individual development accounts update: research highlights, legislative opportunities and...
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INDIVIDUAL DEVELOPMENT ACCOUNTS UPDATE: RESEARCH HIGHLIGHTS, LEGISLATIVE OPPORTUNITIES AND INNOVATIVE IDA PRACTICE
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Overview of Today’s Webinar
Ida Rademacher, Moderator and Vice President, Policy and Research, CFED IDA research studies and ten-year impacts of
IDAs Legislative opportunities for IDA policy: AFI
funding and reauthorization NeighborWorks Umpqua DreamSavers Program
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Housekeeping
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Asking Questions
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Speakers
Caroline Ratcliffe, Senior Fellow, The Urban Institute Signe-Mary McKernan, Senior Fellow/Economist, The
Urban Institute Michal Grinstein-Weiss, Associate Professor, University
of North Carolina School of Social Work Carol Wayman, Federal Policy Director, CFED Inemesit Imoh, Policy Associate, CFED Betty Tamm, Executive Director, NeighborWorks Umpqua Rebekah Barger, IDA Program Manager, NeighborWorks
Umpqua
What Do We Know About IDAs?Urban Institute Literature Review
Zielewski, Ratcliffe, McKernan, et al.
http://www.urban.org/publications/412439.html
IDA Update Webinar: New Research Highlights, Legislative Opportunities, and Innovative IDA Practice
November 15, 2011
URBAN INSTITUTE
Overview• Two major areas:
Overall effect of IDA program participation Effect of specific program design features
• Three outcome areas: Assets and debts Economic outcomes Comparisons of benefits and costs
• Research includes experimental, quasi-experimental, and non-experimental methods
URBAN INSTITUTE
Overall Effect: Assets and Debts
• Low-income individuals can and do save.
• No evidence that IDA participation increases net worth in the first 3 to 4 years.
• IDA participation found to increase homeownership rates of renters after four years.
• IDA participation is associated with business ownership and post-secondary educational advancement.
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Overall Effect: Economic Outcomes
• IDA participation is associated with: Increased employment Better budgeting and financial planning
• IDA participation is not associated with: Increased earnings Reduced receipt of public assistance benefits
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Benefits and Costs of IDAs
• Few studies of costs and benefits of IDAs.
• Existing research looks at ADD and compares program costs to dollars saved. $1 of net savings costs $3.
• Analyses of different programs or benefits may produce different results.
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Program Design Features:Financial Education
• Hours of education received are associated with increased: Savings Deposit frequency
• No relationship between hours of education and asset purchase
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Program Design Features:Match Rates & Match Caps
• Higher match rates are: Associated with greater likelihood of being a saver
and staying in the program Not associated with higher savings
• Higher match caps are associated with higher savings
URBAN INSTITUTE
New AFI Program Evaluation
Urban Institute, RTI, and MEF Associates
Research questions
• What is the impact of AFI program participation on immediate, short-run outcomes such as savings, asset purchases, and material hardship?
• How do specific AFI program design features affect immediate, short-term participant outcomes?
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Importance of this project
• First experimental evaluation of individual development account (IDA) projects operating under the Assets for Independence Act
• Builds upon prior IDA evaluation research
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Basic evaluation design
• Two sites
• At each site: Control group and two treatment groups
Total sample of 1,000 people
• Special funding announcement
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Short-run participant outcomes
• Savings patterns
• Asset purchases
• Debt holdings
• Employment and earnings
• Means-tested benefit receipt
• Material hardship avoidance
URBAN INSTITUTE
Ten-Year Impacts of Individual Development Accounts on HomeownershipEvidence from a Randomized Experiment
Michal Grinstein-
Weiss
Michael Sherraden
William Gale
William Rohe
Mark Schreiner
Clinton Key
American Dream Demonstration
• The American Dream Demonstration (ADD) is the only randomized longitudinal experiment on IDAs in the US
• Conducted in Tulsa, OK from 1998 to 2003
• Eligibility: Individuals had to be employed and earn less than 150% of the federal poverty level at entry
• Random assignment of 1,103 participants
• Interviews at baseline (Wave 1), 18-months (Wave 2), and 4-years after assignment (Wave 3)
The ADD Experiment
• Asset goals: home purchase, home improvement or repair, business start-up or expansion, post-secondary education or training, or retirement accounts
• Match rate of 2:1 for home purchase and 1:1 for all other uses
• Maximum matched deposit: $750 per year for 3 years; Participants could accumulate up to $6,750 for home purchase and $4,500 for other qualified uses
Major Findings on Homeownership from Previous Waves
• Findings from Waves 1-3 (1998-2003) indicate
• Positive effect on homeownership
• Homeownership rates rose rapidly in both groups and increased by about 7 percentage points more in the treatment group than in the control group
• Treatment group was more likely to engage in debt-clearing activities to prepare to apply for a home loan
ADD Experiment Wave 4
• Assessment of the long-term impact of IDA programs
• Follow-up with both treatment and control group participants 10 years after random assignment (6 years after the end of the program)
• Collaboration between UNC, the Center for Social Development, and the Brookings Institution
• Data collection conducted by RTI International from August 2008 to April 2009
Trend in Homeownership by Year (Baseline Renters)
1999 2000 2001 2002 2003 2004 2005 2006 2007 20080.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
Homeownership rate in each year
ControlTreatment
Ho
me
ow
ne
rsh
ip R
ate
Treatment Effect on Homeownership
All Renters Unsubsidized renters0
0.1
0.2
0.3
0.4
0.5
0.6
Predicted Probability of Homeownership by Group
ControlTreatment
Sample
Pro
babilit
y o
f hom
eow
ners
hip
at
Wave 4
Differential Effect on Homeownership by Baseline Income
Above-median income full sample
Above-median income renters
0
0.1
0.2
0.3
0.4
0.5
0.6
Predicted Probability of Homeownership at Wave 4 by Income by Group
ControlTreatment
Sample
Pre
dic
ted
Pro
ba
bil
ity o
f H
om
e-
ow
ne
rsh
ip a
t w
ave
4
Loan Characteristics and Loan Performance
• 90% of mortgage holders at wave 4 in both treatment and control groups held fixed-rate mortgages
• Average interest rate about 6.4% in both groups
• Very few cases of serious delinquency or foreclosure in either group
• No statistically significant difference between the treatment and control groups on loan characteristics or loan performance
Caveats for Generalization
• Self-selected and highly motivated people in both groups
• Housing market in Tulsa
• Other financial assistance and social support available in Tulsa
• Crossovers
• Pioneer IDA program
Summary
• Large increases in homeownership for both the treatment and the control group over the 10-year period
• Good mortgage products
• No statistically significant impact on homeownership rates at wave 4
• Control group members were able to catch up by wave 4
• Within the IDA-eligible population, people with higher incomes may be more able to achieve homeownership
Acknowledgements
• John D. and Catherine T. MacArthur Foundation
• Annie E. Casey Foundation
• Charles Stewart Mott Foundation
• F.B. Heron Foundation
• Rockefeller Foundation
• Smith Richardson Foundation
• National Poverty Center
• University of North Carolina at Chapel Hill
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Research Q&A
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AFI: Preserve funding levels
Senate HHS Appropriations Subcommittee:
$23.907 million (funding levels preserved)
House HHS Appropriations Subcommittee:
$8.9 million (funding levels cut 63%)
Conference Committee discussions beginning
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AFI Reauthorization:Priority Changes
Change the federal to non-federal match rate from 1:1 to 2:1. Allow IDA funds to include replacement of outdated homes and
home repair. Flexibility with qualified expenses for education. Raise the total amount families can receive from $2,000
single/$4,000 double to $5,000/$10,000. Expand the income eligibility standards to include 80% of
Adjusted Gross Income in addition to 200% federal poverty level and TANF eligible.
Support for state programs.
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AFI Reauthorization
Stephanie Tubbs Jones Assets for Independence Reauthorization Act of 2011 (H.R. 1623)
Waivers included Committees of jurisdiction:
House Ways and Means Senate Health, Education, Labor and Pensions (HELP)
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Possible AFI Senate Bill
Pending AFI reauthorization bill in the Senate
The bill would be similar to H.R. 1623
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www.cfed.org
www.cfed.org/go/advocacy
Latest on legislation, track bills, send messages
Carol Wayman, Federal Policy Director, 202.207.0125, [email protected]
Katherine Lucas, Policy Analyst, 202.408.9788, [email protected] Inemesit Imoh, Policy Associate, 202.207.0135, [email protected] Jessica Morales, Administrative Assistant, 202.207.0159,
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Policy Q&A
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NeighborWorks Umpqua
Using Research as a Tool to Help Shape an IDA Program
Presented by:Betty Tamm & Rebekah Barger
Dream$avers IDA Program
• 12 counties in Southwestern, Southern, Central and Eastern Oregon
• 587 active savers and 371 graduates
• 5 asset types
• 3 funding sources
Evaluation + Research Add Up
• Who is the program missing?• What are participants asking to save for?• Where are the gaps in other program funding
where the IDA might fit in?
• What is the success rate of the program?• How can the IDA Initiative better reach hard
working Oregonians?
Putting It Into Practice• From evaluation came new legislation
New asset types Modified age of eligibility from 18 to 12 Opportunities to use innovative products
• From research comes new opportunities Improved marketing as a result of research Emphasis shift as economy changes Increased focus on financial literacy and saving
Knowledge Gems
Program evaluation and research– Resonates with policymakers, funders and
community members– Easily utilized to grow program – Assists in connecting with participants’ needs
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IDA Practice Q&A
43
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Conclusion
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