Order Code RL33764
The HUD Homeless Assistance Grants:
Distribution of Funds
Updated March 15, 2007
Libby Perl
Analyst in Social Legislation
Domestic Social Policy Division
The HUD Homeless Assistance Grants:
Distribution of Funds
Summary
The U.S. Department of Housing and Urban Development (HUD) distributes
four homeless assistance grants, each of which provides funds to local communities
so that they can finance a range of housing and supportive services options for the
homeless. These four grants — the Emergency Shelter Grants (ESG) program, the
Supportive Housing Program (SHP), the Shelter Plus Care (S+C) program, and the
Section 8 Moderate Rehabilitation for Single Room Occupancy Dwellings (SRO)
program — are authorized in the McKinney-Vento Homeless Assistance Act (P.L.
100-77, as amended). Congress appropriates one lump sum for all four grants, and
HUD then determines how the funds are allocated among the four programs.
HUD distributes the four homeless assistance grants annually to eligible
applicants, which include states, metropolitan areas, counties, nonprofit
organizations, and public housing authorities. Funds for the ESG program are used
primarily for the short-term needs of the homeless, such as emergency shelter, while
the SHP, S+C, and SRO programs address longer-term transitional and permanent
housing needs. HUD uses one method to distribute funds for the ESG program and
another method to distribute funds for the SHP, S+C, and SRO programs.
The ESG program distributes funds to states, counties, and metropolitan areas
using the Community Development Block Grant (CDBG) program formula. States
and communities receive the same proportion of ESG funds that they received in
CDBG funds the previous fiscal year. However, if a community is projected to
receive less than .05% of the total amount of ESG funds, its share goes to the state.
After they receive funds, states and communities then distribute them to homeless
service providers, including nonprofit organizations and local government entities.
The SHP, S+C, and SRO grants are distributed through a competitive process
called the Continuum of Care (CoC) application system (these three grants are
sometimes referred to as the “competitive grants”). Through the CoC process,
representatives from local community organizations work collaboratively to develop
a plan for addressing homelessness in their area. They then determine which
homeless services providers in the community should receive funding from the three
competitive grants and submit a unified application to HUD. HUD then uses a multi-
step process to determine which homeless services providers should receive funding.
This involves both a formula aspect, through which HUD determines community
need using the CDBG formula, and a competitive aspect, through which HUD
assigns points for various elements included in the CoC application. Proposed
projects that receive a certain threshold number of points are funded.
Recently, both Congress and the Administration have discussed policy changes
that could affect how the homeless assistance grants are distributed. These include
a bill in the 110th Congress (H.R. 840) that would consolidate the three competitive
homeless assistance grants and refine the CoC application system, and HUD-
proposed changes to the CDBG formula.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Role of Congress and HUD in the Funding Process . . . . . . . . . . . . . . . . . . . . 2
The Emergency Shelter Grants Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Distribution of ESG Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Three Competitive Homeless Assistance Grants
and the Continuum of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
An Overview of the Three Competitive Grants . . . . . . . . . . . . . . . . . . . . . . . 7
The Supportive Housing Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Shelter Plus Care Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Single Room Occupancy Program . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distribution of the Competitive Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Continuum of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
HUD Determination of CoC Pro Rata Need . . . . . . . . . . . . . . . . . . . . 12
Threshold Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Points for Continuum of Care Factors and Need . . . . . . . . . . . . . . . . . 14
Allocation of the Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Emerging Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Consolidation of the Competitive Homeless Assistance Grants . . . . . . . . . 18
Renewals of the Competitive Homeless Assistance Grants . . . . . . . . . . . . . 19
Emphasis on Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
The Role of the Community Development Block Grant Formula . . . . . . . . 21
The Current CDBG Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Proposed Changes to the CDBG Formula . . . . . . . . . . . . . . . . . . . . . . 22
List of Figures
Figure 1. Distribution of the HUD Homeless Assistance Grants . . . . . . . . . . . . 17
Figure 2. FY2006 Percentage Allocation of Competitive Grants . . . . . . . . . . . . 20
List of Tables
Table 1. Funding for Homeless Assistance Grants, FY1987-FY2006 . . . . . . . . . . 4
Table 2. Characteristics of the SHP, S+C, and SRO Programs . . . . . . . . . . . . . 10
The HUD Homeless Assistance Grants:
Distribution of Funds
Introduction
Homelessness in America has always existed, but it did not come to the public’s
attention as a national issue until the 1970s and 1980s, when the characteristics of the
homeless population and their living arrangements began to change. Throughout the
early and middle part of the 20th century, homelessness was typified by “skid rows”
— areas with hotels and single-room occupancy dwellings where transient single
men lived.1 Skid rows were usually removed from the more populated areas of cities,
and it was uncommon for individuals to actually live on the streets.2 Beginning in
the 1970s, however, the homeless population began to grow and become more visible
to the general public. According to studies from the time, the homeless were no
longer almost exclusively single men, but included women with children; their
median age was younger; they were more racially diverse (in previous decades the
observed homeless population was largely white); they were less likely to be
employed (and therefore had lower incomes); they were mentally ill in higher
proportions than previously; and individuals who were abusing or had abused drugs
began to become more prevalent in the population.3
A number of reasons have been offered for the growth in the number of the
homeless and their increasing visibility. Many cities demolished skid rows to make
way for urban development, leaving some residents without affordable housing
options.4 Other possible factors contributing to homelessness include the decreased
availability of affordable housing generally, the reduced need for seasonal unskilled
labor, the reduced likelihood that relatives will accommodate homeless family
members, the decreased value of public benefits, and changed admissions standards
at mental hospitals.5 The increased visibility of the homeless was due, in part, to the
decriminalization of actions such as public drunkenness, loitering, and vagrancy.6
1 Peter H. Rossi, Down and Out in America: The Origins of Homelessness (Chicago: The
University of Chicago Press, 1989), pp. 20-21, 27-28.
2 Ibid., p. 34.
3 Ibid., pp. 39-44.
4 Ibid., p. 33.
5 Ibid., pp. 181-194, 41. See, also, Martha Burt, Over the Edge: The Growth of
Homelessness in the 1980s (New York: Russell Sage Foundation, 1992), pp. 31-126.
6 Down and Out in America, p. 34; Over the Edge, p. 123.
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In the 1980s, Congress first responded to the growing prevalence of the
homeless with several separate grant programs designed to address the food and
shelter needs of the homeless.7 Then, in 1987, Congress enacted the Stewart B.
McKinney Homeless Assistance Act (McKinney Act), which created a number of
new programs to comprehensively address the needs of the homeless, including food,
shelter, health care, and education (P.L. 100-77). The act was later renamed the
McKinney-Vento Homeless Assistance Act (P.L. 106-400).8 Among the programs
authorized in the McKinney Act were four grants to provide housing and related
assistance to the homeless: the Emergency Shelter Grants (ESG) program, the
Supportive Housing Demonstration program, the Supplemental Assistance for
Facilities to Assist the Homeless (SAFAH) program, and the Section 8 Moderate
Rehabilitation Assistance for Single Room Occupancy Dwellings (SRO) program.
These four programs, administered by the U.S. Department of Housing and Urban
Development (HUD), were created to provide temporary and permanent housing to
the homeless, along with supportive services. Over the years, Congress has changed
the makeup of the homeless assistance grants, but there are still four programs, three
of which were part of the original McKinney Act. The four existing grants are the
ESG program, the Supportive Housing Program (SHP), the Shelter Plus Care (S+C)
program, and the SRO program. This report describes how HUD distributes the four
homeless assistance grants.
The Role of Congress
and HUD in the Funding Process
Since creating the four homeless assistance grants in 1987, Congress has played
a decreasing role in how funds are allocated among them. Initially, from FY1987 to
FY1994, Congress appropriated funds separately for each of the four programs.
However, beginning in FY1995 and continuing to the present, Congress has
appropriated one lump sum for all four programs, and HUD has then determined how
those funds are distributed among the ESG, SHP, S+C, and SRO programs. (For a
distribution of the grants from FY1987 through FY2006, see Table 1.)9
After Congress makes its annual appropriation for the homeless assistance
grants (this amount was approximately $1.44 billion in FY2007 — P.L. 110-5), HUD
7 These programs included the Emergency Food and Shelter Program (P.L. 98-8), the
Emergency Shelter Grants Program (P.L. 99-591), and the Transitional Housing
Demonstration Program (P.L. 99-591). All three were incorporated into the McKinney Act.
(The Transitional Housing Demonstration Program was renamed the Supportive Housing
Demonstration Program.)
8 For information about other programs for the homeless created by the McKinney Act, see
CRS Report RL30442, Homelessness: Targeted Federal Programs and Recent Legislation,
coordinated by Libby Perl.
9 In addition to funds for the four grant programs, the congressional appropriation has also
at times contained funds for items like training and technical assistance, data collection, and
the Interagency Council on Homelessness. These amounts make up a small percentage of
the total appropriation.
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first allocates a portion of the total appropriation to the ESG program. This amount
is generally between 13% and 15% of the total appropriation. HUD bases this range
of funding on the proportion of funds Congress devoted to the program in its FY1994
appropriation. After HUD has set aside the ESG funds from the appropriation, it sets
aside funds to renew S+C permanent housing contracts in a separate account.10 In
every HUD appropriations act since FY2001, Congress has required HUD to provide
funds to renew existing S+C contracts on an annual basis, as long as HUD
determines that the S+C projects are needed and meet program requirements. The
amount remaining after the ESG funds and S+C renewal funds are deducted from the
total appropriation is then available for the SHP and SRO programs, and for new
S+C projects. These remaining funds are not specifically dedicated to any of the
three programs.
After determining which funds are available for the ESG program, S+C
renewals, and the SHP, S+C, and SRO programs, HUD uses two methods to
distribute the funds to grantees — one for the ESG program and another for the three
remaining programs. HUD awards the funds allocated to the ESG program through
a formula allocation, and the SHP, S+C, and SRO program funds through a
competitive application system. For this reason, the SHP, S+C, and SRO programs
are sometimes called the competitive homeless assistance grants.
10 See HUD Homeless Assistance Appropriations and Allocations, available on the HUD
website [http://www.hud.gov/offices/cpd/homeless/budget/index.cfm#approps].
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Table 1. Funding for Homeless Assistance Grants,
FY1987-FY2006
($ in thousands)
Fiscal
Emergency
Single Room
Shelter Plus
Supportive
Total funds for
year
Shelter
Occupancy
Carea
Housing
HUD homeless
Grants
(SRO)
(S+C)
Programb
programs
(ESG)
(SHP)
(see note)
1987
$60,000
$35,000
—
$59,000
$195,000c
1988
8,000
—
—
65,000
72,000
1989
46,500
45,000
—
80,000
171,500
1990
73,164
73,185
—
126,825
284,004d
1991
73,164
104,999
—
149,988
339,414e
1992
73,164
105,000
110,533
150,000
449,960f
1993
49,496
105,000
266,550
150,443
571,489
1994
113,840
150,000
123,747
334,000g
822,747h
1995
155,218
136,000
164,000
630,000
1,120,000i
1996
113,841
48,000
89,000
606,000
823,000
1997
113,727
24,000
61,000
663,000
823,000
1998
164,993
10,000
117,000
596,000
823,000
1999
150,000
17,000
151,000
556,000
975,000
2000
150,000
20,000
95,000
784,000
1,020,000
2001
149,670
14,000
174,000
760,000
1,122,525
2002
150,000
10,400
178,700
788,200
1,122,525
2003
149,025
11,200
237,000
865,400
1,217,037
2004
159,056
12,900
322,800
906,900
1,259,525
2005
158,720
14,000
304,400
860,900
1,229,214
2006
158,400
988
322,900
881,800
1,326,600
Sources: HUD Congressional Budget Justifications FY1988-FY2007 (all grants through FY1994 and
competitive grants from FY2002 to FY2005), HUD Community Planning and Development grantee
list FY1993-FY2006 (ESG from FY1993 through FY2006), HUD’s Office of Special Needs
(competitive grants for FY1987 and from FY1995 through FY2001), and CRS analysis of HUD’s
award announcement for FY2006 competitive grants, available at [http://www.hud.gov/offices/
cpd/homeless/budget/2006/index.cfm].
Note: Until FY1995, Congress separately appropriated funds for each of the four homeless assistance
grants. Since then, however, Congress has appropriated one amount for all four grants and HUD has
divided the funds. Therefore, amounts through FY1994 represent appropriations, and those from
FY1995 forward represent funds distributed to grantees. The amounts for each of the four separate
grant programs may add up to more or less than the amount in the column “Total for HUD Homeless
Programs” in a given fiscal year due to the use of carryover funds. And in some years, the sum of the
four separate grants may add up to less than the total due to allocations to other funds like technical
assistance, data collection, or the Interagency Council on the Homeless.
a. The S+C program was authorized in 1990 by P.L. 101-645 and first received funding in FY1992.
b. From FY1987 to FY1993, SHP was a demonstration program. In FY1987 it was called the
Transitional Housing Demonstration Program (P.L. 99-591). SHP as it currently exists was
authorized in P.L. 102-550.
c. The total includes $15 million for the Supplemental Assistance for Facilities to Assist the Homeless
(SAFAH) program. In 1992, P.L. 102-550 incorporated elements of SAFAH and the Supportive
Housing Demonstration Program into the new Supportive Housing Program.
d. The total includes $10,830,000 for the SAFAH program.
e. The total includes $11,263,000 for the SAFAH program.
f. The total includes $11,263,000 for the SAFAH program.
g. In P.L. 103-124, Congress provided that of the amount appropriated for SHP, an amount not to
exceed $50 million could be used for the Safe Havens Demonstration Initiative and $20 million
for the Rural Housing Demonstration Program.
h. The total includes $100 million for the Innovative Homeless Initiatives Demonstration Program.
i. The total includes $25 million for the Innovative Homeless Initiatives Demonstration Program.
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The Emergency Shelter Grants Program
The ESG program, the oldest of the four existing homeless assistance grants,
was established one year prior to enactment of the McKinney Act as part of the
Continuing Appropriations Act for FY1987 (P.L. 99-591).11 The funds distributed
through the ESG program provide for the emergency shelter and service needs of the
homeless. The program uses the Community Development Block Grant (CDBG)
program dual formula to distribute funds to both local communities (called
“entitlement areas” and defined as metropolitan cities and urban counties12) and states
(called “non-entitlement areas”) for distribution in communities that do not receive
funds directly. The CDBG program formula is meant to distribute funds based on a
community’s need for development; the ESG program has used the CDBG formula
to target funds for homeless assistance since its inception.
After the CDBG formula determines the amount of ESG funds each state and
community receives, they, in turn, allocate the funds to local government entities and
nonprofit organizations that provide services for the homeless. These recipient
organizations may use funds for four main purposes: the renovation, major
rehabilitation or conversion of buildings into emergency shelters; services such as
employment counseling, health care, and education; homeless prevention activities
such as assistance with rent or utility payments; and operational and administrative
expenses.13 States and communities must ensure that not more than 30% of the total
ESG funds they receive is used for services, not more than 30% is used for homeless
prevention activities, not more than 10% is used for staff costs, and not more than 5%
is used for administrative costs.14
Distribution of ESG Funds
As a condition for receiving ESG funds, states and communities must present
HUD with a consolidated plan explaining how they will address community
development needs within their jurisdictions. The consolidated plan is required in
order for communities to participate in four different HUD grant programs, including
ESG.15 The plan is a community’s description of how it hopes to integrate decent
housing, community, and economic needs of low- and moderate-income residents
11 The ESG program was initially part of H.R. 5313, which was incorporated into H.Rept.
99-1005, the Conference Report to accompany H.J.Res. 738, which became P.L. 99-591.
12 See 42 U.S.C. 11373(a), which refers to the statute governing the Community
Development Block Grant at 42 U.S.C. §§5302(a)(4)-(6). A metropolitan city is the central
city within a metropolitan statistical area, or a city of 50,000 or more within a metropolitan
statistical area, and an urban county is a county within a metropolitan area that has a
population of 200,000 or more, or 100,000 or more if the county contains no incorporated
areas.
13 42 U.S.C. §11374(a).
14 Ibid.
15 The other programs are the Community Development Block Grant program, the HOME
program, and the Housing Opportunities for Persons with AIDS (HOPWA) program.
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over a three- to five-year time span.16 Consolidated plans are intended to be
collaborative efforts of local government officials, representatives of for-profit and
non-profit organizations, and community members. HUD may disapprove a
community’s consolidated plan with respect to one or more programs, although
communities have 45 days to change their plans to satisfy HUD’s requirements.17 If
HUD disapproves the ESG portion of the plan, the applicant community will not
receive ESG funds.
If HUD approves a community’s consolidated plan, the community will receive
ESG funds based on its share of CDBG funds from the previous fiscal year.
However, the community must have received at least 0.05% of the total CDBG
allocation to the states in order to qualify to receive ESG funds.18 In cases where a
community would receive less than .05% of the total ESG allocation, its share of
funds goes to the state to be used in areas that do not receive their own ESG funds.19
For example, if a community received 0.08% of the total CDBG allocation to the
states in FY2000, it would receive that same percentage of ESG funds in FY2001.
In FY2006, 364 states, cities, counties, and territories received ESG funds.20 For an
overview of how funds are distributed, see Figure 1.
After the recipient states and entitlement communities receive their ESG funds,
they distribute them to local government entities or nonprofit organizations that
provide services to the homeless. These recipient organizations have been previously
determined by the state or local government through an application process in which
organizations submit proposals — HUD is not involved in this process. Each
recipient organization must match the federal ESG funds dollar for dollar.21 The
match may be met through the value of donated buildings, the lease value of
buildings, salary paid to staff, and volunteer time counted at $5 an hour.22
16 24 C.F.R. §91.1(a).
17 24 C.F.R. §91.500.
18 42 U.S.C. §§11373.
19 42 U.S.C. §11373(b).
20 HUD Office of Community Development, available at [http://www.hud.gov/offices/
cpd/about/budget/budget06/].
21 42 U.S.C. §11375(a).
22 Ibid.
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The Three Competitive Homeless
Assistance Grants and the Continuum of Care
The bulk of the funding for the homeless assistance grants is awarded to the
three competitive grant programs: the SHP, S+C, and SRO programs. In FY2006
(the most recent year in which the grants were distributed), more than 88% of the
total amount of funds distributed to the four grant programs went to the competitive
grants. The composition of the competitive grants has remained relatively stable
since the passage of the McKinney Act in 1987. The three existing programs have
together comprised the competitive grants since FY1992. Both the SHP and the SRO
program were part of the original McKinney Act in 1987, and the S+C program was
added in 1990 (P.L. 101-645). Congress later made two other programs, the Safe
Havens for Homeless Individuals Demonstration Program (P.L. 102-550) and the
Rural Homeless Housing Assistance Program (P.L. 102-55), part of the McKinney
Act, and gave HUD authority to allocate funds to them from the SHP appropriation.
However, HUD never allocated funds.
An Overview of the Three Competitive Grants
The three competitive homeless assistance grants each perform somewhat
different functions, but all three have a unified focus in that they concentrate on the
longer-term needs of the homeless rather than their emergency requirements. These
longer-term needs include transitional housing (up to 24 months), permanent
housing, and supportive services. The supportive services are designed to help
homeless individuals with a variety of issues that might prevent them from being able
to find and maintain permanent housing (for example, employment counseling,
health care, and child care). Differences among the programs occur in the eligible
uses of funds, the way in which housing to the homeless is provided, match
requirements by grant recipients, and the eligible populations served. (For a
breakdown of some of these distinctions, see Table 2.)
The Supportive Housing Program. The SHP provides funds for
transitional housing for homeless individuals and families for up to 24 months,
permanent housing for disabled homeless individuals, and supportive services.23 In
FY2006, just over 73% of total HUD competitive grant funds went to recipients as
SHP grants.24 Eligible applicants for SHP grants include states, local government
entities, public housing authorities (PHAs), private nonprofit organizations, and
community mental health centers.25 Grant recipients can provide housing together
with services, or can choose to provide services only (without a housing program
component). Specifically, funds may be used to acquire and/or rehabilitate buildings
that will be used either to provide supportive housing or buildings that will be used
23 At least 10% of total SHP funds must be used for supportive services, at least 25% must
be used for projects that serve families with children, and at least 25% must be used for
projects that serve homeless persons with disabilities. 42 U.S.C. §11389(b).
24 HUD FY2007 Congressional Budget Justifications, p. D-2, available at [http://www.hud.
gov/offices/cfo/reports/2007/cjs/part2/cpd/hagrants.pdf].
25 42 U.S.C. §11382(1).
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to provide supportive services only. Funds may also be used to construct buildings
that will be used for supportive housing (but not supportive services only).26
In addition to financing physical structures, grantees may use funds to provide
services like case management, health care, child care, housing assistance, nutritional
counseling, and employment assistance. Grant recipients may provide these services
themselves, or through contracts with outside providers. In addition, grant recipients
may use funds to pay for up to 75% of their annual operating expenses and to help
implement a Homeless Management Information System (HMIS)27 to keep track of
the homeless individuals served within their community.
Recipients of SHP grants are required to meet match requirements. All of the
matching funds must be provided by cash sources,28 but the level of non-federal funds
required varies with the type of activity undertaken. Funds that are to be used for
acquisition, rehabilitation, or new construction must be matched with an equal
amount of the grant recipient’s own funds.29 Those SHP grantees that receive funds
for supportive services must provide at least a 20% match with funds from other
sources, while grantees that receive funds for operating expenses must provide at
least a 25% match of these funds on their own.30
The Shelter Plus Care Program. The S+C program provides permanent
supportive housing through rent subsidies for disabled homeless individuals and their
families. In FY2006, approximately 27% of total competitive grant funds went to
S+C grantees.31 The S+C rent subsidies may be tenant-based vouchers, project-based
rental assistance, or sponsor-based rental assistance.32 Eligible applicants for the
S+C grants are states, local government entities, and PHAs.33 The S+C program
requires grant recipients to match the amount of grant funds they receive for rental
assistance with an equal amount of funds that they will use to provide supportive
services.34 The services under S+C are similar to those provided in the SHP, and
include activities like physical and mental health care, substance abuse counseling,
26 42 U.S.C. §11383.
27 HMIS is a data collection, organization, and storage initiative to track and count the
homeless. For more information see CRS Report RS22328, The Homeless Management
Information System, by Libby Perl.
28 24 C.F.R. §583.145.
29 42 U.S.C. §11386(e).
30 Department of Housing and Urban Development, “Notice of Funding Availability,
Continuum of Care Homeless Assistance,” Federal Register, vol. 71, no. 45, March 8, 2006,
p. 12059 [hereinafter FY2006 NOFA].
31 HUD FY2007 Congressional Budget Justifications, p. D-2.
32 42 U.S.C. §11404-11406b. In sponsor-based housing, recipient states, local governments,
or PHAs contract with private nonprofit organizations or community mental health agencies
to operate the housing. 24 C.F.R. §582.100(c).
33 42 U.S.C. §11403g(2).
34 42 U.S.C. § 11403b(a).
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child care services, case management, and educational and job training.35 Grant
recipients can fulfill the match requirement with cash, the value of a lease, salary
expenses for employees, or the time of volunteers.
The Single Room Occupancy Program. The SRO program provides
permanent housing to homeless individuals in efficiency units similar to dormitories,
with single bedrooms, community bathrooms, and kitchen facilities. In FY2006,
.082% of total competitive funds awarded went to SROs. The SRO program does
not require homeless residents to be disabled and does not fund supportive services.
Eligible applicants for SRO grants are PHAs and private nonprofit organizations.36
SRO units are funded as part of HUD’s Section 8 Moderate Rehabilitation program,
which requires grant recipients to spend at least $3,000 per unit to rehabilitate
property to be used for SRO housing in order to bring the property into compliance
with HUD’s housing quality standards.37 Grant recipients are reimbursed for the
costs of rehabilitating SRO units through Section 8 rental assistance payments that
they receive over a ten-year contract period. The costs of rehabilitation are amortized
and added to a base rental amount. The maximum amount that a building owner can
spend per unit and still be reimbursed is $20,500 as of FY2006 (this amount is
updated annually).38 After the ten-year rental contracts expire, they are not renewed
through the homeless assistance grant competition, but through a separate HUD
account on an annual basis.39
Resident Contributions To Housing Costs
In the SHP, S+C, and SRO programs, residents are asked to pay a portion of their
income toward rent, if they are able. In all three programs, rent may not exceed
the greater of 30% of adjusted income, 10% of gross income, or if a family
receives welfare benefits, the portion of the benefit designated for housing costs.
35 24 C.F.R. §582.5.
36 42 U.S.C. §11401(j).
37 24 C.F.R. §882.802.
38 HUD publishes the maximum amount of expenditures annually, taking account of changes
in construction costs. See FY2006 NOFA, p. 12061.
39 FY2006 NOFA, p. 12062.
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Table 2. Characteristics of the SHP, S+C, and SRO Programs
Single Room
Program
Supportive Housing Program
Shelter Plus Care
Occupancy
Characteristics
(SHP)
(S+C)
(SRO)
Eligible Uses of
- Transitional Housing
- Permanent Housing
- Permanent
Funds
Housing
- Permanent Housing
- Supportive Services
- Operating Expenses
Eligible Applicants
- States
- States
- PHAs
- Local Government Entities
- Local Government Entities
- Private
Nonprofits
- PHAs
- PHAs
- Private Nonprofits
- Community Mental Health
Centers
Eligible Populations
- Families and Individuals
- Disabled individuals and
- Individuals
(Transitional Housing and
their families
services only)
- Disabled Individuals
Match Requirements
- Dollar for Dollar (Acquisition,
- Equal amount of funds for
- No match
Rehabilitation, or Construction)
services
requirement
- 20% (Services)
- 25% (Operating Expenses)
FY2006 Percentage
73.14%
26.78%
0.082%
of Competitive Funds
Source: The McKinney-Vento Homeless Assistance Act, Title IV, Subtitles C, E, and F, 42 U.S.C.
§§11381-11389, 11401, and 11403-11407b. CRS analysis of HUD FY2006 competitive grant
announcement, available at [http://www.hud.gov/offices/cpd/homeless/budget/2006/index.cfm].
Distribution of the Competitive Grants
The three competitive grants are distributed to eligible applicant organizations
through a complex, multi-step process that involves both formula and competitive
elements. HUD first uses the CDBG formula to determine the need levels of local
communities (generally, a combination of cities and counties); the need level is
effectively the maximum amount of funding that a given community can receive.
HUD then determines through a competition whether applicant organizations that
provide services to the homeless qualify for funds. In the early years that the
homeless assistance grants existed, individual homeless services providers applied
to HUD directly for funds. However, since FY1996 HUD has required applicants to
participate in a collaborative community process called the Continuum of Care (CoC)
application system if they want to receive SHP, S+C, or SRO funds. For an overview
of how funds are distributed, see Figure 1, at the end of this section.
CRS-11
The Continuum of Care. HUD developed the CoC as both a way for
communities to plan services that will address the needs of the homeless, and the
method through which service providers apply for HUD funds.40 Under the CoC
strategy, local communities establish CoC coordinating boards made up of
representatives from local government agencies and service providers who meet to
establish local priorities and strategies to address homelessness in their communities.
The CoC plan that results from this process is meant to contain elements that address
the continuum of needs of the homeless: prevention of homelessness, emergency
shelter, transitional housing, permanent housing, and supportive services provided
at all stages of housing.41 The CoC system was created in 1993 as the Innovative
Homeless Initiatives Demonstration Program, a grant program that provided funding
to communities so that they could become more cohesive in their approach to serving
the homeless.42 Since then, nearly every community in the country has become part
of a CoC, with approximately 474 CoCs in existence as of 2005, including those in
the Territories.43
Since the FY1996 grant application process for the competitive homeless
assistance grants, the CoC system has also been the vehicle through which local
service providers apply for HUD competitive grants.44 The process of applying for
the competitive homeless assistance grants begins at the local level when individual
applicant organizations apply to their CoC advisory boards to be included in a unified
CoC application to HUD for funding. Continuums have flexibility in how they set
up their application processes, called the “review and ranking” process, and may have
written guidelines available for applicants. HUD requires that the process be fair,
and CoCs must explain in their grant applications to HUD the methods they use to
ensure fairness, together with a list of any complaints they received from applicant
organizations.45 Applicant organizations may also address fairness and other
concerns directly to HUD.
40 The development of the Continuum of Care system is described in Priority: Home! The
Federal Plan to Break the Cycle of Homelessness, The U.S. Department of Housing and
Urban Development, 1994, pp. 73-75.
41 Barnard-Columbia Center for Urban Policy, The Continuum of Care: A Report on the New
Federal Policy to Address Homelessness, U.S. Department of Housing and Urban
Development, December 1996, p. 9.
42 See U.S. Department of Housing and Urban Development, “Funding Availability for
Fiscal Year 1994 for Innovative Project Funding Under the Innovative Homeless Initiatives
Demonstration Program,” Federal Register vol. 58, no. 243, December 21, 1993, pp. 67616-
67618.
43 “HUD-Defined CoC Names and Numbers Listed by State,” Revised March 10, 2006,
available at [http://www.hud.gov/library/bookshelf12/supernofa/nofa06/cocnames.pdf].
44 U.S. Department of Housing and Urban Development, “Continuum of Care Homeless
Assistance; Funding Availability,” Federal Register vol. 61, no. 52, March 15, 1996, pp.
10865-10877.
45 Exhibit I of Continuum of Care application, available at [http://www.hudclips.org/
sub_nonhud/html/pdfforms/40090-1.doc].
CRS-12
Each CoC selects the homeless assistance projects that it thinks should be
funded and prioritizes them in a list that is included in an overall CoC application to
HUD. The CoC application packet accompanying the list has multiple parts. It
includes an overall CoC application with information about the CoC structure and
assessment of community needs, and individual applications for each listed project
that the CoC recommends for funding. Continuums send the entire application
packet to HUD, which in turn determines the projects that will be funded, and how
much funding each will receive. Note that HUD determines funding at the individual
project level, not the CoC level, although HUD considers factors involving the CoC
in making its decisions.
HUD Determination of CoC Pro Rata Need. Before the CoC applications
even arrive at HUD, the agency goes through a process where it calculates each
community’s “pro rata need.” Pro rata need is meant to represent the dollar amount
that each community (cities and counties) needs in order to address homelessness.
HUD determines a pro rata need amount for each community and then adds together
the individual need amounts of the communities within a CoC to arrive at a pro rata
need amount for the entire Continuum. This CoC pro rata need amount is essentially
the maximum amount of HUD homeless assistance grant funds (not including S+C
renewals) for which a CoC can qualify. HUD calculates pro rata need through a
three-step process.
Step One. In the first step, HUD calculates preliminary pro rata need. HUD
takes the proportion of funds each community is entitled to under the ESG program
(which uses the CDBG formula), and multiplies this proportion by the total amount
of competitive funds available to grantees (after subtracting the amount needed for
S+C renewals) to arrive at a dollar amount of preliminary pro rata need. For
example, if a city is eligible for 0.08% of total ESG funds, and $1.1 billion is
available for the competitive homeless assistance grants in a given year, the dollar
amount of preliminary pro rata need assigned to that community is $960,000. The
preliminary pro rata need amount for each city and county within a CoC is then added
together to arrive at a total preliminary pro rata need amount for the CoC.
Step Two. In the second step, HUD applies a hold harmless level of need in
cases where the total cost of a CoC’s one-year renewal of SHP contracts exceeds the
preliminary pro rata need amount. In these cases, an amount equal to the difference
between initial pro rata need and the cost of SHP renewals is added to initial pro rata
need to bring the CoC up to a hold harmless level (effectively this means that the cost
of SHP one-year renewals is the hold harmless level). For example, a Continuum’s
total cost of renewing SHP contracts is $4 million, but the preliminary pro rata need
is only calculated to be $2.3 million. The difference between these two amounts
($1.7 million) is added to preliminary pro rata need ($2.3 million) to arrive at the
hold harmless need level of $4 million.
CRS-13
Step Three. In the third step, a Continuum may qualify for additional pro rata
need funds through HUD’s Samaritan Housing Initiative, an incentive to encourage
the creation of permanent supportive housing for chronically homeless individuals.46
If, in its grant application, a CoC ranks as its number one priority project a new
(versus renewal) project that will provide permanent housing for the chronically
homeless, it may receive additional pro rata need dollars up to a maximum of 15%
of its preliminary pro rata need. For example, if a Continuum has a preliminary pro
rata need of $2 million with a hold-harmless level that brings its need level up to $3
million, it may receive a Samaritan Housing bonus of $300,000 (15% of $2 million)
added to its pro rata need of $3 million, for a final pro rata need amount of $3.3
million.
Threshold Review. When CoC applications arrive at HUD, the agency first
goes through a threshold review of the individual project applications within each
CoC application. In this process, HUD looks at various eligibility factors to ensure
that every participant in the proposed projects (from applicant organizations to clients
who will be served) are eligible for the homeless assistance grants for which they are
applying. The following list is illustrative of the factors that HUD considers, and
does not include every element that HUD reviews.47
! HUD confirms that applicants are eligible by law to operate the
program for which they are seeking funds. For example, only PHAs
and private nonprofit organizations may operate an SRO project.
! Individual applicants must show an ability to provide matching
funds for their projects.
! The applications must demonstrate that the proposed projects are
eligible for funding, for example that the population to be served is
eligible for assistance, that the projects will be accessible to the
disabled, that they are cost effective, and that the applicant
organizations are participating (or will participate) in any local
Homeless Management Information System.
! HUD assesses the potential quality of proposed projects by ensuring
that the type of housing and its location fit the needs of participants,
and that participants will be assisted with a variety of services.
! In order to receive funding, projects must comply with civil rights
and fair housing requirements, employ, to the extent feasible, low-
and very low-income persons, meet environmental requirements, and
request funding in accordance with each grant’s guidelines.
46 A chronically homeless person is defined as an individual with a disabling condition who
has been continuously homeless for one year, or has had four episodes of homelessness in
the last three years. See Department of Housing and Urban Development, “Consolidated
Plan Revision and Updates,” Federal Register vol. 71, no. 27, February 9, 2006, p. 6961.
This definition will be published in 24 C.F.R. §91.5.
47 For all of the eligibility factors, see FY2006 NOFA, pp. 12058-12062.
CRS-14
Points for Continuum of Care Factors and Need. In the final step,
HUD reviews each individual project application and assigns points to each project
that the Continuums have recommended for funding. Points are assigned in two
categories: need, as determined through the pro rata need process, and Continuum
of Care factors. The applicants may receive up to 40 points for need and up to 60
points for CoC factors, for a total score of 100 points. The point total is used to rank
each project to determine which will be funded. Projects that score above a certain
point threshold will receive full funding; this threshold number of points varies from
year-to-year. Generally 80-85 points are required for a project to receive full funding.
SHP projects that CoCs propose for renewal, but do not receive sufficient points to
be renewed, may still receive funding through contract extensions. These extensions
may be made for up to one year.48
Points for Need. HUD assigns need points to each individual project listed
within a CoC application based on how highly the project is ranked in the
application, but limited by the CoC’s pro rata need. Projects will receive the
maximum need score of 40 points if they are ranked highly enough within a CoC
application. HUD goes through a CoC’s priority list, adding together the requested
funding for each project in the order they are ranked. As long as the addition of a
project’s requested funding amount does not bring the total amount of funds needed
for the CoC above its total pro rata need, that project will receive 40 points. Those
projects that bring the total amount of funds needed for the CoC above its pro rata
need will receive 10 or 5 points.
For example, assume a CoC has proposed in its application to HUD that 10
projects receive funding, and HUD has assigned that CoC $3.3 million in pro rata
need. HUD will proceed through the list of ten projects and assign 40 need points
to each project in the list, as long as the amount of additional funding required for
each project does not bring the total dollars needed for the CoC above the $3.3
million cap. If the Continuum requests the following dollar amounts for projects one
through seven on its list — $1.3 million, $300,000, $500,000, $800,000, $200,000,
$100,000, and $100,000 (for a total of $3.3 million) — then each of the seven
projects will receive 40 points for need because the addition of the dollars needed for
each project does not bring the total amount of funding required above $3.3 million.
However, projects eight through 10 will not receive 40 need points because the
addition of their needed funds exceeds the pro rata need threshold. Instead, they will
receive either 10 or five points. Those projects that bring the total funding needed
for the CoC to an amount between the pro rata need dollar amount ($3.3 million in
this example) and twice the pro rata need ($6.6 million) receive 10 points, and those
that bring the total funding needed to an amount above twice the pro rata need
receive five need points.
Points for Continuum of Care Factors. HUD also assigns each project
points for Continuum of Care factors; the maximum number of points a project can
score is 60. CoC points are based on the Continuum’s application, not the individual
project applications. Because of this, each project within a CoC application will
48 See HUD Questions and Answers for FY2006 NOFA, p. 19, available at [http://www.hud.
gov/library/bookshelf12/supernofa/nofa06/cocqa.doc].
CRS-15
receive the same score on CoC factors. As a result, unless need points differ among
projects in a CoC’s application, each project in a CoC will receive the same number
of points.
The CoC factors that HUD scores may vary from year to year. In the most
recent Notice of Funding Availability for FY2006, there were five categories in
which projects were scored.49
! Organizational Structure: HUD awards points for the existence of
an inclusive community process to develop a CoC strategy, and a
fair and impartial project review and selection process. A total of 8
points may be awarded in this category.
! CoC Housing and Service Needs: Continuums receive points for the
existence of a strategy to address all aspects of homelessness and all
populations in need of services. The category also includes points
for a CoC’s implementation of an HMIS to track and provide an
unduplicated count of the homeless. A total of 12 points may be
awarded in this category.
! CoC Strategic Planning: HUD awards points in this category to
Continuums with 10-year plans to end chronic homelessness, and
those with discharge policies for persons leaving institutional care
(for example, correctional facilities, hospitals, or foster care). The
category also considers whether CoCs propose projects that address
unmet needs in the community, are able to estimate the cost to renew
SHP and S+C projects for five years, and are able to leverage funds
from other sources. A total of 10 points may be awarded in this
category.
! CoC Performance: The factors considered in this category include
steps that CoCs have taken to meet their goals, whether CoCs have
increased the number of permanent housing beds for the chronically
homeless, whether there has been a decrease in chronic
homelessness, the success that homeless individuals have in
remaining in permanent housing, the success of homeless
individuals in gaining employment and access to available
government programs and funds, the record of CoC projects in
hiring low- and very low-income employees, and the existence of a
local plan to remove regulatory barriers to affordable housing. A
total of 18 points may be awarded in this category.
! Emphasis on Housing Activities: Within this category, HUD awards
points to Continuums based on the percentage of funds to be used to
provide housing (versus services). A total of 12 points may be
awarded in this category.
49 FY2006 NOFA pp. 12064-12065.
CRS-16
Allocation of the Grants. Despite the fact that Continuums of Care serve
as intermediaries between HUD and individual homeless service providers during the
application process, funds go directly to service providers, not to the CoC. Projects
receive funding for between one and ten years depending on the type of project and
whether it is a new contract or a renewal. New SHP projects are funded for two or
three years, while renewals are funded for one to three years.50 Initial S+C contracts
run for five years, renewals are made for one year at a time, and SRO projects are
funded for ten years (renewals take place outside the homeless assistance grant
application process).51 Grant recipients enter into a grant agreement with HUD, and,
if the grant involves construction, work must begin within 18 months of HUD’s grant
award letter and be completed within 36 months.52 Activities that are not contingent
on construction must begin within 12 months of receipt of the grant award letter.
50 HUD FY2006 Application, Exhibit 2, p. 2, available at [http://www.hudclips.org/
sub_nonhud/html/pdfforms/40090-2.doc].
51 Ibid.
52 FY2006 NOFA, p. 12062.
CRS-17
Figure 1. Distribution of the HUD Homeless Assistance Grants
Source: Chart prepared by CRS based on 42 U.S.C. §11373, “HUD FY2006 Notice of Funding Availability,” Federal Register, vol. 71, no. 45, March 8, 2006. Percentages are based
on the FY2006 distribution of the Homeless Assistance Grants.
CRS-18
Emerging Issues
Funding for the four homeless assistance grants was last authorized in FY1994
(P.L. 102-550). Since then no significant legislative changes have been made to any
of the programs. In the ensuing years, however, there have been policy discussions
in both Congress and the Administration about changing policies that would affect
how the grants are distributed. These include consolidating the three competitive
homeless assistance grants, changing the way that renewals of the competitive SHP
and S+C contracts are treated, and making changes to the factors in the CDBG
formula.
Consolidation of the Competitive
Homeless Assistance Grants
In every year since FY2003, the President’s budget has proposed to consolidate
the three competitive homeless assistance grants (SHP, S+C, and SRO).
Consolidation would eliminate the distinctions among the three grant programs,
distribute the funds as one grant, and allow communities greater flexibility in
determining funding priorities. One bill that has been introduced in the 110th
Congress — H.R. 840 — also proposes to consolidate the three programs. The idea
of consolidation is not new. As early as the 104th Congress, legislation was
introduced to consolidate all of the homeless assistance grants in Title IV of
McKinney-Vento.53 Over the years, HUD has also supported consolidation through
proposed legislation.54
The proposal to consolidate the competitive grants in H.R. 840 would also
codify the Continuum of Care application system with some changes from the current
system. These changes would streamline the grant application process so that HUD
could distribute funds more quickly. Under the proposal in H.R. 840, HUD would
review only the applications from Collaborative Applicants — local boards that
would determine funding priorities and jointly submit a single application to HUD
on behalf of all local applicant organizations. Currently, although CoCs submit one
application, HUD must still review the individual applications from organizations
seeking funding. This change would mean the difference between HUD reviewing
hundreds rather than thousands of applications. However, the bill provides an
exception that would allow individual organizations to apply directly to HUD in
cases where HUD determines that the organizations attempted to participate in the
CoC process and were “not permitted to participate in a reasonable manner.” After
reviewing the applications, HUD would then award funds directly to Collaborative
Applicants to be distributed to individual organizations.
53 See H.R. 30, 104th Congress, the Housing and Community Development Act of 1995.
54 U.S. General Accounting Office. Consolidating HUD’s McKinney Programs: Statement
of Stanley J. Czerwinski, Associate Director, Housing and Community Development Issues,
Resources, Community, and Economic Development Division. GAO/T-RCED-00-187. May
23, 2000, p. 9; available at [http://www.gao.gov/archive/2000/rc00187t.pdf].
CRS-19
Other changes in H.R. 840 include making homelessness prevention an eligible
activity for recipients of competitive grants, and creating a single match requirement
of 25%, simplifying the current differing requirements for each of the three programs.
The bill would also add to the definition of homeless individual two categories. The
first would be those persons who are sharing housing because they have lost their
own housing or for other economic hardship. The second would be individuals who
have been released from prison on probation or parole. H.R. 840 would authorize the
Homeless Assistance Grants at $2.5 billion for FY2008.
Renewals of the Competitive Homeless Assistance Grants
In recent years Congress has shown some concern about the cost of renewing
existing permanent supportive housing contracts through the S+C and SHP programs,
while also funding new permanent housing units.55 Currently a large percentage of
competitive homeless assistance grant funds are used to renew existing SHP and S+C
contracts. For example, in FY2006 over 91% of competitive grant funds were used
to renew existing contracts. (For the percentage allocation of the FY2006
competitive grants see Figure 2.) Since FY2001, Congress has set aside funds for
S+C renewals in order to protect the existing permanent housing contracts, but SHP
renewals are not similarly protected. They are simply part of the competition for all
remaining funds.
Congress has also shown concern over sufficient funds for both new and
renewal projects due to the need for additional housing facilities to meet the needs
of the chronically homeless.56 The chronically homeless are defined as disabled
individuals who have been homeless continuously for a year or more, or have had at
least four episodes of homelessness in three years.57 In 2002, President Bush
established an initiative to end chronic homelessness within ten years, and as a result,
many states and communities are making efforts to provide housing for chronically
homeless individuals. It is estimated that 150,000 to 200,000 new housing units are
needed in this effort.
HUD has changed the way it calculates pro rata need in order to help CoCs to
free up funds for new permanent housing projects. With the FY2005 competition for
available funds, HUD enabled CoCs to eliminate funding for existing SHP projects
from their priority lists while still qualifying for the hold harmless level of pro rata
need funds that would have been required to renew those SHP projects. This enables
55 In order to better anticipate the need for renewal funds, beginning in FY2002, Congress
asked HUD to estimate five-year projections for renewing SHP and S+C contracts.
Conference Report to accompany H.R. 2620, Department of Veterans’ Affairs, Housing and
Urban Development, and Independent Agencies Appropriation Act, 107th Cong., 1st sess.,
November 6, 2001, H.Rept. 107-272. HUD has provided these estimates in its FY2003,
FY2006, and FY2007 Congressional Budget Justifications.
56 See, for example, Senate Committee on Banking, Housing and Urban Affairs,
Subcommittee on Housing and Urban Development, HUD’s Fiscal Year 2003 Budget and
Legislative Proposals, 107th Cong., 2nd sess., February 13, 2002, S. Hrg. 107-839, pp. 14-16,
available at [http://banking.senate.gov/_files/107839.pdf].
57 Federal Register vol. 71, p. 6961.
CRS-20
the funds that otherwise would have been directed toward renewals to be used to
create new permanent housing projects.58 While this allows CoCs to defund projects
that they do not think should receive grants, it does not address what CoCs can do
about renewing projects they think are worth funding while also funding projects that
would create new housing.
Figure 2. FY2006 Percentage Allocation of Competitive Grants
New SRO
New S+C
New SHP
.08%
3.8%
4.8%
Renewal S+C
22.9%
Renewal SHP
68.4%
Source: CRS analysis of HUD FY2006 competitive grant announcement, available at [http://www.
hud.gov/offices/cpd/homeless/budget/2006/index.cfm].
Emphasis on Housing
The Continuum of Care system was designed to give communities freedom to
determine the needs of their homeless individuals and to support programs that meet
those needs. However, both HUD and the Administration, through its initiative to
end chronic homelessness, have come to favor, to some degree, the use of HUD
funds for the provision of housing, and specifically housing for the chronically
homeless.59 In FY2005, 55% of competitive grant funds went to housing projects and
40% went to fund services.60 Of the funds dedicated to housing activities, 30%
58 U.S. Department of Housing and Urban Development, “Notice of Funding Availability,
Continuum of Care Homeless Assistance,” Federal Register, vol. 70, no. 53, March 21,
2005, pp. 14283-14284.
59 A chronically homeless person is defined as an individual with a disabling condition who
has been continuously homeless for one year, or has had four episodes of homelessness in
the last three years.
60 Statement of Mark Johnston, Deputy Assistant Secretary for Special Needs, HUD Office
of Community Planning and Development, FY2006 Continuum of Care NOFA Webcast,
March 28, 2006, available at [http://www.hud.gov/offices/cpd/homeless/index.cfm].
CRS-21
funded projects for the chronically homeless.61 According to HUD, the emphasis on
housing activities is due to the fact that it is the only agency that provides funds for
housing, while other agencies provide funds for supportive services.62
The CoC application process awards additional CoC points to project applicants
in Continuums that emphasize housing needs over supportive services. The number
of points in the “emphasis on housing” category has increased over the years.
Beginning with the FY2002 competition, applicants could qualify for up to five
points in this “emphasis on housing” category, in FY2003 and FY2004, they could
qualify for up to 10 points, and in the last two competitions (for FY2005 and
FY2006), applicants could qualify for up to 12 points in this category. Applicants
receive more points the higher the percentage of funds their CoC proposes to devote
to housing activities. In FY2005, the 12 points awarded for an “emphasis on housing
activities” in many cases made the difference between projects that reached the point
threshold to receive funding, and those that did not.63
The President’s initiative to end chronic homelessness has brought focus upon
the need for housing due, in part, to research showing that providing permanent
supportive housing for the severely mentally ill who are chronically homeless is less
expensive than allowing them to remain on the street.64 HUD has incorporated the
needs of the chronically homeless in the Continuum of Care application system for
the competitive homeless assistance grants. HUD awards CoC points to applicants
if their CoCs have developed 10-year plans to end chronic homelessness.65 CoCs can
also receive additional funds if they propose in their application to fund a permanent
supportive housing project for the chronically homeless.
The Role of the Community
Development Block Grant Formula
Recently, both HUD and Congress have considered the possibility of changing
factors in the CDBG formula. The CDBG formula has determined how ESG funds
are distributed since the inception of the program in 1986, and has been used in the
distribution of the competitive grants since at least FY1995. Over the years, the
effectiveness of using the CDBG formula to target funds to the homeless has been
questioned. Two General Accounting Office (now Government Accountability
Office) reports from the late 1980s noted that the CDBG formula might not be the
61 Ibid.
62 Ibid.
63 Ibid.
64 See Dennis P. Culhane, Stephen Metraux, and Trevor Hadley, “Public Service Reductions
Associated with Placement of Homeless Persons with Severe Mental Illnesses in Supportive
Housing,” Housing Policy Debate, vol. 13, no. 1 (2002), p. 107, available at [http://www.
fanniemaefoundation.org/programs/hpd/pdf/hpd_1301_culhane.pdf].
65 FY2006 NOFA, p. 12064.
CRS-22
best way to target funds to areas that most need homeless assistance funds.66
Congress, too, has questioned the relationship between the formula and
homelessness. In FY2001, the Senate Appropriations Committee noted that “the
CDBG formula has no real nexus to homeless needs,” and urged HUD to hasten its
development of a method for counting the homeless.67 HUD responded with a report
that proposed alternative methods for determining community need for homeless
assistance.68 Nonetheless, HUD continues to use the CDBG formula, and changes
to it would result in a different funding distribution for homeless assistance funds.
The Current CDBG Formula. The CDBG program was enacted to target
funds to communities that are in need of community development. It awards funds
to metropolitan cities and urban counties (70% of funds) and to the states for use in
areas that do not receive funds directly (30% of funds).69 The CDBG formula uses
a combination of five factors to award funds to recipient communities. (The CDBG
formula uses four separate methods to award funds; this paper does not discuss the
details of these methods.) The five factors are population, the number of persons in
poverty, housing overcrowding (homes in which there is more than 1.01 persons per
room), the age of housing (the number of housing structures built prior to 1940), and
the extent of growth lag in a given community (the lack of population growth in a
community compared to the growth rate it would have had if it had grown at the rate
of other communities).70 The factors are measured as ratios between the recipient
community and all grant recipients. The CDBG formula was last changed in 1977
(P.L. 95-128).
Proposed Changes to the CDBG Formula. In 2005, HUD issued a report
that both analyzed the effectiveness of the CDBG formula in targeting communities
that are in need of development and proposed alternative factors for the formula.71
The HUD report reviewed several shortcomings of the formula. Among its criticisms
was that the use of the population variable means that some fast-growing
communities with low development needs may still receive increasing CDBG
66 U.S. General Accounting Office, Homelessness: Implementation of Food and Shelter
Programs Under the McKinney Act. GAO/RCED-88-63. December 1987, p. 33, available
at [http://archive.gao.gov/d29t5/134578.pdf], and Homelessness: HUD’s and FEMA’s
Progress in Implementing the McKinney Act. GAO/RCED-89-50. May 1989, pp. 46-48,
available at [http://archive.gao.gov/d25t7/138597.pdf].
67 S.Rept. 106-410. The statement was made regarding the competitive homeless assistance
grants.
68 U.S. Department of Housing and Urban Development. Office of Community Planning
and Development. Report to Congress: Measuring “Need” for HUD’s McKinney-Vento
Homeless Competitive Grants, 2001.
69 42 U.S.C. §§5306(a) - (d).
70 42 U.S.C. § 5306.
71 Todd Richardson, CDBG Formula Targeting to Community Development Need, U.S.
Department of Housing and Urban Development, February 2005, available at
[http://www.huduser.org/Publications/pdf/CDBGAssess.pdf].
CRS-23
grants.72 Another criticism was that the poverty variable may provide college towns
with a disproportionate share of funds by counting college students as living in
poverty.73 A third potential problem with the formula the report noted was that the
age of housing and growth lag factors do not necessarily reflect communities’ needs
for development. In some communities, housing built prior to 1940 has been
rehabilitated and gentrified, while in others it has been torn down or subject to
neglect.74 As a result, some communities with refurbished pre-1940s housing may
qualify for more CDBG funds than deteriorating communities that have demolished
their older housing.
Shortly after the release of HUD’s report, Congress held a series of hearings
about the CDBG program and discussed the formula, among other issues.75 A House
of Representatives’ report issued in January 2006 made a number of
recommendations, including that there be periodic review of the CDBG formula, and
that HUD and GAO together should discuss methods for determining need and
alternative formula criteria.76 In May 2006, HUD released proposed legislation that
would change factors in the CDBG formula and the way funds are distributed.77 The
proposed legislation would add three new factors: the number of female-headed
households, the number of housing units over fifty years old and occupied by
households in poverty, and per capita income. It would also exclude college students
from the number of households living in poverty, and the population and growth lag
factors would no longer be used. Congress did not consider legislation in the 109th
Congress that would have made these changes to the formula, and as of the date of
this report, no legislation has been introduced in the 110th Congress.
crsphpgw
72 Ibid., p. 46.
73 Ibid., p. 47.
74 Ibid., pp. 48-50.
75 House Committee on Government Reform, Subcommittee on Federalism and the Census,
A Top to Bottom Review of the Three-Decades-Old Community Development Block Grant
Program: Is the CDBG Program Still Targeting the Needs of Our Communities, 109th Cong.,
1st sess., March 1, April 26, and May 24, 2005 (Washington: GPO, 2005).
76 House Committee on Government Reform, Subcommittee on Federalism and the Census,
Bringing Communities Into the 21st Century: A Report on Improving the Community
Development Block Grant Program, 109th Cong., 2nd sess., H.Rept. 109-365 (Washington:
GPO, 2006) p. 66.
77 The proposed legislation, The Community Development Block Grant Reform Act of 2006,
is available at HUD’s website [http://www.hud.gov/content/releases/pr06-056act.pdf].