Asset Support Center - Glossary of Terms
Access to Mainstream Financial Services
This category includes strategies that enable unbanked and underbanked individuals and households to obtain access to low- or no-cost bank accounts and other affordable savings and investment products. Without these products and services, households typically pay high fees associated with fringe financial institutions such as check cashers and payday lenders.CAMPAIGNS TO BANK THE UNBANKED
Campaigns to bank the unbank are coordinated efforts led by the public, private and/or nonprofit sectors that aim to support families to access lower-cost products and services offered by mainstream financial institions and/or community development financial institutions (CDFIs), such as low-cost checking and savings accounts, remittance products and other services.INNOVATIVE BANKING PRODUCTS OT INCREASE ACCESS FOR UNBANKED
"Innovative banking products" are new and innovative products and programs that help to connect individuals to affordable financial services. The ASC database does not include products and services offered by mainstream financial institutions as they are beyond the scope of the research.Savings Opportunities
This "savings opportunities" category includes asset-building strategies that encourage or incentivize low-income families to save.INDIVIDUAL DEVELOPMENT ACCOUNTS (IDAs)
Individual Development Accounts (IDAs) are matched savings accounts that enable low-income households to save, build assets and enter the financial mainstream. IDAs reward the monthly savings of working-poor families who are building towards purchasing an asset—most commonly buying their first home, paying for post-secondary education or starting a small business. The match incentive—similar to an employer match for 401(k) contributions—is provided through a variety of government and private sector sources. Organizations that operate IDA programs often couple the match incentive with financial education, training to purchase their asset and case management. (Definition per CFED, www.cfed.org).EMPLOYER-SUPPORTED SAVINGS ACCOUNTS
Most IDAs are offered through community-based organizations, but a national effort is underway to expand the IDA infrastructure by encouraging employers to offer them to their employees. According to CFED, which has been supporting the expansion of employer IDAs nationwide, “In an ideal scenario, employers would provide information about IDAs to new employees as part of their orientation process and employees would have the option of enrolling at their discretion (subject to eligibility requirements). Employers would provide match funding and could also make financial education and training available to all employees.” (For more information, go to www.cfed.org.)LIFELONG LEARNING ACCOUNTS (LILAs)
LiLAs are a type of matched savings account that enables lower-wage workers to save for education and training so that they can improve their skills and, hence, their earning potential. LiLAs respond to the fact that few employers provide education and training opportunities for front-line workers, with the vast majority of training dollars going to managerial, professional and technical employees. The Council for Adult and Experiential Learning (CAEL), a national non-profit organization headquartered in Chicago, has been piloting the LiLA model in recent years through a national demonstration that includes three locations and four industry sectors. As with IDA accounts, individuals save in their LiLA accounts. In the demonstration, LiLA contributions are matched by employers and the project. LiLA savings typically can be used for career-related education and training such as tuition/fees, books, computers, software, supplies and materials. (For more information, see www.cael.org/lilas.htm.)CHILDREN'S SAVINGS ACCOUNTS
Children's savings accounts are accounts for children and youth to save, with savings matched by the government, private institutions, family members and/or other contributors. The accounts can typically be used for post-secondary education, to purchase a home or to build a nest-egg for retirement, once the child reaches a certain age (typically 18). A national demonstration is underway to test various types of children's savings accounts and supportive national, state and city policies. (See SEED initiative at www.cfed.org for more information.)
FAMILY SELF SUFFICIENCY PROGRAM (FSS)
The Family Self-Sufficiency (FSS) program of the U.S. Department of Housing and Urban Development (HUD) -- offered by local public housing authorities (PHAs) -- offers an opportunity for public housing residents and Section 8 voucher holders to accumulate financial assets. Typically, as their incomes increase, participating families’ rent expenditures increases as well (families pay 30 percent of adjusted income for rent and utilities). The FSS program allows all or a portion of this increased rent payment to be deposited into an escrow account. Program participants must develop an employment and savings plan that they will follow throughout the five-year program. Upon graduation from the program, FSS program participants are free to withdraw the funds, tax free, and use them without restrictions.TAX ASSISTANCE
The Earned Income Tax Credit (EITC) is a powerful tool for asset building and community development. Enacted by Congress in 1975 and expanded in the 1980s and early 1990s, it often is cited as one of the nation’s most successful anti-poverty tools because it has helped bring billions of dollars annually into the hands of low-income working families. Local, state and national campaigns have been devoted to increasing families’ awareness of their eligibility to receive EITC and other tax refunds, linking them to low- or no-cost tax preparation services and helping them to claim their tax refunds. Local tax assistance campaigns are often supported by the Internal Revenue Service’s Volunteer Income Tax Assistance (VITA) program that provides free training to volunteers who provide tax preparation services in communities across the country.
FEDERAL HOME LOAN BANK - WISH AND IDEA PROGRAMS
The Federal Home Loan Bank (FHLB) of San Francisco supports two programs that offer matched savings accounts targeted to home ownership, available through member banks in California, Arizona and Nevada. The Individual Development and Empowerment Account (IDEA) offers matched savings for participants in the FSS and IDA programs. The Workforce Initiative Subsidy for Homeownership (WISH) program is available to households earning less than 80 percent of the area median income. (For more information, see www.fhlbsf.com/ci/grant/idea/default.asp)
Investment Opportunities
The "Investment Opportunities" category includes strategies that support low-income households to leverage savings into equity-building investments -- a home, business or commercial real estate.FIRST-TIME HOMEBUYER ASSISTANCE
The first-time homebuyer assistance strategy refers to public sector programs to help first-time, low-income homebuyers to invest in a home.
HOMEOWNERSHIP EDUCATION AND COUNSELING
The "homebuyer education and counseling" strategy includes programs that help low-income, first-time homebuyers to obtain the education and training they need to plan for, purchase and retain a home.
LEASE PURCHASE/RENT-TO-OWN
Lease-purchase or “rent-to-own” housing enables families to rent a home while they clean up their credit or save for a down payment. In a lease-purchase arrangement, a sponsoring organization leases a home to a household that cannot afford a mortgage and then supports the household to move to a position to purchase the home through one or more strategies. Most programs return a portion of the rental or lease payments back to the family to support the downpayment and closing costs on the home purchase.
HOUSING CHOICE VOUCHER HOMEOWNERSHIP PROGRAM (FORMERLY SECTION 8 HOMEOWNERSHIP)
HUD's Housing Choice Voucher Homeownership Program, more commonly known as the Section 8 Homeownership Program, offers Public Housing Authorities (PHAs) the option of allowing Section 8 voucher holders to use the program’s public subsidy to pay a mortgage instead of rent. The program was piloted by HUD in the late 1990s and implemented nationwide in 2001. Section 8 voucher holders pay 30 percent of their income toward their monthly housing costs, and HUD pays the remainder. In the homeownership program, the resources go to a mortgage instead of rent. PHA programs must follow HUD’s final rule on the program, but each is structured differently. Since PHAs do not receive additional funds to administer the program, successful programs are typically supported by local and national funding sources. For more information, see the HUD website at www.hud.gov/offices/pih/programs/hcv/homeownership/index.cfm.
EMPLOYER-SUPPORTED HOMEOWNERSHIP
Employer-assisted housing can take many forms—from homeownership counseling and financial assistance to investment in the development of new affordable homeownership opportunities. Typically, programs include forgivable, deferred or repayable second loans, a grant, a matched savings plan or home-buyer education that helps the employee achieve homeownership.
AFFORDABLE HOMEOWNERSHIP DEVELOPMENT
The affordable homeownership development strategy provides contact information for select public housing agencies, including city offices of housing and redevelopment agencies. Homeownership development programs vary by city and change regularly, so site users should check with agencies directly to learn about programs in their city or county. In some cases, information on nonprofit developers is also provided.
COOPERATIVE HOMEOWNERSHIP
A housing cooperative is formed when people join together to own or control the building in which they live. They form a corporation. Each resident-member purchases shares or a membership in the corporation; each membership carries with it the right to occupy a particular unit in the cooperatively-owned building. Each resident-member pays a monthly amount to cover operating expenses, taxes and any debt service on a shared mortgage. Monthly fees are comparable to or less than the rent paid in similar rental buildings, as fees are set by member-residents and reflect actual costs of owning and operating the property. (Definition from National Cooperative Bank, www.ncb.coop.)
COMMUNITY LAND TRUSTS
A community land trust (CLT) is a nonprofit organization that lowers the cost of homeownership to individual families by separating the cost of land from the cost of a home. According to the model, a CLT purchases land and manages the development or rehabilitation of housing on the land. The CLT then sells the homes to individual families and keeps them affordable, over time, by limiting their resale value based on a formula that is developed by each CLT. (For more information, see www.ice.org.)
SELF-HELP HOUSING (SWEAT EQUITY)
Self-help housing gives aspiring low-income homeowners, who do not have the financial resources to invest in a home, an opportunity to invest “sweat equity” -- time and labor -- into building a home. Then, their labor is converted into a downpayment, they become eligible for a subsidized mortgage and/or other forms of assistance.
MANUFACTURED HOUSING
Today, 19 million Americans live in “manufactured homes” and the number is growing steadily. The common public perception of manufactured homes—of “mobile homes” with little equity-building potential—is becoming rapidly outdated. Manufactured homes have changed markedly in the past decade, partially as a result of federal Department of Housing and Urban Development (HUD) regulation. The federal law that governs manufactured housing, the Federal Manufactured Housing Construction and Safety Standards Act, requires that HUD-code homes be built to a single, national quality and safety standards, which has resulted in higher-quality, more durable models. A national initiative, I'M HOME, is underway to support manufactured housing initiatives in local communities. (For more information, see www.cfed.org/focus.m?parentid=2&siteid=317&id=317).
LAND BANKING FOR AFFORDABLE HOMEOWNERSHIP DEVELOPMENT
Land banking for affordable housing development includes efforts to purchase and hold land so that it can be made available to support the development of affordable homeownership opportunities.
MICROENTERPRISE PROGRAMS
A microenterprise is a small business with five or fewer employees and, typically, capital of not more than $35,000. Microenterprise programs provide services like training and technical assistance to support low-income microentrepreneurs to develop and sustain their businesses.
MICROLENDING PROGRAMS
Microloans are very small loans to low-wealth entrepreneurs who are not considered bankable. Typically, recipients of microloans lack sufficient collateral, steady employment and/or a verifiable credit history to qualify for loan from a mainstream financial institution.WORKER-OWNED COOPERATIVES
A worker-owned coop is a company that is 100 percent owned by its workers. According to the ICA Group, a national technical assistance provider to cooperatives: “Workers hold the basic ‘ownership’ or membership rights which consist of: (1) the voting rights to elect the board of directors+B33 which in turn appoints the management or staff, and (2) the rights to the ‘profits’ or net income of the company. Each member has an equal vote in accordance with the democratic principle of one-person/one-vote. And the net income, which could be positive or negative, is shared among the members according to some agreed upon formula such as equally per dollar pay or equally per hour worked.” (For more information, go to www.ica-group.org.)EMPLOYEE STOCK OWNERSHIP PLANS (ESOPs)
Private sector companies—large and small—can offer a range of options for employees to gain an equity stake in a company or a share of business profits. Governed by the federal Employee Retirement Income Security Act (ERISA), an ESOP is a type of employee benefit plan that was created in 1974 and refined over the years to include a number of specific tax benefits. ESOPs are a promising strategy for converting closely-held companies into worker-owned firms (in whole or in part) because of the associated tax benefits—the seller can defer taxes on the capital gain of the sale if the ESOP holds at least 35 percent of company stock. (For more information, see www.nceo.org.)
EMPLOYEE WEALTH-SHARING PROGRAM
Some private sector employers have begun to institute employee wealth-sharing programs that are accessible to low-wage workers. For example: In 2002, a community development venture capital fund, Pacific Community Ventures, included an employee wealth-sharing program as a condition of its investment in a San Francisco-based manufacturer of bicycle messenger bags, Timbuk2. The program was created through a set-aside of company equity for non-management employees. In October 2005, Timbuk2 was sold to a private equity group. The sale of the company resulted in a significant financial return for Timbuk2’s previous investors as well as a cash payout of more than $1 million to Timbuk2 employees through the wealth-sharing program. The proceeds of the wealth-sharing payout were divided among 40 nonmanagerial employees—primarily seamstresses and warehouse workers who live in many of the Bay Area’s low-income communities—as a one-time bonus. (For more information: www.pacificcommunityventures.org.)
COLLECTIVELY-OWNED RESIDENTS BUSINESSES
Another approached to shared business equity is through collective resident ownership of a local business. The strategy provides a way for residents to create a business, typically established as a limited liability company (LLC), that provides a local service and enables resident-owners to build wealth through business equity and employment.
FRANCHISE OWNERSHIP FOR LOW-WEALTH RESIDENTS
Franchise businesses capture more than a third of all retail expenditures in the United States, and franchise networks continue to expand across industry sectors. In recent years, some companies have expanded into inner-city markets, and a subset of these is working to make franchise opportunities available to low-wealth community entrepreneurs. In addition, national efforts are underway to support minority entrepreneurs to open franchises in underserved communities.COMMUNITY BENEFITS AGREMENTS
A community benefits agreement (CBA) is a legally-binding contract between a developer and community organizations that details the range of community benefits that will result from an economic development project. Typically, a CBA results from direct negotiations between a developer and community groups. In order to make a CBA enforceable by a government entity, it can be incorporated into a development agreement, the contract between a developer and a city or county (also known as “disposition and development agreements” when used by redevelopment agencies). The result is an agreement by the developer to invest in a package of community benefits, while community groups agree to support the developer in the public planning process. Thus, a CBA helps to build a partnership between the developer and the community for outcomes that are mutually beneficial. While asset-building outcomes are not typically part of CBAs, they are being included in some communities. (For more information, see Partnership for Working Families website.)
COMMUNITY DEVELOPMENT IPO
To date, commercial real estate development has not been widely perceived as an area of asset-building opportunity for low-income community members. Instead, public subsidies and other incentives for large-scale commercial and mixed-use real estate projects typically go to well-capitalized developers based outside of the community, and so the majority of the profits typically leave the community. But a promising exception is Market Creek Plaza, cultural and commercial center in southeastern San Diego that is maximizing ownership opportunities for residents of the surrounding communities. Community residents now have the ability to gain an equity stake in the development through a new model, a “community development initial public offering” (CD/IPO), which is inspiring similar efforts in other communities around the country.
Asset Preservation Strategies
Asset preservation strategies include measures to help families protect hard-earned assets, such as strategies to expand access to health insurance and anti-predatory lending strategies.ANTI-PREDATORY LENDING/FORECLOSURE PREVENTION
While there is no legal definition of the term, "predatory lending", it is commonly used to describe deceptive, abusive and/or illegal lending practices. According to the Center for Responsible Lending, "Most abusive lending takes place in the subprime market, intended to allow borrowers with weak or blemished credit records the wealth building benefits of owning a home. Instead, a typical predatory mortgage is a refinance of an existing loan that is packed with excessive or unnecessary fees and provides no tangible benefit to the borrower." Foreclosure prevention strategies include a range of approaches to rescue homeowners who are at risk of losing their homes due to predatory and other types of lending practices that do not reflect the best interests of the homebuyer. (For more information see www.responsiblelending.org).
ALTERNATIVES TO/REGUALTION OF PAYDAY LENDING AND CHECK CASHING
Unbanked families spend scarce resources on the high fees associated with payday lenders, check cashers and other high-cost or "fringe" financial services. This category includes strategies to regulate these institutions or to establish alternative financial institutions offering products that are affordable and accessible to unbanked families.
ACCESS TO AFFORDABLE HEALTH INSURANCE
Families without health insurance are an illness away from asset poverty as a sick adult or child can quickly deplete a family's assets. This category includes countywide efforts to expand health insurance coverage.
REHAB SUPPORT FOR LOW-INCOME HOMEOWNERS
This category includes programs offered by cities, counties and nonprofits to help low-income homeowners to preserve their home equity by undertaking regular maintainance and upkeep of their homes.
Financial Education
This category includes strategies to support financial education through campaigns or innovative approaches. It does note include all financial education programs because of the large number offered by the nonprofit, public and private sectors in each county.FINANCIAL EDUCATION CAMPAIGNS
This strategy includes coordinated efforts -- among nonprofits, public and/or private sector institutions -- to expand access to financial education or training within a defined geographical area.
DATABASE/COMPREHENSIVE LIST OF RESOURCES AVAILABLE
This category includes efforts to "map" financial education services within a defined geographical area and to make that information available to the public.
OTHER INNOVATIVE APPROACHES
This category includes unique or innovative approaches to financial education.
Comprehensive Asset Building Initiatives
This category includes county, city, or neighborhood level efforts to connect and coordinate asset-building services across a range of strategies.COUNTY LEVEL
This category includes comprehensive, countywide initiatives that are working to expand asset-building opportunities across a continuum of strategies. Typically, these efforts are led and/or staffed by a nonprofit or public entity and include a broad range of stakeholders offering a range of services including: access to financial education and services, savings, affordable investment and asset preservation strategies.
CITY LEVEL
This category includes comprehensive, citywide initiatives that are working to expand asset-building opportunities across a continuum of strategies. Typically, these efforts are led and/or staffed by a nonprofit or public entity and include a broad range of stakeholders offering a range of services including: access to financial education and services, savings, affordable investment and asset preservation strategies.
NEIGHBORHOOD LEVEL
This category includes comprehensive, neighborhood initiatives that are working to expand asset-building opportunities across a continuum of strategies. Typically, these efforts are led and/or staffed by a nonprofit or public entity and include a broad range of stakeholders offering a range of services including: access to financial education and services, savings, affordable investment and asset preservation strategies.
COORDINATED CAMPAIGN AMONG FAMILY RESOURCE CENTER TO INCLUDE ASSET BUILDING
This category includes efforts to build a countywide conversation among family resource centers to expand their asset-building services.
ASSET CLAIMING/SHARED OWNERSHIP STRATEGIES
This category includes efforts to capture the value of commercial, natural or other assets and share it among a targeted geographic population. The Alaska Permanent Fund, which provides an annual dividend on oil revenues to every resident in the State of Alaska, is one example of this strategy. (For more information: www.apfc.org.)
*This glossary draws from report, "Building Assets While Building Communities," by Heather McCulloch (2006). The report is published by the Walter and Elise Haas Fund at www.haassr.org/html/resources_links/index.cfm.
