Association for Public Policy Analysis & Management

Asset limits in means-tested programs are designed to limit program eligibility and benefits to people most in need. In doing so, the limits channel program dollars to those with a weak financial safety net. However, if asset limits discourage low-income households from saving, they could impose barriers to financial security. While asset limits can decrease government costs by limiting eligibility, they can increase administrative costs and caseload churn (people exiting and reentering the program within a short window).

This paper advances knowledge about the effects of SNAP asset limits on SNAP eligibility, SNAP churn, and SNAP spell length. We also examine how asset limits affect low-income households’ participation in traditional financial markets (such as having a bank account) and their savings and assets, which can help them weather financial shocks.

The analyses use individual-level data from the Survey of Income and Program Participation and state-specific SNAP rules from the SNAP Policy Database. We use monthly data from 1997 through 2013, regression analyses, and variation in asset limit (and other) policies across states and time to disentangle the effect of asset limits from other factors that affect outcomes, such as other policy variables (e.g., EITC, minimum wage) and state economic conditions (e.g., unemployment rate). The models capture unobservable state and time differences with state and year fixed effects, which control for differences across states and years that do not vary over time.

The results suggest that more relaxed asset limits through BBCE (broad based categorical eligibility) reduce SNAP churn, which could result from a less burdensome recertification process. Specifically, we find that being in a state with BBCE decreases the likelihood of SNAP churn by 2 percentage points, representing a substantial 26 percent decline in SNAP churn. We do not, however, find that SNAP asset-limit policies affect SNAP spell length. The offsetting positive and negative hypothesized effects of asset limits on SNAP spell length are consistent with no overall effect. We find no evidence that relaxing vehicle asset limits affects SNAP churn or SNAP spell length.

Our analyses also suggest that SNAP asset limits affect people’s decisions around savings and asset building for some, but not all, of the measures examined. We find that SNAP asset limits affect behavior at lower levels of wealth—levels below the federal asset limit. Specifically, we find that being in a state with BBCE increases the likelihood that a person is in a household that has a bank account by 3 percentage points (5 percent) and increases the likelihood that people in low-income households have at least $500 in a bank account (by 2 percentage points, or 8 percent).

This research shows that asset limits may increase the program’s administrative costs by increasing churn. The results also suggest that asset limits have the unintended consequence of reducing emergency savings and mainstream financial sector participation, which has the potential to increase program costs as households face greater financial instability. Thus, this research provides evidence on how to make government safety net policy more effective.