Welfare Reform

Because about one-fourth of the residents of public and assisted housing rely on cash assistance for some or all of their income, welfare reform could have a financial impact on the Department of Housing and Urban Development (HUD), which subsidizes housing agencies' operations and tenants' rents, as well as on the housing agencies and private landlords that depend on HUD subsidies. As a result of changing welfare and housing policies and the complexity of these programs, this financial impact has not yet been estimated with any certainty. This report determines (1) what studies have been done on welfare reform's financial impact on public and/or assisted housing and (2) what methodological and data issues, if any, arise when researchers estimate welfare reform's financial impact on low-income housing.

GAO noted that: (1) officials at housing agencies and researchers at government agencies, universities, trade associations, and a consulting firm have estimated welfare reform's financial impact on some components of HUD's housing subsidy programs; (2) GAO identified 13 studies that estimated this impact; (3) these studies of welfare reform's financial impact on HUD's housing subsidy programs varied in their geographic scope, focus and assumptions, methods, and findings; (4) some studies also estimated welfare reform's impact under alternative scenarios and therefore developed a range of estimates of welfare reform's cost for HUD and housing agencies; (5) the estimates in the studies GAO reviewed generally varied with the issues on which they focused and the assumptions on which they were based; (6) some of the authors of the studies GAO reviewed told it that their estimates might not hold up over time because some federal and state welfare laws have changed since the estimates were first developed and the economy has been more robust than anticipated; (7) experts with whom GAO spoke generally agree that several issues complicate efforts to forecast welfare reform's financial impact on HUD's housing subsidy programs; (8) these issues include not only those encountered in predicting welfare reform's impact on the recipients and providers of public assistance, but also those specific to estimating welfare reform's financial impact on the residents of assisted housing, providers of subsidized housing, and HUD; (9) in general, wide variations in state welfare plans and their implementation complicate the estimation of welfare reform's impact; (10) the employment and wage prospects for welfare recipients depend, in part, on future local and national economic health and on recipients' behavior; (11) housing experts generally agree that estimating welfare reform's impact on housing programs is more complex than estimating welfare reform's impact overall because of possible differences in the behavior of welfare recipients with and without housing assistance, as well as variations in policies adopted by housing agencies and landlords; and (12) a lack of reliable data further hampers researchers' efforts to predict welfare reform's financial impact on HUD's housing programs.