Welfare Reform Impacts on the Public Housing Program: A Preliminary Forecast

Authors: Policy Studies Division     Connell, Terrence L.     Devine, Deborah J.     Rubin, Lester    

President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act in August 1996, ending "welfare as we know it." The new law replaces Aid to Families with Dependent Children with Temporary Assistance for Needy Families (TANF). Under TANF, eligible families receive relatively short-term income assistance if the adults in the family participate in work-related activities.

Welfare Reform Impacts on the Public Housing Program: A Preliminary Forecast examines the implications of this new law for public housing authorities (PHAs), whose residents traditionally contribute a portion of their incomes for rent. Prepared by HUD's Office of Policy Development and Research, the study finds that the effects of welfare reform on tenant incomes and PHA rent revenues are expected to vary considerably. Effects will depend on the number of PHA households that include mandated residents (adults required under TANF to seek employment), their potential for finding a job, their contributions to rent revenues, and mitigating actions taken by PHAs.

Substantial numbers of PHA residents have been (or soon will be) required to move from welfare to work -- losing all TANF assistance as they reach their time limits or find a job. Because public housing rents are tied to tenant income, a portion of PHA rent receipts will become uncertain. The resulting effect on Federal budget outlays, in the form of operating subsidies to PHAs, is also uncertain.

Researchers made two major projections that estimate the success of mandated residents at finding jobs. The conservative estimate assumed that the job-finding success of mandated residents will depend on how many job seekers and entry-level jobs exist when benefits end. A more optimistic projection assumed that mandated residents will be as successful at finding jobs as their unassisted peers.

Welfare Reform Impacts on the Public Housing Program focuses on eight PHAs that vary with respect to their State's welfare reform rules, rent and tenant selection policies, demographic characteristics of mandated residents, and economic conditions of the surrounding metropolitan areas. The study of these eight PHAs includes the following findings:

• Most residents are not TANF recipients. Roughly one-fourth of all PHA residents at seven PHAs are TANF- mandated recipients.

• Entry-level job seekers outnumber entry-level jobs by three or four to one in the metropolitan labor markets. Mandated residents sometimes face even greater odds because they live in areas where not enough entry-level jobs are within reasonable commuting range. Other substantial obstacles include inadequate education and job experience and difficulty locating and paying for child care.

• Mandated tenants contribute from 9 to 30 percent of total PHA rent revenue. Up to 60 percent of mandated households must find full-time employment for some PHAs to maintain current tenant rent levels.

• Collectively, the eight PHAs could find themselves as much as $5 million above or almost $4 million below their current rent revenue, depending on the estimating procedure used and factors such as the ability of mandated tenants to find jobs and housing authority rent policies.

• Greater income disparities among PHA residents are expected to occur as welfare reform takes hold because some jobless TANF-mandated residents will lose their only income while those who find jobs are projected to double their current income levels.

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