Affordable Housing Finance
COVER STORY
Serving America's Special-Needs Populations
The Effort to Deliver Supportive Housing
AFFORDABLE HOUSING FINANCE
• January/February 2010
Worries grow that the recession will lead to more homeless
BY DONNNA KIMURA
Fay Joiner lives at the Prairie Apartments,
a supportive-housing development
in Milwaukee. (Photo by Jean-Marc Giboux)
Michael Carter recently moved into permanent supportive
housing that serves formerly homeless veterans in
Battle Creek, Mich.
It’s a place of his own after bouncing around, staying
with friends and family and living in transitional
housing. He’s in school part time, hoping to start a
new career.
“The job market is tough,” says Carter, who was
laid off from an auto-parts factory. It’s especially hard
in his state where the unemployment rate has languished
around 15 percent, the worst in the country.
Nationally, the jobless rate is about
10 percent as the recession lingers.
Unemployment, a weak economy,
and growing poverty are huge worries for
affordable housing advocates and those
seeking to end homelessness.
“I am concerned that the recession
will result in a new generation of homeless
people,” says Nan Roman, president
and CEO of the National Alliance to End
Homelessness. “We have been making
progress on homelessness, which before
the recession was starting to go down. It
has stopped going down, and although it
is not yet going up, we fear that it will.
We can end homelessness, and we can’t
let the recession stop our momentum.”
Growing poverty
There’s reason to worry. Family
homelessness and hunger are on the rise
in many cities, according to a new report
by the U.S. Conference of Mayors.
Nineteen cities, or 76 percent of
those surveyed, reported a rise in family
homelessness, with the recession and a
lack of affordable housing cited as the top
reasons for the increase.
At the same time, homelessness
among single adults decreased or held
steady in 16 of the 25 cities surveyed.
Most of the cities that saw a drop attribute
the decline to instituting 10-year
plans to end chronic homelessness.
The recession is pushing more people
into poverty, according to new Census
Bureau figures, which show that 39.8
million people lived in poverty in 2008,
an increase of 2.6 million, or 6.9 percent,
from the year before.
The growing number of families in
deep poverty is especially troubling, according
to the National Low Income
Housing Coalition (NLIHC). Households
earning less than half of the federal poverty
threshold rose by 1.2 million people, or
7.7 percent, to more than 17 million people
overall, according to the coalition.
At the same time, there is a growing
shortage of housing that is affordable to
the poorest families. In 2007, the shortage
of homes affordable to those earning
no more than 30 percent of the area median
income was 2.7 million. The shortage
grew to 3.1 million in 2008, according
to a NLIHC analysis.
The troubling numbers foretell a
growing demand for affordable housing.
However, financing remains the critical
issue as institutional investment in lowincome
housing tax credits (LIHTCs)
has fallen.
Online Extra:
Studies Build the Case for Supportive Housing
Housing the homeless reduces the public costs by 79 percent, according to a new study that examines the costs for people in supportive housing in Los Angeles.
The average public price for homeless adults dropped when housed from a monthly average of $2,897 to $605.
Where We Sleep: Costs When Homeless and Housed in Los Angeles adds to the growing evidence that permanent supportive housing is a cost-effective solution to homelessness. It is the latest of several recent studies that show that providing housing is significantly cheaper than leaving people on the street.
Sixty-nine percent of the savings were from reduced costs for hospital, emergency room, and clinic visits, according to the Los Angeles Homeless Services Authority and the Economic Roundtable, which produced the report.
The report makes several recommendations, including strengthening government and housing partnerships and leveraging resources, improving retention rates for individuals in supportive housing, and increasing the supply of supportive housing. Where We Sleep can be found at www.lahsa.org.
Several other studies have come out in the past year, with similar findings:
• Authorities in Maine found that during a person’s second year of housing there continued to be decreases in service costs when compared with homelessness. For example, there was a 46 percent drop in health-care costs in the second year of supportive housing for individuals in urban Maine compared to the year before entering housing. There was an 87 percent drop in incarceration. Similar results were found in the rural areas. The Effectiveness of Permanent Supportive Housing in Maine can be found at www.mainehousing.org.
• A United Way of Greater Los Angeles study found a nearly 43 percent savings for taxpayers when permanent housing solutions are used. The study profiled four previously homeless individuals who have been placed in supportive housing. Looking at several cost areas, including health and criminal justice, the study finds that the total cost to provide public services for two years was more than $80,000 greater than with permanent housing with support services. The report can be found at www.unitedwayla.org.
• In Seattle, the innovative 1811 Eastlake project for formerly homeless alcoholics save taxpayers more than $4 million over the first year of operations, according to a study by Mary E. Larimer, a professor of psychiatry and behavioral sciences at the University of Washington. Even after factoring in the cost of administering housing, there was a cost reduction of almost $2,500 per person per month in health and social services compared with a control group of 39 homeless people. 1811 Eastlake was developed by the Downtown Emergency Service Center. The study can be found at www.desc.org.
Supportive-housing projects, which
combine permanent housing with services
for homeless individuals or other specialneeds
populations, can be more difficult
to finance, especially as it competes for a
limited amount of LIHTC dollars.
“Since supportive-housing developments
are generally structured with
long-term rent subsidies and they seldom
have hard debt, we have been able
to arrange investors for them,” says Mark
McDaniel, president of Great Lakes
Capital Fund, a nonprofit LIHTC syndicator.
“We are seeing increased scrutiny
on the part of LIHTC investors with regards
to the financial capacity of sponsors.
This could make it more difficult
for nonprofit sponsors of supportivehousing
developments to find investors
unless they partner with developers who
have significant financial resources.”
Supportive-housing projects are often
more complicated, so they require a
strong sponsor, agrees one major investor,
noting that the developer’s experience
is key when considering such deals.
McDaniel has seen some investors
request a “transition reserve” with developments
that have rent subsidies if they
are subject to annual appropriation or
have a five- or 10-year renewal contract.
“The transition reserve would be
used to help reposition the property with
tenants who can pay full rent,” he says.
“The request for a transition reserve
hasn’t been limited to supportive-housing
developments. However, with these
types of development, the reserve would likely be a greater dollar amount, which
could present a huge hurdle.”
Some investors may question the
financial capacity and durability of supportive-
service providers. To strengthen
these investments, developers can
contract with solid providers and build
costs in to operating budgets to pay for
services as a budget line item from day
one or as a funded reserve that can pay
for services if the provider loses its independent
funding, says McDaniel.
There has been a slowdown in the
project pipeline, but deals are starting
to move forward using the new Tax
Credit Assistance Program and exchange
program, which were part of the
American Recovery and Reinvestment
Act of 2009 (ARRA), to fill funding
gaps, says Deb DeSantis, president and
CEO of the Corporation for Supportive
Housing (CSH).
CSH hopes to illustrate that supportive-
housing projects are as strong
as conventional affordable housing
deals. It plans to soon work with a large
LIHTC investor to examine the performance
of the investor’s supportivehousing
portfolio, says DeSantis.
On the funding front, the
ARRA provided $1.5 billion for the
Homelessness Prevention and Rapid
Re-housing Program (HPRP).
“We hear that the demand for
HPRP resources far exceeds supply,”
says Roman. “Communities that had
been concerned they could not spend
the money within three years are now
concerned that it will all be spent in one
year. Congress is being asked for an additional
$1 billion to meet the need.”
The Department of Veterans
Affairs unveiled a plan to end homelessness
among vets within five years. The
department plans to spend $3.2 billion
this year to prevent and reduce homelessness.
The plan also calls for the department
to partner with community
groups to provide transitional housing
to 20,000 vets and to work with
public housing authorities to provide
permanent housing to homeless vets
in partnership with the Department of
Housing and Urban Development.
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