Thanks to the persistence of social innovators across the country, every day we see strategies that are working and delivering results in a rapidly changing world. This ongoing blog series will highlight the voices of our Coalition of more than 70 social innovators and their solutions to our country’s most pressing social problems, as well as examples of how this powerful work can be transformed into national change. Today we will hear from Sherry Riva, Founder and Executive Director of Compass Working Capital, about their efforts to alleviate poverty and help families gain financial security through the Compass Family Self-Sufficiency (FSS) Program.
Five years ago, Compass Working Capital (Compass) launched a new pilot program serving families living in subsidized housing in the city of Lynn, Massachusetts, a former industrial center just north of Boston that has experienced many years of economic decline. One of the first people to enroll was Jessica, a nursing assistant who, at the time, had been receiving a housing subsidy for about five years.
Jessica was a hard worker and was well-respected at her job. She had dreams and aspirations of a better future for herself and her two young children. Yet she had been turning down promotions and raises at work – Jessica felt trapped. She desperately wanted to get ahead, but the calculation she had made was that she was better off staying where she was.
This is a calculation that millions of U.S. families in our public welfare system make every day. To get ahead, Jessica needed to be able to invest in her future and her children’s futures by building savings, preparing for financial emergencies, improving her credit, investing in education, and working toward an exit from subsidized housing. But earning more money at work meant that she would likely have to pay more rent and could lose her housing subsidy, along with other benefits.
These so-called “poverty traps” are well-documented across U.S. anti-poverty programs. However, it is possible to change these types of incentive structures.
One such change already exists: the Family Self-Sufficiency (FSS) program, created by Congress in 1990 to remove a disincentive tied to the way rent payments are calculated in federally subsidized housing. When you live in subsidized housing, you pay about thirty percent of your income toward rent, a policy that was designed to keep housing affordable. This also means that when your income goes up, so does your rent, creating a disincentive for families to increase their income and making it more difficult to build savings. The FSS program changes this incentive structure through a simple idea – as families work more and earn more money, the FSS program allows them to capture their increased rent payment in a savings account that grows over time. Families like Jessica’s can use these savings to achieve their financial goals, so long as they are not receiving cash welfare, remain employed, and make progress toward achieving their financial goals.
Despite its potential to help lift families out of poverty, FSS has been underutilized around the country. This is due in part to a persistent view of housing assistance as a safety net to catch people when they are in need, rather than as a platform to help people out of poverty. Moreover, resource-strapped housing authorities often struggle to market the program, and as a result, enrollment rates are extremely low.
At Compass, we understood that the real power of FSS was in helping families work toward their financial goals and become more financially secure, and that the only way to accomplish this was to provide families with the financial guidance that housing authorities are simply not equipped to provide.
So, in late 2010, Compass became the first nonprofit organization in the country to launch a new asset building and public-private partnership model for the FSS program. We hypothesized that if we partnered with housing authorities to run the program and put Compass Financial Coaches – highly-trained financial professionals who help families develop budgets, build credit, pay off debt, access high-quality financial products, and utilize the savings they build in the FSS program – at the center of the work, we could significantly expand enrollment and drive stronger results for participants.
Our programs have grown from an initial group of 76 families in Lynn, MA to serve more than 1,000 families each year at 10 locations in three states. Participating families are making significant progress against key financial security indicators such as increases in earnings, savings, and credit scores, and reductions in debt and public assistance. Our first cohort in Lynn is now graduating from the program, and together they’ve built more than $530,000 in savings. Building on the success of our local programs in New England, we recently launched a National FSS Network to help mission-aligned partners in cities across the country expand the scope and impact of the FSS program – a step toward reaching the more than 2 million U.S. households who stand to benefit from this powerful employment and savings program.
Jessica left subsidized housing after only two years in the FSS program. She’d increased her income by 53%, improved her credit score, decreased her debt, and built over $6,000 in savings in her FSS account, which she used as part of a down payment on a home of her own. Investing in Jessica was good for government as well. Before enrolling in FSS, Jessica’s annual housing subsidy was $7,700. When she graduated from FSS, she also chose to leave housing. Her subsidy was passed to someone else waiting for assistance, and Jessica began to pay property taxes on the house she had bought in Lynn – a powerful return on investment.
Jessica’s experience should be the norm, not the exception. We envision a day when housing and other poverty alleviation programs can serve as platforms for economic mobility, by ensuring that all families have the opportunity to save for and invest in their future. Additionally, we challenge the next President to ensure that all Americans can access the programs and tools necessary to achieve financial stability and succeed in today’s economy.
Read more about how social innovators in the America Forward Coalition, like Compass Working Capital, are solving America’s biggest problems in communities across the country every day in our briefing book, Moving America Forward: Innovators Lead the Way to Unlocking America’s Potential, and join the conversation. Follow @CompassWorkCap and @America_Forward, and tell us how poverty alleviation programs like Compass have impacted your life using #AFPresidential16.
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