Imagine that your family has no assets. Imagine that your family has had generations of little to no savings or other assets. Or perhaps imagine that you are a refugee or an asylum seeker who has arrived with just the clothes on your back. How do you save enough money to put 20 percent down to buy a $280,000 fixer-upper home in southern Maine? How do you save $60,000 when you are one car mishap or one minor medical emergency away from losing your life’s savings?
Let’s do some simple math with an imaginary family of two working parents with two children. Each parent is making $15 an hour, and each parent is working a full-time job with no medical benefits. $15 x (40-hour) jobs x 2 parents = $60,000.
The take-home pay after taxes, Medicare and Social Security is roughly $46,800. The rate for a joint tax return is 22 percent. Fair market rent for a three-bedroom apartment in Portland in 2020 is $1,982. $1,982 x 12 = $23,784 in rent. $46,800 – $23,784 = $23,016 left over.
The family now has $23,016 or $442 a week to spend on groceries, child care, health care, heat, clothing, cellphone, internet, utilities, car payments, insurance, gas, repairs and more. (Remember, each parent is working a 40-hour-a-week job. Now think, how is a single parent going to solve this problem with half the resources and more barriers?)
Many programs exist to help lift families out of poverty. Two need more attention and support: Family Self Sufficiency and Housing, which builds equity for its residents, and cooperative and land trust housing are two housing models that build equity for its tenants.
Family Self Sufficiency is a federal employment savings program for employed residents living in public or Section 8 housing. The guidelines are simple: If you work with your FSS case manager, receive Temporary Assistance for Needy Families and work to increase your income, you can begin to save.
Public housing residents and Section 8 recipients pay 30 percent of monthly adjusted income in rent. If their income increases, their rent increases. This is still true for FSS participants, but the difference in rent is put in your savings account, and if you complete your goals, after a year there are no restrictions on how it is used. You can use it for life emergencies, pay for college or keep saving and perhaps purchase a house.
Using simple math without adjusted monthly incomes, let’s say that the family with two working parents making $15 an hour lives in public or Section 8 housing and got new jobs because of an adult ed or a workforce program. Let’s say the parents are now making $18 an hour. Their rent at $15 was $1,560 a month, or $18,720 a year.
Now their rent is $1,872 a month, or $22,464 a year. $22,464 – $18,720 is $3,744 after one year. The $3,744 is theirs. Without FSS, that increase in rent would have gone to the landlord; instead, it is saved for the FSS participant.
Why is building assets important for families in poverty? Even in subsidized housing, families in poverty are in jeopardy of being food insecure, in health neglect and in financial instability. When families in poverty do not have assets, they resort to high-interest loans and/or same-day lending – or they may simply fail to pay their bills, thus affecting their credit scores, which could affect their employment options and limit their access to lower-interest-rate loans.
Other overlooked programs that help households in poverty build assets are cooperative housing and land trust housing. Participants in coops and land trusts are part owners of their developments. A portion of their rent over time builds equity and monetary value. In cooperatives, residents can borrow against their equity for emergency funds, college, purchasing a car and more.
Housing is not the end goal – self-sufficiency and a personal safety net are. If we want to tackle poverty and racial income and asset disparities, the math is simple: The poor need more assets to weather financial storms. Otherwise, they are stuck in a cycle of poverty and potentially lifelong renters. The cards are stacked against them, but these programs help to increase their odds of climbing out of poverty. Housing the poor needs to be more intentional, strategic and holistic.
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