Expanding How Low-Income Renters Can Build Wealth
By Nyla Holland for Housing Matters an Urban Institute Initiative
Homeownership is the primary mechanism for wealth building in the US, but rising home prices and persistent affordability challenges are pushing homeownership further out of reach for renters. First-time homebuyers have dropped to a record low of 21 percent in 2025, with the typical buyer more than a decade older than they were in 1987. Renters who can’t buy homes are losing out on a key path to wealth building—as evidenced by the large renter-homeowner wealth gap, with renters having a median net worth of $10,400 compared with $400,000 for homeowners. These trends also exacerbate racial wealth disparities, as low-income, Black, and Latinx households have the lowest homeownership rates. Limited access to wealth building has cascading effects for economic mobility and community prosperity: While owners can use their mortgage as a forced savings mechanism to build equity that can be used to start a business or invest in education, renters do not have access to those same benefits.
A range of programs seek to address this disparity and help renters build wealth. One such program is the Family Self-Sufficiency (FSS) program, a savings program that allows income-eligible US residents assisted by the US Department of Housing and Urban Development (HUD) to take advantage of an escrow savings account, funded by their earned income increases. Paired with case management and coaching on education, finances, and employment pathways, FSS has helped some participants build an average of $10,803 in wealth over an average of five years. Innovative efforts to replicate the core elements of FSS in different contexts by one of the leading implementers of the program—Compass Working Capital—offers actionable insights that can help expand the promise of wealth-building to more renters.
Compass Working Capital’s innovative FSS model
Across 15 states, Compass runs the financial coaching and savings program for public housing agencies and private owners of HUD-assisted housing implementing FSS. Key elements of their model include trust-based and client-centered financial coaching, building practitioner capacity, and, in some sites, an automatic enrollment (opt-out) design to increase participation. With the support of the Housing Innovation Program, Compass grew its work by expanding its partnerships and exploring ways to adapt lessons learned in new contexts to serve more renters.
After years of implementing FSS in HUD-assisted housing, Compass identified a missed opportunity to support wealth-building among the more than 3 million low-income households that live in properties created through the Low-Income Housing Tax Credit (LIHTC) program, a federal tax incentive program for developing affordable housing. Drawing upon their leaders’ expertise and past work on LIHTC deals, Compass began exploring ways to adapt their work to LIHTC housing.
While Compass could draw upon lessons from the FSS model, they had to make some key changes because FSS is not immediately replicable in the LIHTC context. In FSS, as household earnings rise, required rent payments increase; the incremental rent increase is directed to an escrow savings account; participants receive financial coaching and support; and upon program completion, participants access funds excluded from benefits and federal income tax. However, given differences in how income qualifications and rent calculations look in LIHTC housing than in HUD-assisted housing, Compass knew LIHTC owners would need to identify a different source of funding for their savings accounts than rent increases.
Applying lessons learned to LIHTC
To address this challenge, Compass is collaborating with leading affordable housing groups to adapt wealth-building lessons to the LIHTC context. In March, Compass joined the Housing Partnership Network, National Council of State Housing Agencies, and Stewards of Affordable Housing for the Future (jointly known as the Asset Builders Alliance) to release a framework (PDF) for proposed asset-building mechanisms in LIHTC properties. The framework encourages state housing finance agencies and LIHTC property owners to replicate some of Compass’s proven FSS strategies to help their residents build wealth, including regular workshops and one-on-one coaching sessions to build trust, opt-out design where possible to increase participation, and multimodal, culturally competent resident outreach efforts.
It also leverages insights from interviews with LIHTC stakeholders and housing financiers on adaptations needed to align with LIHTC housing models. Given the breadth and variety of LIHTC stakeholders and properties, the Asset Builders Alliance’s framework offers a suite of options that owners could use to “plug and play” based on their individual circumstances. For example, it outlines a variety of funding mechanisms for savings accounts—including rent rebates, enhanced asset management fees, annual cash flow contributions, and capitalized reserves/sinking funds—and the advantages and limitations of each. It takes a similar approach to outlining the other dimensions of developing a savings program—such as target outcomes and timeline, participation models, savings mechanism design, and intensity of service provision—and presents six example scenarios to illustrate how various models could take shape. The result is an adaptable suite of tools that could help LIHTC owners create customized opportunities for their renters to accumulate between $2,000 and $6,000 over five years.
What’s next for Compass and renter wealth building
To complement their field building efforts, Compass Working Capital is also directly piloting an asset building and financial coaching program in LIHTC properties to determine real-world feasibility. With Preservation of Affordable Housing (POAH) in Chicago, Compass is serving as the lead service partner on a three-year pilot across two to three properties and approximately 160 households. Each participating household receives a $250 seed deposit, which can earn $50 monthly for on-time in-full rent payments, up to $200 annually for consistent payments, and $400 for completing at least two financial coaching sessions—totaling $1,200 in potential annual household earnings. These funds accumulate in asset accounts that residents can use for debt reduction, transportation, education and career advancement, health and wellness needs, small business development, and homeownership preparation. This endeavor pairs the accounts with opt-out enrollment, complementary resident services, and a resident-facing portal to track savings. During the pilot, Compass and POAH will track resident outcomes and feedback to determine the outcomes and feasibility of this LIHTC-based approach.
Compass and partners are pairing their pilot and framework with efforts to ensure the policy environment can support these innovations as well as foster further replication that can support wealth building for low-income renters across the country. Applying lessons learned from the success of FSS programs to build assets for non-HUD-assisted renters could increase upward mobility and economic opportunity for millions of US residents, especially for populations historically barred from wealth building through homeownership and other avenues. To do so, housing practitioners can build upon FSS tools, such as escrow-based savings mechanisms, matched savings structures, and embedded financial coaching, and use insights from Compass and partners to design programs that suit their local context.
Photo: Johner Images, Getty Images