Affordable Housing Finance

SPECIAL FOCUS

The Nation's Hardest to House

An Army of Homeless

AFFORDABLE HOUSING FINANCE • January 2009

One out of four homeless males is a veteran

BY DONNA KIMURA

Paul Livingston was just 18 and fresh out of high school in 1979. He and his older brother applied for the same job. The factory hired his brother, so Livingston joined the Marines. He served for three years. Now 47, he’s made some mistakes and had some hard luck. He was about to be on the streets when he recently got a room at a new development for homeless veterans in Kent, Ohio. The first in his family to enter the military, Livingston has two sons serving in the National Guard, with the youngest recently returning home from Iraq.

Air Force veteran Jonathan Parker says he lost his apartment and was out of options before moving into the Bedford Veterans Quarters in Bedford, Mass. Caritas Communities developed the $3.6 million project on the campus of the Edith Nourse Rogers Memorial Veterans Hospital. (Photos by Bruce T. Martin Photography)

Carisa Dogen served in the Army for a year and 26 days. She was supposed to go to Desert Storm but was diagnosed with scoliosis, a curvature of the spine, and discharged. The former electronic technician was recently sleeping in a park and scavenging for food. The worst days were when it rained, says the 38-year-old. Clean and sober for about three months, she is one of the first residents of a new housing complex for women in Dayton, Ohio.

Jonathan Parker served in the Air Force for four years, working in aircraft maintenance and holding the rank of sergeant. He recently lost his apartment and had run out of options. After being diagnosed as bipolar, the 47-year-old is getting treatment and putting his life back together at a new development for veterans in Bedford, Mass.

Count them among the nation’s army of recently homeless men and women, a population overrepresented by vets. There’s about a one-in-four chance that the homeless man you pass on the street served in the military. Those are striking odds considering that vets make up only about 11 percent of the adult civilian population.

Between 150,000 and 200,000 vets are estimated to be homeless on any given night, and about a million more struggle to pay the rent each month.

In 2005, about 2.3 million veteran renter households had low incomes. An estimated 1.3 million, or about 56 percent of these low-income veteran households, had housing affordability problems, meaning they were paying more than 30 percent of their household income for rent, according to a report by the U.S. Government Accountability Office.

“We’re turning a veteran away every day,” says Matthew Slater, program manager at Freedom House, the 14-bed development where Livingston now resides. The project, which replaced a smaller eight-bed facility, was full two weeks after opening last spring.

In the program’s first three years, Freedom House averaged about 100 phone calls a year from needy veterans, says Slater, noting that there’s only about 150,000 people in Portage County, where Kent is located. In 2008, he was well over that number heading into November.

The vets can stay for up to two years at Freedom House, a program of local nonprofit agency Family and Community Services. The new building was financed with approximately $400,000 from the Department of Veterans Affairs’ (VA) grant and per diem program and about $300,000 in money and in-kind donations. Most of the residents are from the Vietnam era, but Slater has begun to see soldiers from the recent battles.

Freedom House is a hybrid of sorts, combining transitional housing elements with those of a shelter. “All of our residents had been in emergency situations,” Slater says. “They were on the streets, couch surfing, or in a shelter.”

There are two case workers—a veterans’ advocate who serves as a link to the community and another who focuses on drug counseling.

“When I got to Freedom House, I was impressed,” says Livingston, explaining that staff members help the residents sort through legal, financial, and other problems while trying to get them into permanent housing.

He was doing roofing and siding work but was involved in a car accident that left him unable to work for a while. As a result, he says he fell behind on his rent. Livingston also admits that his past includes an arrest for assault.

He is hopeful and confident that he will move past these troubles, a sign of the new outlook and support found at Freedom House. As the holidays approached, Livingston had volunteered to pass out food baskets and collect toys for the poor. He was also looking for a permanent job.

Growing issues

The number of veterans on the streets is already high, but there are growing fears it will increase as soldiers return from Iraq and Afghanistan.

Catholic Charities Housing Development Corp. developed St. Leo Residence for Chicago’s homeless veterans in 2007. (Photo courtesy of Catholic Charities)

“We’re seeing more of them,” says Michael Blecker, a Vietnam veteran and executive director of Swords to Plowshares in San Francisco, one of the nation’s premier organizations providing housing and social services to veterans. The group houses approximately 200 people at a given time in its transitional and permanent housing units, including a handful of formerly homeless Iraq and Afghanistan vets.

It often takes time for issues to surface because when vets return home they are still young and have connections to their communities. According to reports, it took an average of nine years postdeployment for Vietnam vets to fall into homelessness. There’s concern that it’s happening much sooner for the recent vets, says Blecker.

One estimate counts 1,500 homeless vets from Operation Enduring Freedom and Operation Iraqi Freedom, but others say the number may be higher.

There are several reasons why veterans are overrepresented among the homeless. For many, there are health issues, including posttraumatic stress disorder, traumatic brain injuries, or substanceabuse problems, says Cheryl Beversdorf, a former Army nurse and president and CEO of the National Coalition for Homeless Veterans.

There are also economic issues. A study prepared for the VA found that 18 percent of “recently separated servicemembers” are unemployed. In comparison, the national jobless rate was 6.5 percent in October 2008. A quarter of the vets that did find work weren’t earning enough to live on, making less than $21,840 a year.

It’s challenging for many vets to find work because the skills they learned in the military fail to transfer into the civilian sector, says Beversdorf. Livingston is a good example. He worked in artillery, a field that doesn’t have much demand outside of the military.

In addition, it may take six months or more for a vet’s benefits to come through. “You still have to eat and sleep somewhere for those six months,” says Beversdorf. Others point out that many veterans come from poor and disadvantaged backgrounds.

There’s also the overall lack of affordable housing. There’s a shortfall of about 6 million affordable units in the country, meaning there are only 38 affordable and available units for every 100 extremely low-income households.

On the street, the need feels as great as ever. “There’s no decline in demand,” Blecker says. “I think demand is ratcheting up from people barely hanging on.”

In response, Swords to Plowshares has begun plans to develop about 90 more units of housing for vets in San Francisco in cooperation with Chinatown Community Development Center, a local nonprofit organization.

Another issue of growing concern for Swords to Plowshares and other organizations is the number of female veterans in need of assistance. The number of those who are homeless is estimated to be about 7,000.

“Women are being deployed at much higher rates than ever before,” says Blecker. Women make up about 14 percent of the 1.4 million people on active duty, and women vets are the fastest-growing segment of the veteran population. They make up about 7 percent of the total vet population but will comprise an estimated 10 percent by 2020.

More vouchers

An increase in the HUD-VASH program in 2008 is the most notable action on the veterans housing front.

Between 1992 and 1994, the Department of Housing and Urban Development (HUD) and the VA released 1,700 HUD-VASH vouchers, which provided housing assistance modeled after the Sec. 8 voucher program and case management through local VA medical centers. The fiscal year 2008 Consolidated Appropriations Act allocated $75 million for HUD-VASH vouchers to serve an estimated 10,000 vets.

The Bush administration’s proposed fiscal year 2009 budget requests an additional $75 million for the program.

“I think it’s very significant,” says Steve Berg, vice president of programs and policy at the National Alliance to End Homelessness. “We’ve seen in the general homeless system that people who have been homeless for a long time get detached from the mainstream. It takes specific and intensive intervention to get them off the street and back into housing with supportive services.”

The HUD-VASH program provides a means to permanent supportive housing. The VA’s other housing efforts have focused on transitional housing.

Deborah DeSantis, president of the Corporation for Supportive Housing, says there’s an opportunity to make a signifi cant impact in the area of housing for veterans. “There’s bipartisan support related to creating housing opportunity for that population,” she says.

Many are eager to see what the new administration will do after Presidentelect Barack Obama pledged a zero-tolerance policy on the issue of homeless veterans. As a senator, he sponsored the Homes for Heroes Act in 2007, which passed in the House but stalled in the Senate. The bill would have established a $200 million assistance program for supportive housing and services for low-income vets.

New moves, old challenges

There’s hope that more housing for vets is on the way as interest in the issue grows and recent legislative moves ease some of the hurdles to developing special-needs housing.

The Local Initiatives Support Corp. and National Equity Fund, Inc. (NEF), have launched a veterans’ housing initiative that provides predevelopment loans and grants as well as technical assistance to support developers of these projects from the early stages of development.

The effort began with the development of St. Leo Residence, a 141-unit project for homeless veterans that opened a few years ago in Chicago. Created by Catholic Charities Housing Development Corp., the $20 million project used about 10 layers of financing, including lowincome housing tax credit (LIHTC) equity from NEF and a VA loan. Several more deals are in the works under the initiative, says Debbie Burkart, national vice president of supportive housing at NEF.

Paintings provided by The Art Connection, a nonprofit organization, grace the walls of Bedford Veterans Quarters. Resident Jonathan Parker, who was a member of a committee that helped select the pieces, is in front of a painting by Suzanne Hodes. (Photos by Bruce T. Martin Photography)

“The goal of this initiative has been to create an environment to help more of these deals move forward,” she says, noting that the effort goes beyond a “tax credit approach.”

Still, LIHTCs are the main tool for producing new affordable housing in the country, and every state has some type of incentive for creating special-needs housing, although not necessarily for veterans, in their tax credit allocation plans.

The combining of tax credits with VA financing has been uncommon, but the door has opened a little more thanks to the recent Housing and Economic Recovery Act, according to Burkart.

Among several modifications to the LIHTC program, the bill clarified that ongoing rent and operating subsidies from a federal source will not cause a reduction in eligible basis. This will benefit projects serving the homeless and special-needs populations that rely on these subsidies.

The legislation also addressed the general public use requirement, clarifying that occupancy preferences and restrictions are permitted to favor tenants with special needs or members of a specifi ed group, as long as it complies with fair housing. This clarification, which applies to both existing and future LIHTC housing, is important because program auditors began to challenge the targeting of units to special groups.

At a time when many LIHTC deals are stalling due to a shortage of tax credit capital in the market, there is concern that supportive-housing deals, such as those targeting veterans, may get passed over for more straightforward affordable housing projects.

“The challenge is that for supportive housing to be successful you need three things,” says Burkart. “You have to have soft debt on the capital side to keep rents low, you need some rent subsidies because the operating expenses are often more than the residents’ ability to pay, and you need social services funding.”

The problem is that project-based Sec. 8 rent subsidies, a common rent subsidy source in supportive housing, are subject to annual appropriations. As a result, some investors have been wary of viewing them as a guaranteed income source even though there have been few problems with Sec. 8 and other rent subsidy programs being reauthorized.

To address any issues with rent subsidies, developers and state housing finance agencies need to be prepared and flexible, according to Burkart. For example, projects should carry sufficient revenue deficit reserves if a contract is canceled or substantially reduced.

Sponsors and state officials should also think about what would happen in a worst-case scenario if there is a change in rent subsidies or other financing, but the project’s regulatory or loan agreements require units to serve homeless or extremely low-income households long term. For instance, in the event Sec. 8 funds are not appropriated for a 15-year contract, one strategy to reduce a potential revenue shortfall may be for tax credit agencies and/or lenders to waive targeting, rent, and extremely lowincome restrictions (but only in the event that Sec. 8 is discontinued through no fault of the property owner and only to the extent possible to maintain the viability of the project). Waiver language would allow some of the apartments in a project to target residents earning no more than 60 percent of the area median income (AMI) instead of 30 percent of the AMI to maintain project viability through a smaller deficit reserve that does not drain soft financing resources, says Burkart.

On the other side, supportivehousing projects have many attractive qualities, according to Burkart, who has recently closed several such deals. For one, these deals often carry little or no hard debt, which is very appealing to investors. The projects also typically have many public partners and have a strong fundraising support network behind them. In addition, they have little market risk in a softening real estate market because they have rents well below tax credit maximum rents.

Second chances

Paul Livingston, Jonathan Parker, and Carisa Dogen are the fortunate ones. They have a roof over their heads at either a transitional or permanent supportivehousing development.

“I was going to be homeless,” Livingston says. “I lucked out. The day that I was supposed to be out of my home, Freedom House had a bed open.” It is now up to him to get a job and find a place of his own, so the next soldier can move in.

Parker says the Bedford Veterans Quarters has helped him through depression and alcoholism. “I hope they continue to develop more of these,” he says.

Dogen is thinking about going back to school. “I’m just glad I got a second chance,” she says. “Second chances are hard to come by.”