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Community Development Investments (February 2012)

A Look Inside ...

Barry Wides, Deputy Comptroller, Community Affairs, OCC

A mother and child outside their Asheville, N.C. in December 2010. The family found a home through a program that helps individuals and families experiencing chronic homeless.
A mother and child stand outside their Asheville, N.C., home in December 2010. The family found a home through a program that helps individuals and families experiencing chronic homelessness.

In 2000, the National Alliance to End Homelessness, a federation of public, private, and nonprofit organizations, released a landmark report titled "A Plan, Not a Dream: How to End Homelessness in Ten Years." The report urged communities across the United States to move beyond simply providing people experiencing homelessness with food and temporary shelter. The report challenged communities to support solutions that help achieve the goal of ending homelessness, solutions such as affordable rental housing, job training, and counseling.

A decade later, the nation has made progress toward ending homelessness. Nationwide, the number of long-term individuals experiencing homelessness has declined by more than one-third in the past six years, according to The 2010 Annual Homeless Assessment Report to Congress by the U.S. Department of Housing and Urban Development. The report suggests that the most promising solution helping to reduce homelessness is the development of permanent supportive housing (PSH), which combines affordable rental housing with services to help tenants remain in their homes and avoid becoming homeless again.

Banks are playing a key role in the national effort to reduce homelessness by financing PSH, partnering with local nonprofits, making charitable grants, and providing leadership on local boards, community groups, and community projects.

Yet the goal of ending homelessness remains unfulfilled. On any given night, more than 650,000 individuals in the United States—including families with children—sleep on the streets, on relatives’ sofas, or in shelters, according to the National Alliance to End Homelessness. More than 110,000 individuals are experiencing chronic homelessness, under federal guidelines, on a single night. As many as 67,500 military veterans were homeless in 2011, according to the U.S. Department of Veterans Affairs.

By one federal definition, a homeless individual is someone with a disabling condition who has been continuously homeless for a year, or has been homeless at least four times in the past three years. Many more Americans live one paycheck or medical bill away from homelessness, as the economy struggles to recover from the worst recession since the Great Depression.

This issue of Community Developments Investments looks at the financing mechanisms that banks use to help communities invest in PSH for people experiencing chronic homelessness. Banks across the nation are helping many of the 230 communities that have developed plans and are investing in PSH projects for people experiencing chronic homelessness. More opportunities for banks to help will become available as more communities adopt plans to end homelessness.

Now, the nation’s goal—as articulated in the 2010 federal report by the U.S. Interagency Council on Homelessness, “Opening Doors: Federal Strategic Plan to Prevent and End Homelessness”—is to end chronic homelessness by 2015, particularly among our nation’s veterans. Read about the important role banks play in ensuring the plan’s success in the article about this interagency council, “U.S. Interagency Council on Homelessness: How Banks Are Helping to Build Homes for the Homeless.”

The U.S. Department of Housing and Urban Development defines a chronically homeless individual as having one or more disabling conditions, such as untreated mental illness, drug or alcohol addiction, or long-term health issues. Research and experience by those who help people experiencing homelessness suggest that these individuals with disabling conditions benefit from supportive housing that offers access to health and other social services.

Banks are financing projects with acquisition loans and investments in equity opportunities available through the Low-Income Housing Tax Credit (LIHTC) and New Markets Tax Credit programs. The LIHTC Program, the primary source of funding for PSH, offers banks two ways to finance these projects.

First, banks are investing in state and local LIHTC equity funds, such as the Great Lakes Capital Fund. These funds, managed by experienced professionals, invest in carefully underwritten projects to reduce the risk of default and foreclosure by minimizing debt. Great Lakes has nearly 20 years experience investing in housing, including in recent years investments in supportive housing projects for people who experience homelessness in the Midwest. The experience of Great Lakes is discussed in the article “Great Lakes Capital Fund: Raising Capital for Permanent Supportive Housing.”

Second, banks are using LIHTCs to invest directly in PSH projects, as discussed in the article about Huntington National Bank’s work, “Huntington National Bank Community Development Corporation: Making a Difference, One Bank at a Time.”

Communities are partnering with banks and nonprofit organizations, such as the Corporation for Supportive Housing (CSH), to develop and manage appropriate housing for people experiencing homelessness. In addition, CSH and other groups are working with banks to transfer foreclosed multifamily properties to developers for renovation and use as permanent supportive housing. CSH officials believe these partnerships are a win-win for banks and the communities they serve. CSH officials describe their work on behalf of people experiencing homelessness in “Corporation for Supportive Housing: Helping the Homeless Live With Dignity.”

In addition, banks make charitable grants to nonprofit sponsors that provide and enhance services offered by permanent supportive housing. Across the nation, bank grants support recreational, peer, and community activities, as well as supportive services and job training. Enhancements like these dramatically improve the quality of life for residents in supportive housing units and for their neighbors.

Banks also make nonmonetary contributions that are important to community efforts on behalf of people experiencing chronic homelessness. Bank executives provide support and guidance by serving on boards of nonprofit supportive housing developers; participating on local leadership councils; and encouraging bank employees to volunteer with nonprofit groups that help people experiencing homelessness.

Banks that support community efforts on behalf of the homeless in these ways may receive positive consideration under the Community Reinvestment Act.

This issue of Community Developments Investments is designed to encourage more banks to get involved in the nationwide effort to end chronic homelessness. To that end, a list of resources with links to financing sources and glossaries is provided below.

 Resources for Permanent Supportive Housing for the Homeless

The Corporation for Supportive Housing (CSH) is a national nonprofit organization working to expand permanent supportive housing (PSH) for those experiencing homelessness. CSH’s Web site offers the following information on PSH-related agencies, programs, and terms to help interested developers, service providers, and investors.

Cost Study on PSH

Permanent Supportive Housing: An Operating Cost Analysis (2012).  This CSH and Enterprise Community Partners’ Operating Cost Study contains valuable information that may help developers and investors determine if PSH developments can be financially stable and produce adequate returns.

CSH Fact Sheets

Federal Home Loan Bank’s Affordable Housing Program (Potential Source for Capital Financing). This fact sheet gives an overview of eligible activities, the program’s grant and loan terms, and other resources.

Low-Income Housing Tax Credit Program (LIHTC) (Potential Source for Capital Financing). This fact sheet gives an overview of activities, terms, considerations, and additional resources about the use of LIHTC for supportive housing.

U.S. Department of Veterans Affairs, Veterans Programs (Potential Source for Capital, Operating and Services). This fact sheet gives an overview of requirements for permanent supportive housing development that combines rental assistance vouchers, from the U.S. Department of Housing and Urban Development, with case management and clinical services, from the Veterans Administration Supported Housing Program.

Additional Information

The following information is provided by CSH and federal, state, and city agencies.

Continuum of Care (COC), is made up of three programs that partner with other federal agencies working through competitively awarded grants to solve homelessness. The three programs are: Supportive Housing Program, Shelter Plus Care, and Single Room Occupancy. This Web site has background on each program, grant awardees, and contact information.

Glossary of Supportive Housing Key Terms, provided by CSH.

Glossary of Supportive Services, key terms provided by CSH.

Homelessness-Related Definitions, compiled by the Community Development Commission, Sonoma County, Calif.

Homelessness Resource Exchange, a Web site with information about the homeless assistance grants awarded by the U.S. Department of Housing and Urban Development to organizations working to ameliorate homelessness. The two primary grant types are: Continuum of Care and Emergency Shelter Grants. The Web site offers background on these programs and contact information. The Web site provides information on previous grantees and contact information.

Housing Articles, compiled by the Community Housing Network of Troy, Mich., a 501(c)3 organization.

The U.S. Interagency Council on Homelessness (USICH) publishes an electronic, biweekly newsletter with news, funding updates, and reports on programs helping to end homelessness across the nation.