Skip navigation
Ensuring a Safe and Sound Federal Banking System for All Americans Site Map | Text Size: S M L


Resources for bankers

Get answers to banking questions

Job Seekers

Job Seekers
Join one of the best places to work

Community Development Investments (February 2012)

U.S. Interagency Council on Homelessness: How Banks Are Helping to Build Homes for the Homeless

Barbara Poppe, Executive Director, U.S. Interagency Council on Homelessness (USICH)

Barbara Poppe, Executive Director of the U.S. Interagency Council on Homelessness, talks with Landau Murphy, a resident of The Commons at Buckingham—a permanent supportive housing project in Columbus, Ohio.
Barbara Poppe, Executive Director of the U.S. Interagency Council on Homelessness, talks with Landau Murphy, a resident of The Commons at Buckingham—a permanent supportive housing project in Columbus, Ohio—about his experience with homelessness.

On any single night in our nation, nearly 650,000 individuals are without safe and stable housing. Thirty years ago, homelessness was predominantly experienced by single adults. Homelessness among children did not exist in the same way it does today. In 2010, more than 76,000 of America’s veterans experienced homelessness on a single night. People experience homelessness for a variety of reasons. Their stories are different, but their need for stable homes is the same.

Communities across the nation have made remarkable progress in reducing chronic homelessness by more than one-third in the past six years, partially as a result of the expansion of permanent supportive housing (PSH) programs.  This type of rental housing is designed to be affordable and offers services for the specific needs of an individual or family who has a long-term disability and is experiencing homelessness. Banks and community partners have collaborated and played a pivotal role in developing and financing this type of housing in an effort to end chronic homelessness.

The U.S. Interagency Council on Homelessness (USICH) coordinates the federal response to homelessness through partnerships at every level of government and with the private sector. USICH is an independent agency within the federal executive branch. The agency consists of 19 federal Cabinet secretaries and agency heads. USICH partners with federal agencies, state and local governments, advocates, service providers, and individuals experiencing homelessness to carry out its mission of preventing and ending homelessness in America.

In June 2010, USICH and its member agencies launched their plan in the report "Opening Doors: Federal Strategic Plan to Prevent and End Homelessness."  The plan serves as a road map for joint action by the federal government and its partners at the state and local levels. The plan has four goals:

  • Finish the job of ending chronic homelessness by 2015;
  • Prevent and end homelessness among veterans by 2015;
  • Prevent and end homelessness for families, youth, and children by 2020; and
  • Set a path to ending all types of homelessness.

In the United States, chronic homelessness annually affects nearly 110,000 adults and families. Someone is chronically homeless if he or she is disabled and has no home continuously for a year or more, or has been homeless more than four times in the past three years. Six out of 10 chronically homeless adults live on the streets. Most suffer from acute and debilitating health problems that are exacerbated for those who experience homelessness. One-third of chronically homeless adults are military veterans. These statistics and others are available in the U.S. Department of Housing and Urban Development’s 2010 Annual Homeless Assessment Report to Congress.

Chronic homelessness incurs high costs for communities because individuals experiencing homelessness are frequent users of community services. Consequently, chronic homelessness can be a major strain on local community budgets. The biggest costs to communities are health care expenses, because of frequent and avoidable inpatient hospitalizations, and visits to emergency rooms, detoxification centers, and nursing homes. Other high costs are associated with the criminal justice system.

Rents on PSH units are subsidized to ensure affordability for tenants who typically have incomes ranging from zero to 15 percent of the area median income. Supportive housing is delivered through three primary ways: (1) pairing rental subsidies with dedicated services; (2) building new or rehabilitated units at one site that offers rental subsidies and on-site services; and (3) setting aside units within an affordable housing community that offer rental subsidies and on-site supportive services.

"Opening Doors" cites supportive housing as most cost-effective when targeted for those with the greatest needs, such as mental illness, chemical dependency, or HIV/AIDS, or those with multiple conditions, because these individuals impose high costs on communities and governments.

The most effective type of supportive housing uses the Housing First approach, which seeks to screen in rather than screen out individuals with substance abuse and mental illness. Often, people with these conditions are not eligible to receive housing assistance from other programs, many of which require clients to be free of drugs and alcohol. Housing First seeks to move these hard-to-house individuals into permanent housing quickly and then to provide them with the support services they need to achieve and maintain housing stability. As "Opening Doors" highlights, the research is clear that PSH using a Housing First approach is the best solution for individuals experiencing chronic homelessness—and it is the most cost-effective solution for states and communities. Compared with repeated use of emergency services and jails, there is no question that PSH is the better option.

The literature on the cost of single adult homelessness is extensive and in agreement. Figure 1 compares the average costs for a variety of services derived from cost studies of homelessness and homeless interventions conducted from 2004 to 2009 by leading researchers. The figure shows that the cost per day for a formerly homeless individual living in supportive housing is just $31. That is a fraction of the daily cost for someone in jail ($87), a detoxification center ($256), an emergency room ($905), or an inpatient hospital room ($1,940). The data in figure 1 were compiled in Opening Doors based on research in Atlanta, Ga.; Chicago, Ill.; Columbus, Ohio; Denver, Colo.; Los Angeles, Calif.; Portland, Maine; Massachusetts; New York, N.Y.; Phoenix, Ariz.; Portland, Ore.; Rhode Island; San Francisco, Calif.; and Seattle, Wash.

Figure 1: Public Cost of Services for Homeless Individuals (2004-2009)

Chart illustrating cost per day per person for health care and other services.

As figure 2 shows, after an individual experiencing homelessness moved into a PSH unit, the annual taxpayer-funded services for the individual declined sharply in Oregon, Massachusetts, and Maine. In Oregon, for example, the cost of services for an individual experiencing homelessness fell from $42,000 a year to $17,000 a year after the individual moved into PSH.

Figure 2: Cost of Serving the Homeless Declines in Permanent Supportive Housing (2005-2008)

Chart illustrating costs for supportive housing for five states.

The most common model for developing PSH relies on low-income housing tax credits (LIHTC). The LIHTC program began as part of the Tax Reform Act of 1986 and has become the largest affordable housing program in U.S. history. The program allows nonprofit and for-profit developers to apply to state housing finance agencies for tax credits. The tax credits are available on a competitive basis for use in the development of various types of affordable housing, such as senior housing, family housing, and PSH for individuals and families experiencing homelessness.

Banks and other financial institutions are active investors in the tax credit market, which is critical to the development of PSH projects. They represent about 60 percent of the tax credit investment market and annually invest more than $5 billion nationwide. Banks and insurance companies purchase the tax credits to offset corporate tax liabilities in exchange for equity or cash, which is then used for the construction or rehabilitation of affordable housing and PSH projects.

Typically, LIHTC equity accounts for as much as 65 percent of a project’s cost and the LIHTC equity attracts capital grants from the Federal Home Loan Bank, foundations, and other public and private sources of capital. In many cases, these investments can cover 100 percent of the capital cost of a PSH project, eliminating the need for a first mortgage.

Even when capital costs for a project are covered, a PSH developer needs operating capital. Developers, however, cannot count on rents from individuals experiencing homelessness, who have little or no income. Therefore, PSH projects rely on housing subsidies available through the U.S. Department of Housing and Urban Development (HUD). The HUD housing vouchers, sometimes called Section 8 vouchers, are available through the Housing Choice Voucher Program. Other HUD rent subsidies may come from the Shelter Plus Care, Supportive Housing, and HOME programs. These programs provide the operating subsidies PSH developers need to help sustain these projects.

Additional sources of funding help to cover the cost of the support services the PSH project offers. Banks help cover these costs with charitable gifts to nonprofit sponsors that provide these support services. These gifts have supported recreational, peer, and community activities, and have enhanced the quality of life for supportive housing tenants and their neighbors.

In addition, bankers make nonmonetary contributions to PSH projects. They serve in executive and senior leadership positions and as volunteers on boards of nonprofit supportive housing developers. Bankers also participate on local leadership councils, such as 10-year planning bodies, interagency funding groups, and Continuum of Care coordinating committees. Bankers interested in learning more about or serving on Continuum of Care committees, as well as other efforts underway to help end homelessness, can visit the Homelessness Resource Exchange.

Thanks to support from banks, the national effort to end chronic homelessness has made significant gains with targeted investments in PSH units across the nation. While this is positive news, more PSH units are needed in coming years if the nation is to meet the goals of ending chronic homelessness by 2015 and preventing and ending homelessness for families, youth, and children by 2020.

Clearly, PSH is the right thing to do for those who experience, or are at risk of experiencing, chronic homelessness. PSH also is a smart investment for banks, which benefit from PSH investments in several ways. First, they receive income from tax-advantaged investments. They generate goodwill by helping to create jobs through the construction and maintenance of PSH projects. Finally, banks may receive positive recognition from banking regulators and community members.

Ultimately, the biggest beneficiaries of bank investments in PSH are those who are able to leave our nation’s streets for the comfort of a stable home. Continued collaboration by private and public benefactors is needed in the years ahead to finish the job of housing our nation’s most vulnerable by 2015.

For more information, visit; call Jason Kravitz, USICH’s Director of Communications and Congressional Relations, at (202) 708-4663; or e-mail