nonelderly heads of household

should be placed in a selection pool along with similar new applicants. Priority

in selecting residents for the next year from within this pool should be given to

those applicants with the best record of employment and/or other constructive activity. It is important to note that this system would not penalize those cannot

find formal employment since they would be given credit for performing other

constructive activity. The system would, however, send the very strong message

that idleness would not be tolerated for able-bodied individuals within assisted

housing.

• These requirements would result in an increase in employment among public

housing and Section 8 tenants. This, in turn, would result in an increase in rents

paid and decrease in costs to the Public Housing Authority. The PHA’s could use

the surplus funds generated by the increase in rents to pay for ancillary services

such as day care.

• PHA’s could contract with other organizations such as local TANF offices to help

in the implementation of these work rules.

• These work rules should be implemented incrementally; the onset of implementation could be delayed until fiscal year 2004 when the current recession will have

fully passed.

Subsidized Housing and Marriage

A second important goal of welfare reform is to increase healthy and stable marriages. Today, nearly one third of all American children are born outside marriage,

one child every 35 seconds. The collapse of marriage is the principal cause of child

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poverty and a host of other social ills. A child raised by a never-married mother is

seven times more likely to live in poverty than a child raised by his biological parents in an intact marriage. And a child born and raised out-of-wedlock is 1700 percent more likely to become dependent on welfare than is a child raised by an intact

married couple. Overall, nearly 80 percent of long-term child poverty occurs among

children from never-married or broken families.

Children of never-married mothers are 24 to 78 percent more likely to suffer from

emotional and behavioral problems when compared to children from two parent

families. Children in single-parent homes are more likely to abuse drugs and more

likely to end up in jail; they perform more poorly in reading, spelling, and math are

more likely to repeat grades and eventually to dropout of school. Finally, children

living with nonmarried mothers are up to 33 times more likely to suffer from serious physical child abuse than are children with a married mother and father.

The growth of single-parent families has an enormous impact on Government. Indeed, the modern welfare state, as it relates to children, has grown up largely as

a support system for single parenthood. At present Federal and State governments

spend some $150 billion per year in means-tested aid for single-parent families. In

subsidized housing, some 87 percent of the aid to families with children goes to single-parent families.

But the collapse of marriage is not inevitable. In nearly half of all out-of-wedlock

births, the mother is actually cohabiting with the father at the time of birth. In

another 30 percent of cases the mother is romantically involved with the father

although they do not live together. These nonmarried fathers, on the average, earn

around $17,000 per year; very few have drug or alcohol problems or they are abusers. In most cases, the couples look favorably on marriage as an institution. Yet,

in general, these couples will not enter into marriage and will not sustain their relationships.

How Welfare and Housing Programs Discriminate Against Marriage

In many respects, the failure of millions of low-income couples to enter and sustain marriages is a result of the barriers that the welfare system erects against

marriage. Marriage has eroded and out-of-wedlock childbearing has soared, in part,

because subsidized housing, Temporary Assistance to Needy Families (TANF), Food

Stamps, Medicaid, and other means-tested welfare programs discriminate against

and penalize marriage.

Penalties against marriage are inherent in the structure of all means-tested aid

programs. In these programs, benefits are incrementally reduced as a recipient’s

earnings increase; this is generally termed the benefit reduction or marginal tax

rate on earnings. (For example with a benefit reduction rate of 50 percent, a beneficiary might be given $5,000 in aid if annual earnings are zero, $2,500 in aid if

earnings are $5,000, and no aid if earnings are $10,000.)

While it is widely recognized that this type of means-tested program discourages

work, it is less commonly understood that means-tested aid also discourages marriage and rewards single parenthood. Subsidized housing and other means-tested

welfare programs penalize marriage because a single mother will suffer a substantial reduction or even elimination of benefits whenever she marries an employed

male. However, if the couple remains unmarried, the father’s earnings will generally

not be counted in determining the mother’s welfare benefits and the value of those

benefits will not be cut. As a result, low-income couples can maximize their combined income by remaining unmarried, but will suffer a serious income loss from

marrying.

In the case of subsidized housing, the typical single mother receives a subsidy

worth about $5,000 per year; if she marries (or cohabits with) a male with earnings,

the value of the rent subsidy will be reduced. The more the male earns the greater

the loss of housing aid. If the mother marries a male with earnings around $18,000

per year (a typical sum for unmarried fathers), the housing subsidy will be completely eliminated. Thus, in general, low-income couples can maximize their welfare

income by remaining unmarried.

The antimarriage incentives implicit in subsidized housing programs are intensified by the fact that most recipients receive aid from more than one means-tested

program. Each individual means-tested program (such as TANF, Food Stamps,

Housing, or Medicaid) contains its own antimarriage incentives; these incentives are

additive and become very severe when multiple programs operate together.

For example: The typical single mother on Temporary Assistance to Needy Families receives a combined welfare package of various means-tested aid benefits worth

about $14,000 per year. Suppose this typical single mother receives welfare benefits

worth $14,000 per year while the father of her children has a low-wage job paying

$18,000 per year. If the mother and the father remain unmarried, they will have

44

a combined income of $32,000 ($14,000 from welfare and $18,000 from earnings.)

However, if the couple marry and live together, the father’s earnings will be counted

against the mother’s welfare eligibility. Overall, welfare benefits will be nearly

eliminated and the couple’s combined income will fall substantially.

The public is dismayed by the antimarriage bias of welfare programs. A 1999

Roper poll found that 56 percent of national adults found that ‘‘welfare programs

that encourage single-parent families and teenage pregnancy’’ were a ‘‘very serious’’

problem. Another 27 percent found this a ‘‘somewhat serious’’ problem. Only 4 percent concluded that the problem was ‘‘not serious at all.’’

Public housing officials should recognize that the existing bias against marriage

has extremely harmful long-term consequences for children and society. The penalties against marriage implicit in current housing programs should be substantially

reduced. This could be accomplished by altering the treatment of husbands’ earnings

in determining rents and eligibility. Housing program rules for married couples with

children could be altered so that the first $1,000 in a husband’s earnings each

month would be ignored or ‘‘disregarded’’ in determining the married couple’s eligibility for subsidized housing, and the couple’s monthly rent payment. Under this

system, a single mother could marry without incurring an overwhelming cut in her

housing subsidy.

Conclusion

It is widely recognized within both political parties that the 1996 welfare reform

has been highly successful. But Government housing programs have not been reformed. These programs continue to operate in the same manner as the pre-reform

Aid to Families with Dependent Children Program. In current housing programs,

able-bodied individuals are given benefits, but are not required to work or to undertake activities aimed at self-sufficiency. This nondemanding and permissive system

is harmful to recipients and to society.

Government housing programs should be restructured according to the current

principles of welfare reform. First, able-bodied recipients should be required to be

fully employed or to undertake activities leading to employment. Second, healthy

marriage should be encouraged not penalized.