Model Legislation to Implement Block-Grant Homelessness Funding

The Continuum of Care program is the federal government’s largest single source of homelessness funding. Through it, the U.S. Department of Housing and Urban Development distributes nearly $3.5 billion to communities across the nation.[1] It sits within HUD’s Homelessness Assistance Grants program.

As currently structured, the Continuum of Care has two problems: it bypasses state governments; and it places too many restrictions on the use of its funding. Passing legislation to change the Continuum of Care into a block grant, distributed to the states, would fix both problems.

Funds from the Continuum of Care flow to a network of roughly 400 local community organizations set up to allocate federal homelessness assistance grants. Localism was the original justification when this funding structure was set up about three decades ago. The Continuum of Care would facilitate a “partnership” between the federal government and communities that would allow them to define the substance of homelessness policy as they saw fit.

Over the years, though, HUD planners deprioritized local autonomy in favor of forcing communities to conform to planners’ preferred “Housing First” philosophy.[2] Housing First holds that no-strings-attached permanent housing is the only legitimate solution to homelessness. Homelessness service providers that favored short- and intermediate-term housing solutions and that emphasized wraparound services such as mental health care, addiction treatment, and employment, saw their access to federal funding cut off.

The Continuum of Care program’s central planning document is the “Notice of Funding Opportunity” (NOFO; formerly known as the “Notice of Funding Availability,” NOFA).[3] It contains scoring criteria that determine which homelessness service providers in a given community will qualify for funding from their local Continuum of Care. HUD planners pushed Housing First through NOFO’s scoring criteria. The 2014 NOFA was the last not to make any reference to Housing First. Since then, the number of transitional housing units have been cut in half while the number of permanent supportive housing units have increased by one-third.[4]

During this same shift in funding priorities, homelessness reached a record high,[5] as of HUD’s most recent count, despite proponents’ claims that Housing First would end homelessness.[6]

The Housing First–oriented Continuum of Care program is one of the most straightforward examples of bureaucratic overreach by the D.C.-based deep state. Press reports out of New York City,[7] Indiana,[8] Atlanta,[9] and Hawaii[10] documented how, during the 2010s, HUD restricted funding access to programs that did not conform to Housing First.

Reforming the Continuum of Care fits squarely within the agenda endorsed by the incoming Trump administration and current leadership in Congress. Weakening Housing First requirements would rein in the deep state and respond to the homelessness-related public disorder concerns that drove the electoral and ballot initiative results in California this past November. By restructuring a dysfunctional federal program that does not even reduce homelessness, much less end it, reforming the Continuum of Care should be seen as low-hanging fruit for proponents of a more efficient federal government.

Block-granting is the best way forward for Continuum of Care reform. It would empower state governments and strip out the program’s overly prescriptive Housing First requirements.

Block-granting would work as follows: HUD would distribute the funds to state housing agencies to use for a variety of allowable purposes. State housing agencies would be required only to: (1) continue to compile information on local homelessness totals (“Point in Time” count) and programs (“Housing Inventory Count”); and (2) use the funds on residential programs for homeless Americans. Use of wraparound services (employment, mental health care, and addiction treatment) would be encouraged, provided they were connected to an existing shelter, transitional, or permanent housing program. Funding for permanent housing for the homeless would be limited to those who are expected to be permanently disabled in some way. In general, states would still be allowed to fund Housing First programs with federal homelessness assistance grant allocations, but they would no longer be required to do so.

It makes sense to shift the locus of policymaking from localities to state governments, which has already been happening. Governors in both blue and red states have recently been taking a more active role in homelessness, in response to dissatisfaction with local responses.[11] States, more than localities, have the lead role in health and human services programs, thus making them a more logical recipient of federal homelessness assistance funds. States will be better positioned to coordinate that funding with other housing, social, and behavioral health resources than the current, more locally oriented, system.

Block-granting homelessness assistance is about a better safety net, not a more threadbare one. For too long, we have had a federal homelessness policy that neglects root-cause factors such as mental illness, addiction, and unemployment. The public understands that homelessness is much more than a housing problem. A course correction is in order, and block-granting the Continuum of Care would accomplish just that.

Section 101. The McKinney-Vento Homeless Assistance Act is amended by:

(1) Striking Subtitle C of Title IV (42 S.C. 11381 et. seq.) and inserting the following:

“Subtitle C—Flexible Homeless Funding Block Grant Act”; and

(2) Striking Sections 421 and 422 (42 U.S.C. 11381 and 11382) and inserting the following new sections:

“Section 421. Purposes

(a) To provide states maximum flexibility to address the diverse causes of homelessness

(b) To support diverse programs by state and local governments, nonprofits, and other providers to help the homeless on a path to independence

(c) To optimize self-sufficiency among individuals and families experiencing homelessness”

“Section 422. Flexible Homeless Funding Block Grant

(a) A state shall prepare and submit to the Secretary a description of the uses of its grant, in such manner, and containing such information as the Secretary may Such a description shall include a point-in-time count of the homeless population in the state and an inventory count of housing units available for use by the homeless or formerly homeless.

(b) Grant provision and use

1. Grants shall be provided to states to use directly or to subgrant to local governments, nonprofits, or other eligible entities for the purposes stated in Section 11383.

2. The states shall be awarded grants based on a combination of total state population size, as determined by the last decennial census, and the latest point-in-time count numbers, so that [X]% of funding is divided to states per capita based on population, and [Y]% is divided to states based on the total homeless population.

3. Notification of funding The Secretary shall release a notification of funding availability for grants awarded under this part for a fiscal year not later than three months after the date of the enactment of the appropriate act making appropriations for the Department of Housing and Urban Development for such fiscal year.

4. Not later than nine months after the announcement referred to in Subsection (b)(2) above, each state that has submitted an appropriate grant description shall receive the grant funds.

(c) Matching To be eligible to receive a grant under this section, a state shall provide assurance to the Secretary that, with respect to the costs to be incurred by an eligible entity receiving assistance in carrying out activities under this section, the eligible entity will make available (directly or through donations from public or private entities) nonfederal contributions to such costs in an amount equal to 25% of such costs.

(d) Administration

1. State responsibility. A state shall have responsibility for administering a grant awarded by the state under this section and for monitoring eligible entities that receive assistance under such grant.

2. Audits.  state shall require each eligible entity receiving assistance under a grant awarded under this section to conduct an annual audit with respect to the activities of the entity. Such audits shall be submitted to the state.

3. Misuse of funds

A. Repayment. If the state determines, through an audit or otherwise, that an entity receiving assistance under a grant awarded under this section has misused the assistance, the state shall notify the Secretary of the misuse. The Secretary, upon such a notification, may seek from such an entity the repayment of an amount equal to the amount of any such misused assistance plus interest.

B. Appeals process. The Secretary shall by regulation provide for an appeals process with respect to repayments under this paragraph.

(e) Flexibility to serve persons defined as homeless under other federal laws

1. In general, a state may use not more than 10% of funds awarded under this part (Flexible Homeless Funding Block Grant) for any of the types of eligible activities specified in Paragraphs (1) through (7) of Section 11383(a) of this title to serve families with children and youth defined as homeless under other federal statutes, or homeless families with children and youth defined as homeless under Section 11302(a)(6) of this title.

2. Treatment of certain populations

A. Notwithstanding Section 11302(a) of this title and subject to Subparagraph (B), funds awarded under this part may be used for eligible activities to serve unaccompanied youth and homeless families and children defined as homeless under Section 11302(a)(6) of this title only pursuant to Paragraph (1) of this subsection, and such families and children shall not otherwise be considered as homeless for purposes of this part.

B. At risk of homelessness, Subparagraph (A) may not be construed to prevent any unaccompanied youth and homeless families and children defined as homeless under Section 11302(a)(6) of this title from qualifying for, and being treated for, purposes of this part as at risk of homelessness or from eligibility for any projects, activities, or services carried out using amounts provided under this part for which individuals or families that are at risk of homelessness are eligible.”

Section 102. The McKinney-Vento Homeless Assistance Act is amended by striking Section 423 (42 U.S.C. 11383) and inserting the following new section:

“Section 423 Eligible Activities

(a) In general

Grants awarded by states or projects administered by the state with the use of funds received under Section 11382 of this title shall be used to carry out projects that serve homeless individuals or families that consist of one or more of the following eligible activities:

1. Construction of new housing units to provide transitional or permanent housing

2. Acquisition or rehabilitation of a structure to provide transitional or permanent housing, other than emergency shelter, or to provide supportive services

3. Leasing of property, or portions of property, not owned by the recipient or project sponsor involved, for use in providing transitional or permanent housing or providing supportive services

4. Provision of rental assistance to provide transitional housing to eligible persons. The rental assistance may include tenant-based, project-based, or sponsor-based rental Project-based rental assistance, sponsor-based rental assistance, and operating- cost assistance contracts carried out by project sponsors receiving grants under this section may, at the discretion of the state and the project sponsor, have an initial term of 15 years, with assistance for the first five years paid with funds authorized for appropriation under this chapter, and assistance for the remainder of the term treated as a renewal of an expiring contract as provided in Section 11386(c) of this title. Project-based rental assistance may include rental assistance to preserve existing permanent supportive housing for homeless individuals and families.

5. Payment of operating costs for housing units assisted under this part or for the preservation of housing that will serve homeless individuals and families and for which another form of assistance is expiring or otherwise no longer available

6. Supportive services for individuals and families who are currently homeless, who have been homeless in the prior six months but are currently residing in transitional or permanent housing, or who were previously homeless and are currently residing in transitional or permanent housing

7. Provision of rehousing services, including housing search, mediation or outreach to property owners, credit repair, providing security or utility deposits, rental assistance for a final month at a location, assistance with moving costs, or other activities that:

A. are effective at moving homeless individuals and families immediately into housing; or

B. may benefit individuals and families who in the prior six months have been homeless but are currently residing in permanent housing.

8. Operation of, participation in, and ensuring consistent participation by project sponsors in a community-wide homeless-management information system

9. Payment of administrative costs related to meeting the requirements of that section, for which the state may use not more than 3% of the total funds under this part for such costs, in addition to funds used under Paragraph (10)

10. Payment of administrative costs to project sponsors, for which each project sponsor may use not more than 10% of the total funds made available to that project sponsor through this part for such costs

11. Facilitating and coordinating activities to ensure compliance with Subsection (e) of Section 12491 of Title 34 and monitoring compliance with the confidentiality protections of Subsection (c)(4) of such section

12. Projects in rural areas that consist of one or more of the following activities:

A. Payment of short-term emergency lodging, including in motels or shelters, directly or through vouchers

B. Repairs:

(i) to units in which homeless individuals and families will be housed; or

(ii) to units that are currently not fit for human

C. Staff training, professional development, skills development, and staff-retention activities

(b) Use restrictions

1. Acquisition, rehabilitation, and new construction

A project that consists of activities described in Paragraph (1) or (2) of Subsection (a) shall be operated for the purpose specified in the application submitted for the project under Section 11382 of this title for not less than 15 years. Any new permanent housing projects funded under Paragraphs (1), (2), or (3) of Subsection (a) shall be provided only for those deemed to be permanently disabled and unable to support themselves independently.

2. Other activities

A project that consists of activities described in any of Paragraphs (3) through (11) of Subsection (a) shall be operated for the purpose specified in the application for the project under Section 11382 of this title for the duration of the grant period involved.

3. Conversion

If the recipient or project sponsor carrying out a project that provides transitional or permanent housing submits a request to the Secretary to carry out instead a project for the direct benefit of low-income persons, and the Secretary determines that the initial project is no longer needed to provide transitional or permanent housing, the Secretary may approve the project described in the request and authorize the recipient or project sponsor to carry out that project.

4. Substance use

No funds under this act shall be obligated to temporary or permanent housing provided to individuals solely or partially on the basis of any individual’s substance use or abuse, unless such housing and services are tied to mandatory services designed to ensure sobriety and are tied to mandatory service participation

(c) Potential repayment of assistance for permanent housing and prevention of undue benefits

1. Repayment

If a recipient or project sponsor receives assistance under Section 11382 of this title to carry out a project that consists of activities described in Paragraph (1) or (2) of Subsection (a) and the project ceases to provide transitional or permanent housing

A. earlier than 10 years after operation of the project begins, the Secretary shall require the recipient or project sponsor to repay 100% of the assistance; or

B. not earlier than 10 years, but earlier than 15 years, after operation of the project begins, the Secretary shall require the recipient or project sponsor to repay 20% of the assistance for each of the years in the 15-year period for which the project fails to provide that housing.

2. Prevention of undue benefits

Except as provided in Paragraph (3), if any property is used for a project that receives assistance under Subsection (a) and consists of activities described in Paragraph (1) or (2) of Subsection (a), and the sale or other disposition of the property occurs before the expiration of the 15-year period beginning on the date that operation of the project begins, the recipient or project sponsor that received the assistance shall comply with such terms and conditions as the Secretary may prescribe to prevent the recipient or project sponsor from unduly benefiting from such sale or disposition.

3. Exceptions

A recipient or project sponsor shall not be required to make the repayments, and comply with the terms and conditions required under Paragraph (1) or (2) if:

A. the sale or disposition of the property used for the project results in the use of the property for the direct benefit of very low-income persons;

B. all the proceeds of the sale or disposition are used to provide transitional or permanent housing meeting the requirements of this part;

C. project-based rental assistance or operating-cost assistance from any federal program or an equivalent state or local program is no longer made available and the project is meeting applicable performance standards, provided that the portion of the project that had benefited from such assistance continues to meet the tenant income and rent restrictions for low-income units under Section 42(g) of Title 26; or

4. Administration of rental assistance

Provision of permanent housing rental assistance shall be administered by a state or any agency or entity designated by a state.”

Section 103. The McKinney-Vento Homeless Assistance Act is amended by striking Sections 427, 428, and 430–31 (42 U.S.C. 11386 and 11386(a–b) and (d–f).

Please see Endnotes in PDF

Photo: ftwitty / E+ via Getty Images