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INDIVIDUAL DEVELOPMENT ACCOUNTS UPDATE: RESEARCH HIGHLIGHTS, LEGISLATIVE OPPORTUNITIES AND INNOVATIVE IDA PRACTICE Slide 2 @CFEDNews Overview of Todays 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 Slide 3 @CFEDNews Housekeeping All webinar attendees are muted to ensure sound quality (this webinar is being recorded) If you have any trouble dialing in, you can listen through your computer by connecting speakers or a headset to your computer If you experience any technical issues, please email Slide 4 @CFEDNews Asking Questions Q&A sessions at the end of each presentation Ask a question anytime by typing the question into the text box of the GoToWebinar Control Panel Answers to questions not addressed during the webinar will be posted online along with the webinar recording Q&A facilitated by Lauren Stebbins, External Relations Associate, CFED Slide 5 @CFEDNews 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 Slide 6 What Do We Know About IDAs? Urban Institute Literature Review Zielewski, Ratcliffe, McKernan, et al. IDA Update Webinar: New Research Highlights, Legislative Opportunities, and Innovative IDA Practice November 15, 2011 URBAN INSTITUTE Slide 7 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 Slide 8 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. URBAN INSTITUTE Slide 9 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 URBAN INSTITUTE Slide 10 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. URBAN INSTITUTE Slide 11 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 URBAN INSTITUTE Slide 12 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 a ssociated with higher savings URBAN INSTITUTE Slide 13 New AFI Program Evaluation Urban Institute, RTI, and MEF Associates Slide 14 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? URBAN INSTITUTE Slide 15 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 URBAN INSTITUTE Slide 16 Basic evaluation design Two sites At each site: Control group and two treatment groups Total sample of 1,000 people Special funding announcement URBAN INSTITUTE Slide 17 Short-run participant outcomes Savings patterns Asset purchases Debt holdings Employment and earnings Means-tested benefit receipt Material hardship avoidance URBAN INSTITUTE Slide 18 Ten-Year Impacts of Individual Development Accounts on Homeownership Evidence from a Randomized Experiment Michal Grinstein-Weiss Michael Sherraden William Gale William Rohe Mark Schreiner Clinton Key Slide 19 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) Slide 20 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 Slide 21 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 Slide 22 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 Slide 23 Trend in Homeownership by Year (Baseline Renters) Slide 24 Treatment Effect on Homeownership Slide 25 Differential Effect on Homeownership by Baseline Income Slide 26 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 Slide 27 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 Slide 28 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 Slide 29 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 Slide 30 @CFEDNews Research Q&A 30 Ask a question by typing the question into the text box of the GoToWebinar Control Panel If you experience any technical issues, please email Slide 31 @CFEDNews 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 31 Slide 32 @CFEDNews 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. 32 Slide 33 @CFEDNews 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) 33 Slide 34 @CFEDNews Possible AFI Senate Bill Pending AFI reauthorization bill in the Senate The bill would be similar to H.R. 1623 34 Slide 35 @CFEDNews Latest on legislation, track bills, send messages Carol Wayman, Federal Policy Director, 202.207.0125, Katherine Lucas, Policy Analyst, 202.408.9788, Inemesit Imoh, Policy Associate, 202.207.0135, Jessica Morales, Administrative Assistant, 202.207.0159, 35 Slide 36 @CFEDNews Policy Q&A 36 Ask a question by typing the question into the text box of the GoToWebinar Control Panel If you experience any technical issues, please email Slide 37 NeighborWorks Umpqua Using Research as a Tool to Help Shape an