How Do Communities Access Federal Funding for Homelessness?

This post is intended to provide general information about how communities can access federal funding for homelessness. This money is distributed through the U.S. Department of Housing and Urban Development (HUD), and more specifically through HUD's Continuum of Care (CoC) program. First, I'll provide a brief description of the process in which the funds are allocated and managed. Second, I'll summarize the legislation and implementing regulations of the CoC Program. Third, I'll point out what communities need to do to position themselves to secure CoC funding.

Every year HUD releases its CoC NOFA for homeless housing and services. In order to receive this funding, HUD requires that communities establish CoCs, which are local coordinating bodies that consist of government and nonprofit agencies focused on ending homelessness in their community. The CoC has a governing body, usually called a "Council" that directs the business of the CoC. Different roles are assigned to participating CoC entities. The two most important roles are the Collaborative Applicant that is responsible for submitting an application to HUD on behalf of the CoC, and the Homeless Management Information System (HMIS) Lead that is responsible for managing a homeless information database. One of the CoC's primary roles is the review and ranking of individual project applications within its jurisdictions, which are then presented by the Collaborative Applicant in the CoC's Consolidated Application. This structure, and supporting policies and procedures, must be in place before communities secure CoC funds.

The HUD CoC program is governed by the HEARTH Act, which became law in 2009. This law amended the McKinney-Vento Homeless Assistance Act by consolidating three separate homeless assistance programs into a single grant program. The HEARTH Act also codifies the CoC planning and administration process as described above. The stated goals of the HEARTH Act are to promote community-wide commitment to ending homelessness, provide funding to quickly rehouse homeless individuals and families, promote access to other mainstream assistance programs for homeless persons, and optimize self-sufficiency among homeless persons. The "Interim Rule" (24 CFR 578) consists of the HEARTH Act implementing regulations.

HUD has prioritized CoC funding to align with the goals of the federal plan to prevent and end homelessness- "Opening Doors: Federal Strategic Plan to Prevent and End Homelessness". The most currently relevant goal of this plan is to end Chronic Homelessness in 2017. Chronically Homeless persons are defined by HUD as persons who have a disability that have been continuously homeless for at least 12 months or that have been homeless on at least four separate occasions in the last three years. See the complete definition here. The plan identifies the following strategies for meeting this goal:

• Reallocate existing CoC funding to projects that house Chronically Homeless individuals.
• Prioritize existing permanent supportive housing beds for Chronically Homeless individuals with the greatest needs.
• Engage Chronically Homeless individuals through street outreach and standardize assessment and placement in a way that makes it easier to access housing.
• Implement community-wide "Housing First" programs that lower barriers to accessing housing.
• Request additional funding from Congress to build more permanent supportive housing units.

This year's CoC NOFA competition rewards communities that are taking concrete steps to implement the first four strategies listed above. CoCs must demonstrate progress through outcomes that are recorded in HMIS. Projects requesting annual renewals for rental assistance and/or supportive services must demonstrate that they are prioritizing available beds for Chronically Homeless individuals. In addition, new projects requesting funds must serve the Chronically Homeless with permanent supportive housing or rapid-rehousing using a Housing First model.

For more general information, check out HUD's Introductory Guide to the CoC program. As you can see, HUD has a very specific, prescriptive way that they want to fund projects that address homelessness. You will want to understand what will be required and whether your community has the capacity to deliver it before you pursue this funding.

A New Strategy to Reduce Homelessness

A number of strategies to address homelessness have been debated and attempted in cities across the nation. These have included everything from criminalizing homelessness to legalizing homeless encampments, and from building tiny house villages to implementing aggressive street outreach and housing first placement.

San Francisco has been breaking ground on a uniquely new strategy called the "Navigation Center". This is a one-stop complex where homeless individuals are welcomed for short stays without placing barriers to their entry. The approach is welcoming and accommodating, which creates an atmosphere of trust that helps people change their living situation. The goal is to warm people up to accessing housing and services, which is often an obstacle to helping them off the streets, especially for chronically homeless individuals with substance abuse and/or mental health issues. During stays, homeless individuals are assisted through proactive one-on-one interaction with case managers and counselors who identify appropriate supportive housing and help them move in.

This model has already demonstrated success in moving people off the streets, and it will be formalized within a new City Department of Homelessness and Supportive Housing, and supported by new City funding targeted to producing new supportive housing units. The first Navigation Center was established in the Mission about a year ago and offers 75 beds. The Mission Navigation Center had served 468 individuals as of early May of this year. About 84% of those individuals served had moved into permanent housing. A second Navigation Center opened in a renovated hotel in Civic Center that will offer 93 beds.

The Department of Homelessness and Supportive Housing has plans to develop three more Navigation Centers. These centers will be the organizing force for a completely redesigned homeless services system. One of the aims is to attract people out of homeless camps that are often dangerous, unhealthy, and have negative impacts on the surrounding neighborhood. The key to making the centers successful is producing an adequate number of affordable housing units that will provide permanent destinations for visitors. San Francisco has made some progress in that regard by using bond financing to generate $810 million for affordable housing last year. Part of the bond financing was approved through a proposition last November with 75% of voters favoring the measure.

Most cities don't have the political will right now to implement a similar program in type or scale to San Francisco. However, if it becomes a successful model that can show public cost savings to taxpayers, then the Navigation Center approach may become replicable elsewhere. It is now well documented that placing a homeless individual in subsidized supportive housing is generally much less expensive than leaving that individual on the streets in terms of public costs. Further, these studies typically do not consider the broader positive impacts to the local economy. I will be tracking the success of San Francisco's Navigation Centers to see how this strategy might demonstrate a solution to the problem of homelessness on a large scale.

The Great Debate on Solving California's Housing Crisis

For the first time in recent memory, there is a broad consensus in California that we have a housing crisis. Numerous media and research reports show that we are not building anywhere near enough units to house the growing population, and that a significant portion of the population cannot afford to live in the state. There is general agreement that the housing crisis is a drag on the economy, deteriorates our quality of life, and is a problem that must be solved.

Now that the problem has been identified, a debate is underway about how to solve it. Is it a problem of inadequate housing supply overall, or should resources be targeted to those with the lowest incomes? Can the problem to solved with government resources, or should the private sector take on the responsibility? Is the problem overregulation, or inadequate funding? Should we be increasing the supply of housing, or addressing households' ability to afford it?

Jerry Brown initiated the debate in earnest when he presented his budget, which included a provocative proposal to deregulate the permitting process for affordable housing development. Developers that commit to make 10%-20% of a project's units affordable to low income households would be entitled to build by right on properties zoned for high density residential, without requiring a permit and associated discretionary local reviews.

Some have questioned the effectiveness of Governor Brown's proposal. The greatest concern is whether jurisdictions will cooperate. The Governor's proposal does not address the problem of cities that do not have adequate land zoned high density residential in the first place. Communities may also re-zone high density residential land to other uses. While State Housing Element law requires communities to zone adequate land for high density housing, there is no straightforward way to ensure compliance other than extended inter-jurisdictional wrangling and protracted lawsuits.

Meanwhile, the legislative branch wants to allocate funds to subsidize the development of affordable housing. The Senate passed a bill to put a $3 billion bond for housing on the November ballot. It still requires approval of two-thirds of Assembly members and the Governor. The Assembly is proposing an allocation of $650 million for a range of affordable housing programs. However, the Governor has stated that he does not believe that allocating funds to affordable housing will make an impact that is worth the expenditure. He has voiced support, however, for housing subsidies and services targeted to homeless individuals.

Yet another approach being debated is to not incentivize private sector development, but require the private sector to set aside affordable housing units through inclusionary zoning. San Jose's inclusionary ordinance was recently upheld by the courts after a long legal battle with home builders. The housing market in San Jose is so expensive that government subsidies are currently far inadequate to address it without assistance from for-profit developers.

San Francisco, another one of the most expensive housing markets in the country, has arguably the greatest challenge of any California city in addressing housing needs. Proposition C will give voters the opportunity to vote for a revision of the current inclusionary housing ordinance that would raise the required affordable housing unit set-aside for market rate developments from 12.5% to 25% of all units in a project. The big question is whether this will reduce overall production if it becomes more difficult for projects to pencil financially.

The positive in all of this is that solutions are being debated. For too many years there has not even been a consensus acknowledgement that housing affordability is a widespread problem. We won't ultimately know what strategies will be most effective in addressing the problem until they are implemented and assessed. The crisis has reached a stage where elected leaders are finally willing to propose creative and bold solutions. That is movement in the right direction. If some of these initiatives are implemented, we will know much more about how public policy can improve the housing situation in the coming years.

The National Housing Trust Fund and Latest Federal Housing Policy Trends

I was at the Housing California Conference last month and attended the session titled "Federal Housing Policy in a Presidential Election Year" with panelists Peter Lawrence from Novogradac and Linda Couch from the National Low Income Housing Coalition. Below are some noteworthy trends and developments.

The National Housing Trust Fund

The National Housing Trust Fund (HTF) has released its first allocation of $174 million. Each state will receive $3 million plus an additional amount based on need. Funds will be distributed to states this summer. At least 80% of each grant must be used to produce rental housing affordable to Extremely Low Income and Very Low Income households.

The HTF regulations are largely modeled after the HOME program, but with deeper affordability targets. In fact, all of the HTF allocation must assist Extremely Low Income Households earning less than 30% of Area Median Income until the HTF balance reaches $1 billion. After the HTF balance exceeds $1 billion, 75% of the HTF allocation must assist Extremely Low Income Households. Because projects serving this income level will have limited revenue, the program allows HTF to fund operating reserves when project-based Section 8 subsidy is not available. Initial commitments for reserves will be allowed to subsidize operations for up to five years at a time, although they can be renewed with subsequent grants to each State. It is yet to be determined how compatible this arrangement will be with debt underwriting standards. Hopefully norms and agreements can be established similar to underwriting of Section 8 Project-Based subsidies. The amount of funding for operating reserves allowed will be determined by each State. Providing flexibility for operating reserves will be key to making the program work for Extremely Low Income households.

The National Housing Trust was established under the Housing and Economic Recovery Act of 2008 and is funded by new business value from Fannie Mae and Freddie Mac transactions. Now that those institutions have rebounded from the recession, funds are available for allocation for the first time. More information about the National Housing Trust Fund and the Interim Rule is available on HUD's HTF website. A list of the allocation amounts by state are found here. While $174 million is a drop in the bucket to address the nationwide need, creation of the HTF is an exciting development in that it creates a structure for future investments of a much more significant scale.

Proposed Section 202 Changes

The "PRAC" operating subsidies for Section 202 projects do not currently allow for capitalization with new financing. The President's 2016 budget proposes moving PRACs to a Section 8 structure that can support refinancing of existing 202 projects and take on debt.

HR 3700

Also named the "Housing Opportunities Through Modernization Act (HOTMA)", the House passed this bill unanimously. It would increase flexibility for housing authorities to project base a larger portion of their Section 8 vouchers, and allow more project based vouchers per property, while requiring more project based Section 8 to assist homeless households.

Low Income Housing Tax Credit Expansion

Senator Cantwell supported legislation that successfully set the 9% tax credit factor permanently. She is now co-sponsoring legislation with Senator Schumer that would increase the allocation of 9% tax credits by 50%. The bill would also allow use of income averages to meet affordability targets, set the 4% tax credit factor permanently, and provide a 50% basis boost for Extremely Low Income projects.

An Explanation of HUD's FY2015 Homeless Grant Awards

On March 8th, HUD announced $1.6 billion in homeless grant awards for the FY 2015 Continuum of Care (CoC) NOFA. Those of you tracking this program may have been perplexed about how HUD came to their funding decision. First, not all of your CoC grant requests, including renewals, were funded. Second, awarded funding was increased over the amount requested for many of the grants.

To answer the first question, HUD is not awarding all of its FY 2015 CoC funds at once this year. They announced $1.6 billion in Tier 1 awards on March 8th, and will award another $300 million in Tier 2 awards at an unspecified date later this spring. CoCs were required to rank their grant requests, grouping their highest priority grants that equal 85% of their Annual Renewal Amount in Tier 1, and the remaining 15% of their Annual Renewal Amount, plus the amount of their Permanent Housing Bonus, in Tier 2. Tier 1 grant requests were generally awarded funds on March 8th. Those grant requests that were split between Tier 1 and Tier 2 were not awarded funds at that time.

On the second question, HUD made adjustments to their awards based on the FY 2016 Fair Market Rents in effect at the time of application submission. In addition, adjustments were made to permanent housing project operating and leasing costs based on increases in the Fair Market Rent, weighted for population density.

See HUD's complete explanation and the list of awardees here.

As stated in HUD's news release, the CoC NOFA has become increasingly competitive in recent years. The major scoring criteria is the extent to which grant requests meet the program's principal priorities: serving the Chronically Homeless, lowering barriers to access housing, and implementing rapid re-housing and permanent housing. Many CoCs are moving funds from projects that do not address these priorities to projects that do meet them. In addition, CoCs are required to invest more time and money in developing an infrastructure to coordinate CoC programs, including governance structures, coordinated intake and assessment, program evaluation, and HMIS. These investments require a larger commitment of non-HUD funds to CoCs than have been committed in the past, as HUD does not allocate funds for CoC administration other than small, infrequent planning grants.

I will revisit this emerging trend further in future blogs. Feel free to contact me if you need help with your CoC.

President's Proposed Budget Would Be a Major Step Forward in Addressing Homelessness

The White House released its proposed HUD budget this past week. I recommend you take a look at the National Housing Conference Blog, which does a nice job of summarizing it. This budget is more aggressive in dealing with homelessness than any of this President's previous budgets. I want to highlight a few elements of his proposal that are significant changes in affordable housing policy:

• Allocates almost $11 billion to house homeless families over the next 10 years. In California, if this is combined with a $2 billion multi-year initiative proposed in this year's legislative session, real progress could be achieved in eliminating homelessness.

• 10,000 new housing vouchers for homeless families

• 25,500 new units of permanent supportive housing for chronically homeless individuals

• Statutory changes to the HOME Program that include eliminating the 24-month commitment requirement, and eliminating the required 15% set-aside for Community Housing Development Organizations (CHDOs). In my view, these changes would allow greater flexibility and more effective use of the HOME Program by Participating Jurisdictions. These requirements often force communities to fund projects that are less feasible or not as ready to start construction as others. As a result, expending HOME funds within the mandated deadlines has been a challenge for many communities, especially those with few soft funding options.

Of course, there is the real possibility that this budget proposal is gutted by the time it gets through Congress. However, there is a glimmer of hope that there is enough bipartisan support for addressing homelessness and using HOME funds more efficiently that those portions of the budget could survive intact.

Accessing Cap and Trade Funds for Housing

California was the first state in the nation to establish a cap and trade program in which polluting industries pay into a state-controlled fund in exchange for the right to exceed greenhouse gas emissions standards. A portion of the money generated from payments into this fund has been aside for smart growth transportation and development, including affordable housing. The program incentivizes development that is integrated into transportation infrastructure that shifts transportation trips from cars to public transit, biking and walking, and can demonstrate a reduction in projected greenhouse gas emissions. The program has been generating more revenue than initially forecast, as the funding allocation has grown from $120 million in 2015 to $320 million in 2016. Find more background here.

The Affordable Housing and Sustainable Communities Program (AHSC) is jointly managed by the California Strategic Growth Council (SGC), and Housing and Community Development Department (HCD). Below I highlight some key aspects of this program.

• AHSC encourages joint applications between housing developers and public entities that build transportation infrastructure (transit authorities, counties, cities, etc.). Housing and connections to transit, pedestrian and bike improvements should be planned holistically, with the intent to facilitate use of these alternative forms of transportation by residents.

• Projects to be funded with AHSC must have completed their CEQA and NEPA environmental review processes prior to application submission in order to qualify.

• Match funding is a key scoring criteria.

• Funding committed to housing development is made in the form of a permanent, residual receipts payment loan, with terms and loan limits similar to HCD's Multifamily Housing Program.

• Housing projects can also apply for Housing Supported Infrastructure for off-site improvements. This funding is made in the form of a grant.

• Housing projects must provide at least one secure off-street bike storage space for every two units. 

• In future funding rounds, AHSC will not subsidize off-street parking costs. These costs will need to be funded by other sources.

As you can see,  putting together an application for this funding requires advance planning, even though the formal NOFA and guidelines have been released just a couple months before the application due date each of the last two years. There are two application phases, with the first due in March of each year. Therefore, Applicants should start planning to submit an application in September or earlier of the prior year.

More information about this year's NOFA can be found at the AHSC website. Feel free to contact me if you need assistance with this program.