Streamlining income verification for application processors in Kentucky increased application approval rates by at least 7 percentage points

Streamlining income verification to broaden access to rental assistance

What is the agency priority?

At the outset of the COVID-19 pandemic, housing advocacy groups warned that 20% of renting households would be at risk of eviction by the end of 2020 if the government did not act. Housing instability was especially high among renters with low incomes and renters who identified as people of color.

The U.S. Department of the Treasury administered the Emergency Rental Assistance (ERA) programs, which collectively provided over $46 billion to state, local, territorial and Tribal governments (grantees) to prevent eviction and housing instability in the wake of the pandemic. The ERA grantees provided direct cash assistance to renters, landlords, and utility providers to assist with rent, utilities, and other housing-related expenses. Individuals were eligible for ERA assistance if their household income fell below an area-specific threshold, in addition to being at risk of housing instability and experiencing hardship due to the pandemic.

When the procedures used to verify income caused a bottleneck in distributing much-needed assistance, Treasury encouraged grantees to streamline their income verification procedures. Several program design flexibilities were proposed to enable more efficient delivery of ERA program benefits to communities disproportionately impacted by the pandemic.

What did we evaluate?

The Kentucky’s Housing Corporation (KHC) ERA program, Healthy at Home Eviction Relief Fund (HHERF), began accepting applications in February 2021. ERA application reviewers were overwhelmed by the large influx of applications and a backlog developed.

In June of 2021, KHC switched from having application reviewers examine a complex set of documents to verify an applicant’s income (e.g., tax forms and pay stubs) to using the applicant’s neighborhood income as proof of income eligibility. Of the 769 ZIP codes in Kentucky, 403 had median incomes that fell below the county-level income threshold required to be eligible for assistance under the program.

After the change, if applicants from those ZIP codes attested to having an income below that threshold, their applications were automatically flagged as income-eligible without further review. This system is referred to as a “fact-specific proxy” (FSP) because the fact of the neighborhood income proxies as proof of the applicant’s income. By removing the need to review, verify, and, in many cases, request follow-up income documentation, the FSP streamlined the process of income verification by application reviewers, while keeping the application form and requirements for applicants the same.

Figure 1. Before and after process flow chart Before and after process flow chart

How did the evaluation work?

We partnered with KHC to understand if streamlining the income verification process broadened access to ERA assistance. KHC shared de-identified data from 75,234 applications, submitted between February 2021 and January 2023, as well as a dataset designating ZIP codes as FSP-eligible or FSP-ineligible. To estimate impact, we compare the outcomes of applications from ZIP codes that were right near the cutoff for FSP-eligibility. See the abstract, analysis plan, and technical appendix for the details.

What did we learn?

Streamlining the income verification process using the FSP increased the approval rate by between 7.5 and 13.2 percentage points, from a baseline approval rate of 42.5% of applications in non-FSP ZIP codes. We estimate that FSP caused the approval of up to 9,500 applications.

Further, we found that streamlining the income verification process was equally effective for applicants who identified as people of color, were living in rural areas, or had extremely low incomes. Finally, streamlining the process did not greatly weaken or strengthen application reviewers’ ability to detect fraudulent applications.

In summary, a FSP can be an important tool to broaden access to assistance in programs where application volume is high, when specific application criteria may be slow to verify, when it may be difficult for some applicants to upload supporting documentation, and when applications for funding assistance are potentially time-sensitive. For example, our findings suggest settings such as applications for financial assistance after storm-related disasters could be suitable for an FSP.

Read the technical appendix.

Verify the upload date of our Analysis Plan on Github.

Year

2024

Status

Complete

Project Type

Impact evaluation of program change

Agency

Treasury

Domain

American Rescue Plan

Resources

View Analysis Plan (PDF) View Abstract