Building Bridges to Financial Security for Low-Income Families

For many Americans, home is not just a place to live and raise a family–it is also a way to build and pass on generational wealth. However, for families receiving federal housing assistance to pay their rent, building financial security can be a struggle, even when they are able to consistently stay ahead of their bills. A partnership between Compass Working Capital, the Boston Housing Authority, and JPMorgan Chase is designed to address this problem by helping families use their rent payments to build assets and financial stability.

The cornerstone of this partnership is the Family Self Sufficiency (FSS) program, which is overseen by the Department of Housing and Urban Development (HUD). Compass' model for the FSS program provides households—predominantly led by Black and/or Hispanic women—with one-on-one financial coaching. Additionally, each household is set up with an escrow account managed by BHA, which helps them build wealth and reach their financial goals—while increasing their income, paying off debt, and improving their credit scores.

By building up their escrow accounts during the program, FSS enrollees are simultaneously setting financial goals and accumulating the savings they need to achieve them. As their rent goes up, a portion of each enrollee's federal housing assistance is set aside as savings by the BHA. Families leave the program after five years with an average of $8,100 in savings, a nest egg that can help them build their assets—and find a bridge out of poverty.

“FSS allows families to build savings through something they're doing anyway, and that's paying rent," says Markita Morris-Louis, CEO of Compass Working Capital. "We think of it as both a forward-looking way of investing in families to help them move out of poverty, and as a preventative measure for when they face a crisis."

Caught in a Pinch

Federally, HUD requires low-income families in subsidized housing to put about 30 percent of their household income towards rent. Participants may find that this rent scale feels like a barrier to bettering their financial circumstances, given that, as they earn more money, their rents also climb, potentially eating up gains from new income. Meanwhile, their higher wages can mean that they lose other benefits, like assistance with food or childcare.

Participants in the FSS program don't have their raises sucked up by rent hikes. That extra money goes into a savings account that can accrue for several years—savings that can put them on a path to improved financial health. “It's really assets that puts distance between people and poverty," Morris-Louis says. "Income is important, but we believe assets are really the true measure of a family's—or a household's, or a community's—financial stability."

Getting Larger Through Partnership

Compass launched its first FSS program in Boston in 2014, leveraging HUD funding, along with support from some local philanthropies. According to Compass, the program served 242 families over the following four years—far exceeding expectations. Although small and hyper-local, Compass' FSS model stood out because of its user-centric approach and combination of one-on-one support with a digital platform that showed the potential to scale. It also benefited from a robust impact evaluation that was conducted by Abt Associates, a trusted, independent third-party evaluator, and which showed strong financial health outcomes for program participants.

“Here was this small local program that already had really impactful metrics that were being validated by an external evaluator," says Miriam Freeman, Vice President of Financial Health, Global Philanthropy at JPMorgan Chase. “That really piqued our interest."

JPMorgan Chase provided Compass with philanthropic support in 2018, key aid that positioned Compass to begin a partnership with the BHA. This helped to supercharge the program in Boston: Over the past five years, Compass says, it has been able to serve 1,886 households in the Boston area, with enrollees collectively accumulating $3.8 million in savings in FSS escrow accounts.

Reconsidering Assumptions

Instead of punishing poverty, the FSS program seeks to empower people living on low incomes.

“A lot of the policies that exist are based on unstated assumptions, for example, the ability of people living on a low-income to save," says Freeman. "Having a program that has a demonstrable impact on financial outcomes helps to counter that narrative and can be tremendously helpful in moving the needle."

Compass' numbers speak for themselves: After just a year in the program, the nonprofit reports, 73 percent of participants are employed, with 27 percent reporting a spike in their income (on average, $20,561). Compass claims that credit scores have risen for 65 percent of enrollees (by an average of 39 points), and 80 percent of participants have decreased or maintained no debt in collections (the average decrease in debt is $2,865). Finally, Compass reports that 37 percent of participants have built an average of $2,085 in savings in their FSS escrow accounts.

Building a Future

The partnership between JPMorgan Chase and Compass also included support for technological innovation. “Because of philanthropy—and JPMorgan Chase in particular—we've been able to build different tools to help make the program more efficient," Morris-Louis says.

It used to take months for residents to enroll in FSS. The process was paper-based and time-intensive, and residents used to have to take off work, get a babysitter, find transportation, and/or wait in line to enroll. Because of technological innovations enabled by JPMorgan Chase's support, 95 percent of families now enroll online.

“It's been a gamechanger for us. It's helped us be able to deliver services in this remote work environment," Morris-Louis says. "We know that this remote environment is going to be around for a while. As we expand into new markets, it allows us to scale in a really cost-effective way."

Compass is already expanding—in 2019, it replicated its successful FSS program in Philadelphia. In all, it's expanded to eight states, with the hopes of serving more local housing authorities soon. And it's getting national attention: In 2022, Compass, JPMorgan Chase, and the BHA received the HUD Secretary's Award for Public-Philanthropic Partnerships.

In Boston, FSS savings accounts have become publicly supported by the state government. They have become personal safety nets and emergency reserves for thousands. Some enrollees have earmarked their savings for a down payment on a home, even as others plan to use them for college or to start their own business.

Nationally, about 60,000 families are currently enrolled in FSS programs, but—according to Compass' Morris-Louis—that number should be as high as 2.2 million. As the program expands to new under-served communities, the vision is for this FSS model to become the norm at HUD. Just like employee-sponsored retirement, low-income residents would be automatically enrolled.

“Generational poverty is not caused by individual action and, frankly, will not end because of individual action," says Morris-Louis. "It's caused by our policies and our systems, and it will end because our policies and our systems make it possible for people to have a different life."