SPECIAL FOCUS >> HARDEST TO HOUSE

America’s Homeless Crisis

BY DONNA KIMURA

AFFORDABLE HOUSING FINANCE • JANUARY 2008

States across the country are increasingly encouraging the development of supportive housing through their low income housing tax credit (LIHTC) programs.

Every state provides potential scoring advantages or extra consideration for supportive housing, according to Housing Credit Policies in 2007 that Promote Supportive Housing, a new study that looked at each state’s qualified allocation plan (QAP).

That’s a jump from 36 states that offered scoring advantages in 2005, according to Patricia Magnuson, national director of supportive housing for Enterprise, which produced the study along with the Corporation for Supportive Housing (CSH).

The study found that 20 states had implemented notable new policies or substantially revised policies encouraging supportive- housing development in the two years between the studies.

Twelve states promote supportive housing through set-asides. Many of these set-asides have been created or expanded in recent years.

Five states promote the development of supportive housing through threshold criteria. Two states, North Carolina and Louisiana, call for all tax credit developments to reserve a percentage of their total units for supportive housing.

“Expanding opportunities for private investment through the federal housing credit program is a productive and proven way for states to create permanent affordable housing while addressing the special needs of homeless persons without burdening state budgets,” said Deborah De Santis, president and CEO of CSH.

The QAP requirements and incentives can lead to tension about how to fund and underwrite the necessary social services and programs. Some industry leaders have raised concerns that states are creating “unfunded mandates.”

Funding for the services come from a variety of sources. De Santis said the mental health systems have been strong supporters. Some states have directed funds from the federal Temporary Assistance to Needy Families program to services. Federal McKinney- Vento Homeless Assistance Act and Housing Opportunities for Persons With AIDS funds have also helped pay for services.

In addition, investors have a better understanding of supportive housing and have grown much more comfortable with funding these projects, De Santis said.

In the recent study, supportive housing refers to permanent housing with intensive services targeted to people with special needs who struggle to retain stable housing without easy access to comprehensive supportive services. This group includes people who have been homeless, emancipated youth, and those with disabilities, chronic mental health issues, HIV or AIDS, or substance- abuse problems, and other groups that would not be able to live independently and maintain housing without intensive support. These are among the hardest people to house because of their low incomes and challenging needs.

Both De Santis and Magnuson attribute the increased interest in supportive housing to the growth in the number of communities adopting 10-year plans to end homelessness, which are generating goals to develop this type of housing. For more information about the study, visit www.shippartners.org.

The homeless

In January 2005, an estimated 744,313 people were homeless in America. During the course of a year, the number of people experiencing homelessness is 2.3 million to 3.5 million, according to the National Alliance to End Homelessness (NAEH).

Fifty-six percent of the homeless people counted were living in shelters and transitional housing. A shocking 44 percent were unsheltered, according to Nan Roman, NAEH president.

In addition to LIHTCs, a key source of financing to assist the homeless comes from the 20-year-old McKinney-Vento Act, which is up for reauthorization. Senate Bill 1518, which was introduced by Sens. Jack Reed (D-R.I.) and Wayne Allard (R-Colo.), seeks to consolidate the three main competitive grant programs—the Supportive Housing Program, Shelter Plus Care, and Moderate Rehabilitation/Single Room Occupancy—into one called the Community Homeless Assistance Program. The Senate Committee on Banking, Housing, and Urban Affairs has voted in favor of S.B. 1518. The bill would boost McKinney-Vento funds to $2.2 billion, an increase of about $700 million over current funding levels.

Under the existing McKinney-Vento program, at least 30 percent of the homeless assistance grant appropriations must be used for permanent housing projects. The Senate bill maintains that 30 percent set-aside.

“It recognizes the efficacy of providing permanent supportive housing for those experiencing long-term homelessness,” De Santis said.

Advocates give the bill a decent shot of being approved by Congress this session.

In the House of Representatives, Rep. Julia Carson (D-Ind.) introduced H.R. 840, the Homeless Emergency Assistance and Rapid Transition to Housing Act, also known as the HEARTH bill, which would also reauthorize the McKinney-Vento Act and consolidate the three competitive homeless assistance programs.

One much-discussed aspect of the HEARTH bill is its proposal to expand the definition of a homeless individual to include people who are sharing housing with others due to the loss of housing, economic hardship, or a similar reason. It would also add people who are living in a motel, hotel, or camping ground as well as those living in substandard housing.

An NAEH analysis found that roughly 3.8 million people are doubled up for economic reasons. That’s five times the number of people who are currently defined as homeless and eligible for homeless assistance from the Department of Housing and Urban Development.

“Expanding eligibility prior to expanding resources is a recipe for disaster,” Roman told the House Subcommittee on Housing and Community Opportunity in October 2007.

NAEH has raised concerns about how homelessness is defined in the HEARTH bill. However, the group does believe that the definition of homelessness needs to be expanded. “The question is where to place the bright line between those who are doubled up and homeless and those who are doubled up for economic reasons and not homeless,” Roman said.

NAEH favors a version in the Senate bill, which would also broaden the definition but is more precise. S.B. 1518’s definition includes people who are living in hotels or motels paid for by federal, state, or local programs, or charitable organizations. It also includes those living in hotels and motels because they lack the resources to rent a decent and safe housing unit, lack the resources to pay for a hotel or motel room for more than a short time, and have changed primary residences three or more times in the past year or two or more times in the past 21 days.

It would also add households who are living in a residence that is owned or leased by another because the individual or family lacks the resources to rent a decent and safe housing unit and has been notified by the owner or renter of the residence that the individual or family may stay for only a short time. The individual or family must also have moved frequently and be unable to make a significant contribution to the housing costs of the owner or renter of their current residence.

This expansion is considered a victory for supporters who have argued that the definition needs to better reflect the nation’s housing issues.

Blending with LIHTCs

Advocates have also been urging Congress to take steps that would make it easier to use LIHTCs with ongoing governmental subsidies like the McKinney-Vento homeless program, homeless veterans programs, the Sec. 202 elderly housing program, and Sec. 811 for disabled housing.

Supportive housing projects generally need three things to be successful—a lot of soft capital, rent subsidies, and money for services, said Debbie Burkart, vice president of supportive housing and assisted living for the National Equity Fund, Inc.

“We need more rent subsidies and changes in the Sec. 42 tax code to allow existing ongoing federal governmental subsidies to be treated similarly to Sec. 8 rental assistance,” Burkart said.

The issue has been that some ongoing government subsidies are treated as grants and reduce tax credit basis, she explained. Sec. 8 has been an exception. Burkart and others say that the ongoing government subsidies should not be treated as grants, and they are pushing to have the penalties for combining the programs with tax credits removed. The point was made before the House Subcommittee on Select Revenue Measures in 2007.