January 8, 2001
Larry Hurst was initially skeptical. A program that would match every dollar he saved, 2-for-1, toward the purchase of a new home? He wasn't buying.
"It didn't sound too real," says Hurst, who had lived in New Orleans public housing for 25 years. "It sounded like a rip-off."
Hurst isn't a skeptic anymore. In April, he closed on the purchase of a house for his family in the lower Ninth Ward, an acquisition made possible through the C.J. Peete housing development's Individual Development Account program.
Hurst's success is just the kind of story Lina Alfieri Stern hopes to hear. Stern serves as managing director of the Greater New Orleans Individual Development Account Collaborative, an initiative launched in October to make IDAs available to low-income residents throughout the city.
"Social-service policies have traditionally stressed consumption," says Stern, assistant director of the Freeman School's Levy-Rosenblum Institute, which established the pilot program at C.J. Peete in 1998. "Now we're starting to teach people how to gain assets as a way to wealth and were providing them with a vehicle to do that."
Individual Development Accounts are matched savings accounts designed to help low-income individuals and families achieve specific savings goals, such as home ownership, job training, or business start-up. Funded through a combination of public and private sources, IDA programs match account holders' savings by varying multiples.
The Greater New Orleans IDA Collaborative plans to match money saved for educational expenses, business start-ups or car purchases on a 2-to-1 basis. Money saved for homebuying is matched on a 4-to-1 basis. IDA funds can be accessed only when a participant achieves his or her savings goal and only for the account's designated purpose.
The theory is based on the work of Michael Sherraden, professor of social work at the University of Washington in St. Louis, who argues that asset building and holding offer better opportunities for breaking the cycle of poverty and achieving self-sufficiency than traditional models of savings and consumption. Since the concept was developed in the early 1990s, more than 200 IDA programs have sprung up across the country.
Inspired by the success of the C.J. Peete program and encouraged by the allocation of federal funds to start IDA programs, Stern began to build a coalition of local businesses and service organizations to pool their efforts to obtain funding.
"I wanted to figure out a way for any group that wanted to start an IDA program to do so, like a small church for example," Stern explains. The collaborative that has emerged comprises diverse partners with diverse roles.
The Levy-Rosenblum Institute and the National Center for the Urban Community of Tulane and Xavier are coordinating the program. Partners such as Entergy and the Booth Bricker Fund are providing funding. Hibernia National Bank and United Bank & Trust are providing free savings accounts for participants as well as financial support.
At the heart of the collaborative, however, are the social-service organizations that represent the outreach component of the program. Organizations such as Neighborhood Housing Services of New Orleans, Total Community Action, the Housing Authority of New Orleans, New Orleans Council on Aging, Covenant House and others will be responsible for promoting IDAs as vehicles to build assets, guiding clients through the application process and monitoring their progress.
As of mid-November, more than 40 local organizations were either signed-on or pending partners in the collaborative. The Levy-Rosenblum Institute also will conduct classes in economic literacy. In addition, IDA participants, many of whom have never had savings accounts, are required to attend asset-specific classes while in the program.
Participants saving toward buying a home, for example, attend homebuyers classes to learn what to look for in a house and what to expect from banks and mortgage companies. Business owners, in turn, go through business courses. The Levy-Rosenblum Institute will manage the collaborative and house its database, which is linked to the financial institutions and which enables the institute to monitor the progress of the program.
At its current funding level of just more than $500,000, the collaborative can accommodate approximately 180 individuals or families for IDAs, but Stern is hopeful that growing interest in the program, and more success stories like Hurst's, will lead to additional funding.
"The IDA concept is a good one," she says. "The program is structured, it builds good habits in terms of savings, it teaches people about budgeting and investment issues. We're really adding to their knowledge base. We're teaching a person to fish."
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