Asset Building Policy in the United States Ms. Josephine Bias Robinson Director, Office of Community Services Administration for Children and Families U.S. Department of Health and Human Services

2 Role of Assets in Economic Security and Independence U.S. anti-poverty strategy has traditionally focused on income support to help low- income households. Policy makers are increasingly considering the role that wealth and assets play in a household’s economic security and access to opportunity, and in long-term intergenerational independence.

3 Theory and Research Underlying Asset Building Policy Assets not only help households sustain themselves during difficult economic times, they also orient people to the future and provide a stake in society. As more low-income households have a stake in society, families and neighborhoods stabilize and economic opportunity and the economy expand. Low-income households want to and can save and, while saving generally rises with income, they may actually save at a higher rate (as a percentage of income) than higher-income households. Evidence suggests that, while providing household stability and expanding educational and entrepreneurial opportunity, asset building also can: –Decrease economic strain, marital dissolution, and risk of intergenerational poverty; –Increase property values, property maintenance, health and satisfaction, and local civic involvement.

4 Adequate Income and Possible Savings Household Income minus Consumption or Inadequate Income and Possible Debt # workers from household # hours worked worker capital ONE POLICY LEVER: INCREASE HOUSEHOLD INCOME VIA INCREASING WORKER CAPITAL (AFI does this via enabling education and small business development) # members in household Economic Model for Poverty Reduction

5 Origins of Asset Building Policy in the U.S. In 1991, Michael Sherraden, a Washington University professor, argued that income support policies often have been inadequate in helping low-income households escape poverty and improve their economic status. Sherraden recommended an asset-focused approach based on two primary considerations: –While the U.S. has long successfully used tax code mechanisms to incentivize saving and asset building, those mechanisms largely excluded low-income households due to their limited income tax liability. –Means-tested income support programs often have asset limits that can act as disincentives to saving and investment and discourage economic independence. Sherraden recognized that an asset-building approach could not replace income support programs so long as poverty persists, but would complement and augment existing policy.

6 Individual Development Accounts as a Mechanism for Helping Low-Income Households Build Assets Individual Development Accounts (IDAs) have emerged as a mechanism for incentivizing saving among low-income households. Other mechanisms include: –Homeownership – Down-payment assistance, mortgage insurance, and support for property rehabilitation –Small Business Capitalization – Loans and technical assistance to microenterprises –Tax Credits – Saver’s Credit, Earned Income Tax Credit, Child Tax Credit IDAs are bank accounts for low-income households that incentivize saving by matching individual deposits. Federal and State agencies work through community-based organizations, along with banks and other private sector partners, to promote IDAs for low-income households.

7 Assets for Independence (AFI) A Federal IDA Program Federal program that provides five-year AFI grants that enable participants to use IDAs to acquire a first home, capitalize a small business, and pursue postsecondary education and training. AFI projects work with clients to open IDAs and provide basic financial management training and supportive services. Participants are individuals who meet one of the following criteria: –They are eligible for income support through Temporary Assistance for Needy Families; –They are eligible for the Earned Income Tax Credit and have household net worth of less than $10,000 (excluding a residence and one vehicle); or –They have household incomes of less than two times the Federal poverty line (Federal poverty line was approximately $21,000 for a family of four in 2007) and have household net worth of less than $10,000 (excluding a residence and one vehicle) Participant savings are matched at rates between $1:$1 - $8:$1, depending on the provider and the asset to be purchased. Through Fiscal Year 2006: –Participants opened 36,077 IDAs, depositing a total of $31,508,293 in earned income. –11,029 participants had withdrawn an average of $3,839 in savings and match funds for purchasing an asset.

8 AFI in Action: AnewAmerica AFI funded project serving low-income new citizens, immigrants, and refugees living in the San Francisco Bay area of California. Mission: “promote the long-term economic empowerment of new Americans - new citizens, immigrants, and refugees - and to encourage their full participation in the political, social and cultural growth of America.” Participants are provided with three years of customized services that includes business development, asset building, and social responsibility. Since the establishment of the program: –103 small business startups and expansions were achieved –155 new jobs have been created in these businesses –110 accountholders have accumulated $416,972 in savings and earned match –24 families have purchased 20 homes with a combined value of $9,175,500.

9 Sources AnewAmerica Community Corporation (2007). Annual Report Berkeley, California. Beverly et al. (2008). “Determinants of Asset Building.” Report prepared by the Urban Institute and its collaborators for the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation (ASPE). Caner, A. and E. Wolff (2004). “Asset Poverty in the United States: Its Persistence in an Expanding Economy.” Public Policy Brief, no. 76. The Levy Economics Institute of Bard College. Organisation for Economic Co-Operation and Development (2003). “Asset Building and the Escape from Poverty: A New Welfare Policy Debate.” Sherraden, M. (1991). Assets and the Poor. A New American Welfare Policy. New York: M.E. Sharpe. U.S. Department of Health and Human Services, Office of Community Services (2007). Report to Congress. Assets for Independence. Status at the Conclusion of the Seventh Year.

10 Web Resources Office of Community Services The Office of Community Services is an office within the Administration for Children and Families, U.S. Department of Health and Human Services. The mission of the office is to work in partnership with states, communities, and other agencies to provide a range of human and economic development services and activities which ameliorate the causes and characteristics of poverty and otherwise assist persons in need. The aim of these services and activities is to increase the capacity of individuals and families to become self-sufficient, to revitalize communities, and to build the stability and capacity of children, youth, and families so that they become able to create their own opportunities. Anew America Corporation AnewAmerica's mission is to promote the long-term economic empowerment of new Americans - new citizens, immigrants, and refugees - and to encourage their full participation in the political, social and cultural growth of America. The organization was founded in 1999 by a group of community leaders representing immigrants and community development advocates who saw a continuing lack of integrated job creation, asset development, and community empowerment strategies for low-income new Americans living in the San Francisco Bay Area. Corporation for Enterprise Development – CFED CFED is a nonprofit organization that expands economic opportunity. Established in 1979 as the Corporation for Enterprise Development, CFED works to ensure that every person can participate in, contribute to, and benefit from the economy by bringing together community practice, public policy, and private markets. Access tools, resources and policy reports on IDAs and asset building strategies. MoneySmart Developed by the Federal Deposit Insurance Corporation, Money Smart is a training program to help adults outside the financial mainstream enhance their money skills and create positive banking relationships. The Money Smart curriculum helps individuals build financial knowledge, develop financial confidence, and use banking services effectively. The curriculum includes 10 modules on topics such as managing a checking account, key to savings, and owning your own home and is available in English, Spanish, Chinese, Korean and Vietnamese.

11 Web Resources Consumer Action In partnership with Capital One, Consumer Action provides the MoneyWi$e series which combines free multilingual financial education materials with community training seminars. The resources include: leader guides, PowerPoint presentations, training outlines, and attendee booklets. These tools are available to order or a PDF version is available in English online. In addition, there is a MoneyWi$e Best Practices Online newsletter, a quarterly publication, designed to bring you news, expert tips and success stories from financial educators nationwide who have used the MoneyWi$e materials in creative and innovative ways. Moneywi$e is a great resource to turn your free tax preparation service into a year-round asset development volunteer program. In addition, Consumer Action offers many more free publications that range from Health Care education to legal materials. Check out for a complete list. Center for Social Development The Center for Social Development (CSD) is part of the George Warren Brown School of Social Work at Washington University in St. Louis. The central theme in CSD's work is research and policy development that will enhance the capacities of families and communities. Find resources on Individual Development Accounts and other asset building tools and policy here.