Studies of Welfare Reform’s Financial Impact on HUD’s Housing Subsidy Programs Varied Widely

We identified five studies estimating welfare reform’s financial impact on housing programs nationally, one estimating the impact for eight housing agencies, and another seven estimating the impact for a single housing agency. Differences in the studies’ focus and assumptions help explain the widely varying estimates. Moreover, because certain welfare and housing policies have changed since the estimates were developed, the economy has been stronger than anticipated, and the effects of welfare reform on welfare recipients’ behavior are difficult to predict, some of the authors of the studies we reviewed expressed uncertainty about their estimates. The studies used varying assumptions and models to estimate welfare reform’s impact under different scenarios. Multiple Issues Complicate Efforts to Forecast Welfare Reform’s Financial Impact on HUD’s Housing Subsidy Programs

The experts with whom we spoke generally agree that several methodological and data issues complicate efforts to forecast welfare reform’s financial impact on HUD’s housing subsidy programs. Some issues, such as differences in state welfare policies and plans for implementing welfare reform and uncertainty about the strength of the economy and the behavior of welfare recipients, make it difficult to predict the impact of welfare reform itself. Housing researchers generally agree, however, that estimating welfare reform’s financial impact on housing programs is more complex than estimating welfare reform’s impact overall because the characteristics of welfare recipients with housing assistance may be different from those of other welfare recipients, and housing agencies and landlords may adopt a broad range of housing philosophies and policies. Finally, the lack of consistent and reliable data further hampers researchers’ efforts to predict welfare reform’s financial impact on HUD’s housing programs with any certainty. The supply of low-skilled workers will depend, in part, on how welfare recipients respond to changes in their state’s welfare program. HUD collects administrative data on the residents of public and tenant-based assisted housing in its Multifamily Tenant Characteristics System database. Scope and Methodology

To identify studies that estimated welfare reform’s financial impact on housing assistance programs, we contacted known experts and officials from a variety of organizations and government agencies. To better understand the methodological and data issues that arise when estimating welfare reform’s financial impact on HUD’s housing programs, we also contacted known experts in welfare and housing who represented a broad range of views. “Technical Paper: Welfare Reform Budgeting.” U.S. Department of Housing and Urban Development (HUD). Office of Policy Studies and Research. 2. 3.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on welfare reform's financial impact on the Department of Housing and Urban Development's (HUD) budget, focusing on what: (1) studies have been done on welfare reform's financial impact on public and assisted housing; and (2) methodological and data issues, if any, arise when researchers estimate welfare reform's financial impact on low-income housing.

What GAO Found

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.