Faced with a funding shortfall, a longtime housing nonprofit is headed toward closing.
Sacramento Self-Help Housing (SSHH) serves around 600 vulnerable residents in California’s Sacramento and San Joaquin counties and employs approximately 180 employees.
“The organization from its founding had always tried to house the hardest to house—single individuals with no or very little income in a market that has no housing for single individuals with no or low income,” said Ethan Evans, board chairman.
Unfortunately, the nonprofit has fallen into acute financial crisis, according to Evans, who moved from board member to chairman in January to help sort out the troubles.
As one of the organization’s main services, SSHH leases homes from private property owners to provide scattered-site housing and sheltering opportunities for people exiting homelessness. Under this shared housing model, a resident living in one of the bedrooms would serve as a house leader, earning money or receiving lower rent to help with some of the responsibilities at the home.
SSHH had multiple contracts with Sacramento County and others to provide needed housing. The small nonprofit did good work, slowly establishing itself and modestly growing over the years, but then experienced a big jump in the contracts that it was taking on around 2016, according to Evans.
A roughly $3 million organization in 2016 grew to a $15 million enterprise in 2020, he said.The trouble was the contracts were “not well written from the standpoint of the provider organization,” said Evans, explaining that additional capital was still needed to fill funding gaps.
However, SSHH leaders at the time still saw the contracts as an opportunity to house more people in need even though it was pushing the organization toward a tailspin. SSHH made it work for a while, but then the COVID-19 pandemic hit, which not only increased expenses but reduced fundraising, according to Evans.
The government contracts still existed, but they weren’t funding what it costs to provide the services, he said.
“At some point [SSHH] ran out of money in the checking account and got into a hole of not paying rents” as it waited for the next invoice to be paid, according to the chairman.
In January, Evans and others received information about what was happening and abruptly changed leadership and began working on a way for SSHH to regain its footing.
The situation proved to be dire. With the possibility of a sudden closure hanging over them, the leaders made the tough decision that the most responsible step would be to plan for the organization’s dissolution and disperse its assets to other nonprofits. Leaders are hopeful that services to clients will not be affected, but plans have yet to be made with any new organizations.
Latest Steps
In addition to empty pockets, time is against the housing group.
Having lost confidence in SSHH, Sacramento County leaders have decided not to renew its contracts with the organization for the scattered-site housing. They plan to let their existing agreements expire at the end of June.
Recognizing the importance of the housing, county officials are working on paying landlords their overdue rents directly in an effort preserve those relationships and keep people in their homes. Officials report that many of the property owners who are leasing homes to SSHH have not received rents for several months and, in some cases, have sustained property damage.
SSHH operates about 160 beds of scattered-site housing through the county contract, and about half of the beds were occupied at the end of March, said a county official at a March 28 board of supervisors meeting.
At that session, supervisors unanimously approved a request to redirect up to $1 million in county general funds within the Department of Human Assistance to preserve housing supports for individuals in the scattered-site shelter program and redirect up to an additional $700,000 in contract savings to preserving housing for households in the county’s Flexible Housing Pool program.
During the meeting, board members said they are not alleging wrongdoing by SSHH. “This was a situation where I think things became unmanageable or unwieldly through unfortunately a greater need that existed,” said supervisor Pat Hume. “I think people were trying to respond with good intentions and to do good work.”
At the same time, if the county had been demanding audits as required by the contracts, the situation may not have gotten to this point, he said.
SSHH is reportedly two years behind in providing audited financial statements.
“It’s very important for the members of the public, the advocates, the unhoused to hear unequivocally that this board is 100% supportive of the scattered-site shelter program in Sacramento County, 100% supportive of making sure people are able to stay in the housing that they have and to expand that scattered-site shelter housing that we have,” said Rich Desmond, chair of the board of supervisors.
It’s also inaccurate to characterize the problems as ones that happened overnight, and it’s inaccurate to say the county hasn’t been paying attention, added supervisor Patrick Kennedy, a former SSHH board member, noting that the county has been working with the nonprofit for months, if not years, to address problems.
“I feel that we have exhausted everything that we can do as a county to work with the organization at this point and so therefore that’s why we’re looking for other providers,” he said.
Lessons Learned
The county leaders did what was needed as a stopgap and to get the money in place.
However, the issue remains complicated because SSHH is on the leases, and it’s not going to be funded after June 30. As a tenant, it’s obligated to provide a 60-day notice to the owners that it plans to hand back the keys to an empty house, explained SSHH’s Evans.
To ensure that the nonprofit doesn’t have to move people out of their homes, SSHH needs to be taken off the lease and replaced by the county or a new provider. Until that happens, the nonprofit must take steps to return the houses back to their owners, he said.
The plans also necessitate that SSHH stays in business until new arrangements are made. But, the nonprofit is dependent on the invoices it writes and the funds that come in, and that money has to line up to when the payroll company takes money out of the organization’s account to pay employees. As soon as it sees that money is not there and that payroll is going to be hit, it needs to file for bankruptcy, Evans said.
Any disruption to the funds coming into SSHH increases the chances it will have to shut abruptly, he said.
While Evans and others are in the thick of trying to solve different problems and keep people in their homes, some early lessons can be seen.
Evans described them as “classic lessons.” One is don’t overextend if it doesn’t make sense. “Have your business hat on, on top of your service heart,” he said.
In addition, the larger service, philanthropic, and government community has to understand that if it wants this work to be done, there has to be a different way to put deals together.
“For the government to just say, ‘we’ll only fund you this much, and you better go out and hustle,’ or for philanthropy to say, ‘we’ll give you this money, but you can only use it in these ways,’ it makes it much more challenging to get the job done,” Evans said. “There’s got to be a better balance. …”
SSHH is not the first organization to find itself in this situation, he said, and “given the structure of things, we’re probably not going to be the last.”
