Family Self-Sufficiency Freqently Asked Questions

What is Family Self-Sufficiency and the Escrow Credit?

Family Self-Sufficiency (FSS) is a program established by HUD in 1990 to promote economic self-sufficiency among eligible participating families who receive housing assistance. FSS is a five-year program.

FSS offers a financial incentive to families that becomes available to the families upon successful completion of their Contract of Participation or upon achievement of certain interim goals. The incentive, or “escrow savings”, is based upon an increase in “earned” income.

The general concept of the escrow account is that FSS families continue to pay rent in accordance with their incomes (even as their incomes increase due to employment income). As a rule, the amount of the increase in family rent resulting from an increase in earned income is escrowed. Because there are other factors that affect the family rent, it will not necessarily be dollar for dollar. The amount escrowed for the family will depend on whether the family is considered a Very Low or Low Income family. HUD provides a worksheet that guides the Public Housing Authority (PHA) through the proper calculation.

THE PHA is required to deposit all escrow credits into a single depository account. The IRS does not count the funds or interest on the funds in the escrow account as income for purposes of income taxes, either before or when the family actually receives the escrow. The PHA does not have to submit IRS form 1099 to FSS families with escrow account balances or who receive final disbursements.

Families who choose to participate in the Homeownership Program often use their escrow credit towards down-payment and/or closing costs. The PHA established a minimum down-payment requirement of three percent of the purchase price, with at least one percent from the family’s personal resources. The escrow savings satisfies that requirement.