Testimony of Joyce Grangent, Corporation for Supportive Housing
	U. S. House Committee on Appropriations, Subcommittee on VA, HUD, and Independent Agencies April 16, 2002

Thank you Mr. Chairman and Members of the Subcommittee. My name is Joyce Grangent and I am here to testify on behalf of the Corporation for Supportive Housing (CSH) regarding the fiscal year 2003 appropriation for the McKinney-Vento Homeless Assistance Grants. CSH is a national non-profit intermediary that helps community-based non-profits and local and state government stakeholders to develop and operate permanent supportive housing – affordable housing linked to flexible accessible supportive services.

Permanent supportive housing provides the combination of housing and supportive services that people need when they are not only too poor to afford housing, but also confront mental illness, drug addiction, HIV/AIDS or other long-term health problems. Without the flexible, accessible supportive services they need to address these conditions, homeless people with special needs cannot escape homelessness even with affordable housing, because their chronic conditions – when untreated – hinder good tenancy. At the same time, while homeless, these vulnerable people cannot access appropriate medical, mental health, and other services. Rather, due to their homelessness, they either receive no help or a costly patchwork of services obtained during a tragic cycle through emergency rooms, psychiatric hospitals and even jails. In a very real sense, these are people who 'but for' supportive services cannot maintain their housing, and 'but for' the stability offered by permanent, affordable housing cannot access the services they need.

I know first-hand about the effectiveness of permanent supportive housing. In the mid-1990's, I experienced a devastating period of homelessness in Chicago. During this time, I struggled with drug and alcohol abuse, and suffered from poorly treated mental illness, including deep depression. Luckily, a social worker referred me to Lakefront SRO Corporation, which offered me a spot in their Delmar Apartments permanent supportive housing project. At the Delmar, I was provided all the support I needed to address my addiction and mental health issues, coupled with all the independence I could handle, both in my tenancy – as a leaseholder – and in my life. This special combination soon provided the base for me to re-enter the labor force. At first I volunteered extensively at the Delmar and in other Lakefront buildings, doing everything from tenant advocacy in the state capital to working on the tenant newspaper. Then I joined the professional staff of Lakefront SRO itself, and was employed for over 4 years in their innovative Employment and Training Program. In time, I not only moved on to my current position as a Program Officer for Employment Initiatives in CSH's Illinois Field Office – helping groups like Lakefront and others establish and expand employment programs – I also got married and now own my own home. I feel strongly that none of this would have been possible without the opportunity, at the most desperate time in my life, to live in permanent supportive housing for as long as I needed to.

I know that this Subcommittee recognizes that supportive housing is both a humane and cost-effective strategy for ending homelessness for the most vulnerable among us. In each of past 4 fiscal years, under the leadership of Chairman Walsh, the Subcommittee has ensured that at least 30% of the annual McKinney-Vento appropriation be targeted to permanent supportive housing for homeless persons with disabilities. For this action, CSH thanks you – this investment in permanent supportive housing is already paying dividends around the country and I know the Subcommittee intends for it to spur substantial progress in ending long-term or chronic homelessness among persons with disabilities over the next decade.

But I feel compelled to appear before this Subcommittee today because a critical appropriations issue threatens this hoped for progress. More precisely, if this Subcommittee fails in fiscal year 2003 to act decisively to resolve for good the ongoing crisis of expiring operating subsidies under the McKinney-Vento Shelter Plus Care (SPC) program and the Supportive Housing Program Permanent Housing Component (SHP-PH), the vulnerable tenants of permanent supportive housing across the country risk the loss of their housing. And dedicated non-profits like Lakefront SRO – along with their local government partners – will be unable to sustain their existing portfolio of permanent supportive housing, much less to develop the additional units this Subcommittee has recognized that the country needs to end long-term homelessness among people with chronic health challenges.

I know this issue of renewal of expiring operating subsidies under the SPC program and SHP-PH is not new to the Subcommittee. Each of the last two HUD appropriations bills reported out of this Subcommittee has addressed it directly in some fashion, as have the final HUD appropriations enacted by the full Congress. Nor is the policy solution that CSH recommends today – renewing expiring operating subsidies to permanent supportive housing under these two McKinney-Vento programs from the Housing Certificate Fund – one that any Member of the Subcommittee is likely not to have heard before. I hope, however, that my testimony might help to clarify why this is the right fiscal year finally to authorize such a measure in the FY 2003 HUD appropriations bill.

Let me first briefly describe the importance that an operating subsidy like those under the SPC and SHP-PH played in my own transition from homelessness to homeownership. Like most formerly homeless tenants of permanent supportive housing, when I first moved into the Delmar Apartments, my income was so low that I could not afford to pay enough rent for Lakefront to cover its costs to operate the unit and the building's common areas. But that was okay. Lakefront was able to rent me my unit for 30% of my income, which I now know to be the federal standard of affordability, because the project received a rent subsidy under the Section 8 program. Lakefront could count on HUD making up the difference between what I could afford to pay and the cost of operating the apartment I lived in. But, for other tenants supported by the SHP-PH operating subsidy, there was no such certainty. For me, this meant that when my income was near zero, as it was when I first entered the Delmar, didn't have to worry about losing my housing due to poverty. At the same time, as my income increased, when I got back on my feet, acquired more job skills, and began earning income – I was responsible for paying progressively higher rents. As I mentioned, eventually my income rose high enough that I could actually afford a mortgage on my own home – truly the American, and my own, dream.

Such financial goals are attainable for many supportive housing tenants, while others may stabilize in housing and lead lives of dignity and participation in the community without ever being able to earn high or even moderate incomes. For example, for those supportive housing tenants whose mental illness or other chronic health condition is deemed too disabling for them to work, the Supplemental Security Income program provides them a quite modest monthly income. Indeed, in Chicago, such benefits are $545 per month, or 13% of the local area median income. Thirty percent of $545 is about $165 per month – not enough to cover the cost of operating housing in the Chicago area. Even a minimum wage job, which at a 40 hour work week yields an annual income of about $10,300 and a monthly income of about $860 – does not provide enough income for an individual to afford the Fair Market Rent for a 1-Bedroom apartment in the Chicago area – over $660 per month. Thus, for supportive housing tenants who remain on SSI or reattach to the labor force only at the minimum wage level, the loss of their housing subsidy is likely soon to mean the loss of their housing.

Now that I work with non-profit supportive housing providers in my capacity as a Program Officer for CSH, I realize that operating subsidies play another crucial role as well; namely, they enable supportive housing providers to leverage investments that meet the capital and supportive services funding needs of permanent supportive housing. For example, when a project sponsor has a reliable operating subsidy to make up the difference between what those tenants can afford to pay in rent and the actual costs of operating the housing, private sector investors in the Low Income Housing Tax Credit are willing to place tax credit equity in the supportive housing project because they know the project will be able to continue serving extremely poor, formerly homeless tenants and remain financially viable. This means developers like Lakefront SRO can purchase property and construct or rehab buildings for their projects.

Conversely, without the guarantee of an ongoing operating subsidy – whether from a mainstream program like Section 8 or McKinney-Vento programs like SPC, the SHP-PH, or the Mod Rehab SRO program – capital sources such as the Low Income Housing Tax Credit will not in the first instance invest in permanent supportive housing that serves extremely poor tenants. Or, at best, they will act rationally to protect their investment by insisting that – in the event of the discontinuation of subsidies – that even mission-driven developers like Lakefront SRO plan for the eviction of such tenants in favor of higher income households who can affords rents that will cover the full operating costs of the building.

A similar dynamic governs the services side of the supportive housing equation. Funders of mental health, substance addiction, employment and other services – mostly state and local governments (often combining their own revenues with federal 'pass through' funds – want to be certain that if they underwrite the services in a permanent supportive housing project, the units in that project continue to serve the population whose needs these agencies are mandated to address, which may be an extremely low income population (e.g., the homeless mentally ill). But the only mechanism that can allow a supportive housing developer to house such a poor tenancy is the presence of an ongoing operating subsidy. Simply put, if the operating subsidy evaporates, so does the supportive housing provider's ability to house the target population of the service funding agency, which rapidly threatens the supportive services overlay of the entire project. A reliable operating subsidy, then, is key not only to leveraging capital investments to cover so-called 'hard-costs' of developing supportive housing, like acquisition and construction, but also to obtaining the funding for needed supportive services.

Loss of an operating subsidy is equally devastating for supportive housing that relies on the private rental market. By no means all supportive housing takes the form of multi-family projects developed and operated by non-profits like Lakefront SRO. Indeed, nearly one-half of the McKinney-Vento SPC program's 27,000 units nationwide consist of units rented in the private market. Tenants of these units receive supportive services delivered by local public and non-profits agencies. Private landlords are willing to rent to this vulnerable population – for example, SPC Program participants must be homeless persons with chronic disabilities – because they know they can rely on the federal government to subsidize the tenants rent and on local service providers to make sure the tenants continue to address their special needs. If these landlords receive any signal, however, that the rent subsidy cannot truly be counted upon – especially in tight rental markets, they will exit the program to avoid the hassle of evicting tenants who can no longer afford the rent.

In sum, a continuing, reliable operating or rent subsidy is essential to permanent supportive housing – without it, the financing structure of the integrated housing and services falls apart. Accordingly, if we as a nation want the supportive housing that has already been developed to remain viable, or to bring into operation high-quality new units of supportive housing, we must both sustain and expand the availability of these subsidies. I have already disclosed that CSH urges the Subcommittee to provide such a guarantee for expiring SPC and Supportive Housing Program operating subsidies by renewing from the Housing Certificate Fund. Why do we think this is superior to alternative approaches?

Transferring responsibility for renewal of these operating subsidies to the Housing Certificate Fund would carry out Congress's intent in enacting the McKinney-Vento Homeless Assistance Act of 1987. From the Act's inception, Congress made clear its expectation that federal agencies would integrate successful McKinney-funded strategies for helping persons experiencing homelessness into their mainstream housing and services programs. Recently, the Administration and others have drawn attention to the need for HHS to take such steps in their mainstream services programs. But what is good for the goose ought to be good for the gander. In other words, HUD has a duty to join other agencies in bringing its mainstream resources to bear on the issue of homelessness in a sound fashion. Shifting the renewal of these expiring subsidies, so that the current year McKinney appropriation can be invested in incremental units of supportive housing and other essential components of local Continuums of Care, furthers this sound strategy. Indeed, given Congress' action several years ago to fund renewals of the McKinney Act's other long-term rent subsidies (the Mod Rehab SRO program) from the Housing Certificate Fund, this measure would simply continue Congressional recognition that our nation's mainstream affordable housing program should be responsible for ensuring the housing stability of formerly homeless tenants who still desperately need a rent subsidy.

Congress cannot justify assuring so many tenants and developers of federally subsidized permanent housing reliable renewal of operating subsidies from the Housing Certificate Fund, while failing to extend this protection to tenants and developers of SPC and SHP-PH housing. In honoring a public commitment that no Section 8 or other subsidy within the Housing Certificate Fund would be defunded so as to displace subsidy-holders from housing, Congress and two successive Administrations have recognized that “permanent housing” should truly mean “permanent” – from the perspective of both the poor tenant who lives in federally subsidized housing and that of the non-profit developer or private landlord who relies on that subsidy. Yet now, while the tenant of any Section 8 housing in Chicago or elsewhere can count on their subsidy being available next year, the tenant of a SPC or SHP-PH project – who is likely to be at least as poor and certain to have a chronic disability – has no such guarantee. Similarly, Lakefront SRO faces the inexplicable dilemma of knowing that its Major Jenkins project is financially viable for the long term, and its tenants secure in their housing for as long as they need it, because – as a building with both project-based Section 8 and McKinney Mod SRO – its subsidies will be automatically renewed from the Housing Certificate Fund, while its planned High Prairie project and its future tenants will in 5 years face constant risk as its SPC subsidies expire.

To require that communities renew operating subsidies to existing and incremental SPC and SHP-PH from the current year McKinney-Vento appropriation would unwisely pit permanent supportive housing against other effective, needed homeless housing and services programs. The Subcommittee could adopt the stance that while indeed 'permanent should mean permanent,' the reliable source of renewal of expiring SPC and Supportive Housing program operating subsidies to permanent housing should be the current year McKinney appropriation. In other words, the Subcommittee could mandate that such expiring subsidies to existing or newly developed permanent supportive housing be taken 'off the top' of each year's McKinney-Vento appropriation. CSH strongly urges that this would be a short-sighted and damaging approach.

Under one scenario – where SPC and SHP-PH renewals counted against the 30% set aside (assuming the set aside were made a permanent feature of the McKinney-Vento programs), within a few years, the entire set aside would be used up simply to sustain existing housing. Under another, where renewals did not count against the set aside, and the recent average annual McKinney-Vento appropriation of about $1 billion were sustained, this would enable the development of nearly 10,000 new units of permanent supportive housing each year (using the average annual cost of a SPC subsidy). But, without more, after a decade of such investment, nearly the entire McKinney-Vento appropriation would again have to be targeted to sustaining the existing and new portfolio of permanent supportive housing. This would be acceptable if truly NO other intervention besides permanent supportive housing – whether it be street outreach, emergency shelter, transitional housing and various supportive services projects in permanent housing and elsewhere – merits funding over the long-term within the McKinney-Vento account. Although CSH is dedicated to expanding the availability of high-quality permanent supportive housing, we cannot subscribe to such a theory. Rather, we urge that 30% of each year's appropriation be targeted to new permanent supportive housing, that other important homeless housing and services interventions maintain access to McKinney-Vento funds, and that HUD's largest housing program begin to assume an appropriate role.

Only renewing these expiring subsidies from the Housing Certificate Fund would truly resolve the 'forward funding' issue that this Subcommittee raised in FY 2002. In fiscal year 2002, this Subcommittee suggested that it would be possible to 'skip' a year of separate appropriations for expiring SPC subsidies given that most if not all of these subsidies would actually expire in fiscal year 2003. Indeed, the Subcommittee argued, to do otherwise would constitute inappropriate 'forward funding' of these renewals. Let me close by saying a few words about this issue. Right now, homeless housing and services providers around Chicago are sitting down with the FY 2002 SuperNOFA. As they decide how to rank projects – which will determine whether they are funded or not – they know that expiring SPC subsidies are taken care of by the fiscal year 2002 appropriation of $100 million. This makes the ranking process workable, though by no means easy – even with the separate funding of SPC renewals, it may require nearly 5/6 of the City's expected homeless assistance appropriation for FY 2002 simply to renew existing homeless housing and services projects.

By contrast, if the FY 2003 HUD appropriations bill does not clearly provide funding for expiring SPC and SHP-PH, when these planners sit down to the FY 2003 NOFA next year, they will have to assume that such funding is not available. Meanwhile, private landlords involved in the SPC program will rapidly exit in the face of such uncertainty. Even if funding for expiring subsidies is ultimately provided in the FY 2004 appropriations legislation, as the Subcommittee suggests, irreparable damage and disruption to local planning will have occurred. But if these subsidies are instead renewed from the Housing Certificate Fund, they can be funded as they actually expire –in the next fiscal year if appropriate – rather than prior to the release of the FY 2003 NOFA.