Introduction
Research Questions
- What are the impacts of AFI program participation on homeownership, business ownership, and postsecondary education or training?
- How do the impacts of AFI program participation vary over time and by participant characteristics?
- What are the impacts of AFI program participation on other outcomes the program might influence (e.g., material hardship, alternative financial product use, economic well-being)?
Assets such as a home or business can provide families with economic stability and a foundation for long-term upward mobility. To help households with low incomes build assets, the federal government launched the Assets for Independence (AFI) program, authorized by Congress in 1998. This program funded individual development accounts (IDAs) that matched personal savings for assets such as a first home, capital to start a business, or higher education and training. Federal fiscal year 2016 marked the final year of five-year grant awards under the demonstration, as no funds were appropriated for the AFI program for 2017.
The Urban Institute evaluated the AFI program at two sites using a randomized controlled trial, the gold standard for measuring program effectiveness. In this final report of our three-year evaluation, we find that the program did not result in greater asset ownership among the full sample of participants. However, exploratory subgroup analyses provide suggestive evidence that AFI participation might have increased homeownership and business ownership among participants who rented and who were non–business owners at study enrollment, respectively. These findings suggest that matched savings programs such as IDAs can promote economic security for people who needed the greatest support.
Note: This report was updated August 2020 to clarify in the overview and executive summary that this exploratory analysis suggests that, in the medium term, AFI increased homeownership among renters and increased business ownership among non-business owners. A sentence was also added noting that the study identified preliminary positive effects that may warrant further examination.
Purpose
This report presents findings from our randomized evaluation of the AFI program at two sites: Prosperity Works in Albuquerque, New Mexico, and RISE Financial Pathways in Los Angeles, California. AFI participants at these two sites had financial education requirements and could receive match funds on savings up to $1,000. In Albuquerque, participants could receive a $4 match for every $1 saved. In Los Angeles, participants could receive $2.50 for every $1 saved. Participants could use their savings, plus the AFI project savings match, to purchase an asset.
Key Findings and Highlights
Although AFI did not result in greater asset ownership among the full sample of participants after three years, our findings offer suggestive evidence that AFI IDAs:
- Help people with low incomes build assets, particularly among those who have yet to make an asset purchase. AFI increased homeownership among renters by 4.7 percentage points (52 percent) and increased business ownership among non–business owners by 5.1 percentage points (53 percent).
We also find evidence on certain secondary outcomes that AFI IDAs:
- Improve financial stability and well-being. Participants saw a 25 percent reduction in the number of material hardships related to utilities, housing, or health.
- Connect participants to mainstream financial services. Participating in AFI reduced the use of alternative check-cashing services by 3 percentage points (47 percent), suggesting that the program helped participants enter and remain in the financial mainstream.
Methods
This is the first large-scale, multisite study to evaluate the AFI program using a randomized design. At both sites, we randomly assigned participants to a treatment group and control group, allowing us to attribute differences in outcomes between the two groups to the AFI program.
Over 19 months (January 2013 to July 2014), 807 people enrolled in the study (299 in Albuquerque and 508 in Los Angeles). Among these participants, 407 were assigned to the treatment group and 400 to the control group. This third-year report draws primarily on a baseline survey completed at study enrollment and a follow-up survey conducted roughly three years after study enrollment (between April 2016 and September 2017). This third-year follow-up survey achieved a 77 percent response rate, yielding an analysis sample of 621 people.
Recommendations
The AFI findings suggest that incentivized savings programs such as IDAs can help people with low incomes build assets, particularly among those who have yet to make an asset purchase. However, difficulty securing nonfederal funds can be an impediment to scaling IDAs. The Los Angeles site faced difficulties securing the nonfederal funds required by the AFI program and, consequently, 30 percent of participants who made an unmatched withdrawal did so because match funds were not available.
Another program limitation was the restriction that AFI dollars for postsecondary education costs be used only for tuition, fees, books, and supplies bought directly from an eligible school. Future IDA programs could consider allowing participants to cover other costs of obtaining higher education and training, such as living expenses, transportation, and Internet access.
Integrating incentivized savings programs in other programs (college, safety net, employment) that serve households with low incomes can maximize the program’s reach. Doing so may increase participants’ financial capability and help programs achieve faster and longer-lasting results. Finally, our evaluation highlighted opportunities for future research, including disentangling the relative roles of the IDA account, promise of a savings match, financial education or coaching, and other support services.
Citation
Ratcliffe, Caroline, Signe-Mary McKernan, Gregory Mills, Michael Pergamit, and Breno Braga. (2019). From Savings to Ownership: Third-Year Impacts from the Assets for Independence Program Randomized Evaluation, OPRE Report #2019-106. Washington, DC: Office of Planning, Research, and Evaluation, Administration for Children and Families, U.S. Department of Health and Human Services.
Glossary
- AFI (Assets for Independence):
- the Assets for Independence program is a federally supported individual development account demonstration authorized under the Assets for Independence Act of 1998.
- IDA (individual development account):
- individual development accounts match personal savings for specific investments, such as a first home, capital to start a business, or higher education and training.