The HUD Homeless Assistance Grants: Distribution of Funds

The HUD Homeless Assistance Grants:
Distribution of Funds
Updated September 10, 2008
Libby Perl
Analyst in Housing Policy
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
to finance a range of housing and supportive services options for homeless persons.
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 homeless persons, 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. In
general, states and communities receive the same proportion of ESG funds that they
received in CDBG funds the previous fiscal year. 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 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.
In the 110th Congress, bill have been introduced in both the House and the
Senate that would reauthorize the homeless assistance grants and change some
aspects of how they are distributed. The Community Partnership to End
Homelessness Act (S. 1518) was approved by the Senate Banking, Housing, and
Urban Affairs Committee on September 19, 2007. In the House, the Financial
Services Committee approved the Homeless Emergency Assistance and Rapid
Transition to Housing (HEARTH) Act (H.R. 840) on July 31, 2008.



Contents
In troduction ......................................................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
Scoring the Applications...................................13
Allocation of the Grants....................................15
Special Activities.............................................16
Samaritan Housing Initiative................................16
Rapid Re-Housing Demonstration Program....................16
Legislation and Other Issues........................................19
McKinney-Vento Reauthorization Legislation in the 110th Congress.....19
Consolidation of the Competitive Homeless Assistance Grants.....19
Definition of “Homeless” and “Chronically Homeless”...........20
Homelessness Prevention...................................21
Rural Homelessness.......................................22
Renewals of the Competitive Homeless Assistance Grants.............22
Emphasis on Housing.........................................24
The Role of the Community Development Block Grant Formula........25
The Current CDBG Formula................................26
Proposed Changes to the CDBG Formula......................26
List of Figures
Figure 1. Distribution of the HUD Homeless Assistance Grants............18
Figure 2. FY2007 Percentage Allocation of Competitive Grants............24
List of Tables
Table 1. Funding for Homeless Assistance Grants, FY1987-FY2008..........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,2
and it was uncommon for individuals to actually live on the streets. 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, homeless persons 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 drugs3
began to become more prevalent in the population.
A number of reasons have been offered for the growth in the number of
homeless persons 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 homeless people 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.

In the 1980s, Congress first responded to the growing prevalence of
homelessness with several separate grant programs designed to address the food and
shelter needs of homeless individuals.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 homeless people, including
food, shelter, health care, and education (P.L. 100-77). The act was later renamed the
McKinney-Vento Homeless Assistance Act (McKinney-Vento) in P.L. 106-400 after
its other prominent sponsor, Bruce F. Vento.8
Among the programs authorized in the McKinney Act were four grants to
provide housing and related assistance to homeless persons: 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 homeless persons, along with supportive
services. Over the years, Congress has changed the makeup of the homeless
assistance grants, but there are still four currently funded 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 FY2007, see Table 1.)9


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). In 1987, all three were incorporated into the Stewart
B. McKinney Homeless Assistance Act (P.L. 100-77), although the Transitional Housing
Demonstration Program was renamed the Supportive Housing Demonstration Program.
8 For information about other programs 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
(continued...)

After Congress makes its annual appropriation for the homeless assistance
grants (this amount was approximately $1.586 billion in FY2008 — P.L. 110-161),
HUD 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.


9 (...continued)
the total appropriation.
10 Department of Housing and Urban Development, “Notice of Funding Availability,
Continuum of Care Homeless Assistance,” Federal Register, vol. 73, no. 133, July 10, 2008,
p. 39849 [hereinafter FY2008 NOFA].

Table 1. Funding for Homeless Assistance Grants,
FY1987-FY2008
($ in thousands)
EmergencySingle RoomShelter PlusaSupportiveTotal Funds for
FiscalShelterGrantsOccupancy(SRO)Care(S+C) HousingProgrambHUD HomelessPrograms
Year(ESG)(SHP)(see note)
(a) (b) (c) (d) (e)
198760,00035,000 59,000195,000c
19888,000 65,00072,000
198946,50045,000 80,000171,500
199073,16473,185 126,825284,004d
199173,164104,999 149,988339,414e
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 158,400 988 322,900 881,700 1,326,600
2007 160,000 1,600 383,000 942,200 1,441,600
2008j160,000 1,585,990
Sources: HUD Congressional Budget Justifications FY1988-FY2007 (all grants through FY1994, competitive
grants from FY2002 to FY2005, and total funds for HUD homeless programs), HUD Community Planning and
Development grantee list FY1993-FY2007 (ESG from FY1993 through FY2007), 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 and FY2007 competitive grants, available at [http://www.hud.gov/offices/cpd/
homeless/budget/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 in columns (a) through (d) in the years FY1987 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 column (e) “Total for HUD Homeless
Programs,” which is the amount appropriated for HUD homeless program activities in a given fiscal year. In
some years, this could be due to the use of carryover funds, and in others, 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.
j. FY2008 competitive grants (SHP, S+C, SRO) have not yet been awarded.
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 McKinney-Vento 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
homeless persons. 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 homeless persons. 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; homelessness 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


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.

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 needs, and economic needs of low- and moderate-income
residents 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 FY2008, 361 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 homeless persons. 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 lease22


value of buildings, salary paid to staff, and volunteer time counted at $5 an hour.
15 The other programs are the Community Development Block Grant program, the HOME
program, and the Housing Opportunities for Persons with AIDS (HOPWA) program.
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/budget08/index.cfm].
21 42 U.S.C. §11375(a).
22 Ibid.

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 FY2007
(the most recent year in which the grants were distributed), more than 89% of the
total amount of funds distributed to the four grant programs went to the competitive
grants. The composition of the homeless programs that are part of the competitive
grant process has remained relatively stable since the passage of McKinney-Vento
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 and the Rural Homeless Housing Assistance Program (both
enacted in P.L. 102-550), part of McKinney-Vento, 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 homeless individuals and families rather than their emergency
requirements. These longer-term needs include transitional housing (up to 24
months), permanent housing, and supportive services. 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 homeless
persons 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,23
permanent housing for disabled homeless individuals, and supportive services. In
FY2007, slightly more than 71% of total HUD competitive grant funds went to24
recipients as SHP grants. Eligible applicants for SHP grants include states, local
government entities, public housing authorities (PHAs), private nonprofit25
organizations, and community mental health centers. 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


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 Summary of Competition Awards Report, available at
[http://www.hudhre.info/documents/2007_NationalHomelessAwardsSumma ry.pdf].
25 42 U.S.C. §11382(1).

rehabilitate buildings that will be used either to provide supportive housing or
buildings that will be used 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 FY2007, approximately 29% of total competitive grant funds went to
S+C grantees.31 The S+C rent subsidies may be tenant-based vouchers, project-based32
rental assistance, or sponsor-based rental assistance. 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


26 42 U.S.C. §11383.
27 HMIS is a data collection, organization, and storage initiative to track and count homeless
persons. For more information see CRS Report RL33956, Counting Homeless Persons:
Homeless Management Information Systems, by Libby Perl.
28 24 C.F.R. §583.145.
29 42 U.S.C. §11386(e).
30 FY2008 NOFA, pp. 39842-39843.
31 HUD FY2007 Summary of Competition Awards Report, available at
[http://www.hudhre.info/documents/2007_NationalHomelessAwardsSumma ry.pdf].
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).

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,
child care services, case management, and educational and job training.35 Grant
recipients can fulfill their match requirement with cash, the value of a lease, salary
expenses for employees, or the time of volunteers.
The Single Room Occupancy Program. The Single Room Occupancy
(SRO) program provides permanent housing to homeless individuals in efficiency
units similar to dormitories, with single bedrooms, community bathrooms, and
kitchen facilities. In FY2007, 0.12% of total competitive funds awarded went to36
SROs. The SRO program does not require homeless residents to have a disability
and does not fund supportive services. Eligible applicants for SRO grants are PHAs37
and private nonprofit organizations. 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.38 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 reimbursed39
is $21,500 as of FY2008 (this amount is updated annually). After the ten-year
rental contracts expire, they are not renewed through the homeless assistance grant40
competition, but through a separate HUD account on an annual basis.
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.


34 42 U.S.C. § 11403b(a).
35 24 C.F.R. §582.5.
36 HUD FY2007 Summary of Competition Awards Report, available at
[http://www.hudhre.info/documents/2007_NationalHomelessAwardsSumma ry.pdf].
37 42 U.S.C. §11401(j).
38 24 C.F.R. §882.802.
39 HUD publishes the maximum amount of expenditures annually, taking account of changes
in construction costs. See FY2008 NOFA, p. 39849.
40 Ibid.

Table 2. Characteristics of the SHP, S+C, and SRO Programs
ProgramSupportive Housing ProgramShelter Plus CareSingle RoomOccupancy
Characterist ics (SHP) (S+C) (SRO)
Eligible Uses of-Transitional Housing-Permanent Housing-Permanent
FundsHousing-Permanent Housing
-Supportive Services
-Operating Expenses
Eligible Applicants-States-States-PHAs
-Local Government Entities-Local Government Entities-Private
No np r o fits-PHAs -PHAs
-Private Nonprofits
-Community Mental Health
Ce nte r s
Eligible Populations-Families and Individuals -Disabled individuals and-Individuals
(Transitional Housing andtheir families
services only)
-Disabled Individuals
Match Requirements-Dollar for Dollar (Acquisition,-Equal amount of funds for-No match
Rehabilitation, or Construction)servicesrequirement
-20% (Services)
-25% (Operating Expenses)
FY2007 Percentage of71.01%28.87%0.12%
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 FY2007 competitive grant announcement, available at
[ h t t p : / / www. hud.go v/offices/cpd/homeless/budget/2007/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 homeless persons 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.



The Continuum of Care. HUD developed the CoC as both a way for
communities to plan services that will address the needs of homeless persons, and the41
method through which service providers apply for HUD funds. Under the CoC
strategy, local communities establish CoC advisory 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 homeless persons: prevention of homelessness,
emergency shelter, transitional housing, permanent housing, and supportive services
provided at all stages of housing.42 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 their43
approach to serving homeless people. Since then, nearly every community in the
country has become part of a CoC, with approximately 468 CoCs in existence as of44

2008, including those in the territories.


Since the FY1996 grant application process for the competitive homeless
assistance grants, the CoC system has also been the vehicle through which local45
service providers apply for HUD competitive grants. 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 applicant46
organizations. Applicant organizations may also address fairness and other
concerns directly to HUD.


41 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.
42 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.
43 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.


44 “HUD-Defined CoC Names and Numbers Listed by State,” Revised April 2008, available
at [http://www.hud.gov/offices/adm/grants/nofa08/coclisting.pdf].
45 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.


46 Exhibit I of Continuum of Care application, available at [http://www.hud.gov/offices/adm/
hudclips/forms/files/40090-1.doc]. This document is from the 2007 application. For
FY2008 funds, HUD implemented an online application system, and application materials
are not available.

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 for which a CoC can
qualify. Pro rata need does not include amounts needed to renew S+C contracts or
amounts for new Samaritan Bonus or Rapid Re-Housing projects (these two latter
projects are described in the next sections of this report). CoCs qualify for either a
“preliminary pro rata need” (PPRN) level or a “hold harmless need” (HHN) level.
Preliminary Pro Rata Need. To calculate 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.
Hold Harmless Pro Rata Need. 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 preliminary pro rata need and the cost of SHP renewals is added
to preliminary 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. Beginning with the
FY2005 grant competition, CoCs may choose to reallocate their hold harmless need
from existing SHP projects to new projects under any of the three competitive grants.
In the FY2008 competition, CoCs may also choose to reallocate SHP renewal funds
to an HMIS project.



Final Pro Rata Need. Final pro rata need (FPRN) is the higher of PPRN or
HHN. Whether the CoC is in PPRN status or HHN status, in order to receive
sufficient funding for existing projects that must be renewed, the CoC must prioritize
those renewal projects within the final pro rata need level, or they will not receive
sufficient funding.
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 persons
with disabilities, 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.
Scoring the Applications. In the final step, HUD reviews each individual
project application and assigns points to each project that the Continuums have
recommended for funding. Until the FY2008 competition, HUD awarded a total of
100 points in two categories: points for need (40 points) and for CoC factors (60
points). Need was based on each individual project’s ranking within a CoC’s
application, while CoC factors were based on various characteristics and performance
outcomes of CoCs. However, in the FY2008 competition, HUD eliminated points
for need; instead, need is accounted for in the pro rata need determination process.
The entire 100 points are now awarded on the basis of CoC factors. Note that even
though points are based on CoC applications, points are awarded to individual


47 For all of the eligibility factors, see FY2008 NOFA, pp. 39846-39849.

projects within the CoC application. This means that each project receives the same
score.
The points that are awarded to projects on the basis of CoC factors are used to
determine which projects will be funded. Projects that score above a certain point
threshold will receive full funding up to their final pro rata need. In cases of ties,
HUD has established a tie-breaking system.48 The threshold number of points varies
from year to year. In most years, 80-85 points have been required for a project to
receive full funding. For example, in the 2006 competition, 86 points were needed.49
However, in FY2007, only projects that scored 90.25 points or more received full
funding.50 Certain projects — SHP projects that CoCs propose for renewal, projects
that CoCs propose to fund with reallocated SHP funds, and new HMIS projects —
may still be funded even if they do not receive enough points to meet the threshold
funding level, as long as the projects fall within their CoC’s final pro rata need level.
The SHP contract extensions may be made for up to one year in these cases.51
Points for Continuum of Care Factors. The CoC factors that HUD scores
may vary from year to year. In the most recent Notice of Funding Availability for52
FY2008, there are five categories in which projects are scored.
!CoC Housing, Services, and Structure: HUD awards points for the
existence of an inclusive and outcome-oriented community process
to develop a CoC strategy, and a fair and impartial project review
and selection process. The strategy should be comprehensive,
addressing the continuum of services, and designed to serve all
homeless subpopulations. In addition, the CoC should have created,
maintained, and built upon housing and services available to meet
the needs of homeless persons. A total of 14 points may be awarded
in this category.
!Homeless Needs and Data Collection: This category awards points
on the basis of a CoCs understanding of the number of homeless
individuals in the CoC’s area and their needs, as well as a CoC’s
progress in implementing an HMIS to track and provide an
unduplicated count of homeless persons. A total of 24 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


48 Ibid., p. 39853.
49 Statement of Mark Johnston, Deputy Assistant Secretary for Special Needs, HUD Office
of Community Planning and Development, FY2007 Continuum of Care NOFA Webcast,
March 27, 2007, available at [http://www.hud.gov/offices/cpd/homeless/index.cfm].
50 HUD SuperNOFA Broadcast slides, February 21, 2008, p. 8, available at
[http://www.hudhre.info/documents/2007_debrief_broadcast.ppt].
51 FY2008 NOFA, p. 39852.
52 Ibid., pp. 39850-39852.

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 the next 5 years, and are able to leverage
funds from other sources. A total of 16 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 chronically
homeless individuals, 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, the implementation of
energy-efficiency measures in housing and community facilities, and
the existence of a local plan to remove regulatory barriers to
affordable housing. A total of 28 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). CoCs need not use all funds for
housing in order to receive the maximum number of available
points. A total of 18 points may be awarded in this category.
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.53 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 grant54
application process). Grant recipients enter into a grant agreement with HUD, and,
if the grant involves construction, work must begin within 18 months of HUD’s grant55
award letter and be completed within 36 months. Activities that are not contingent
on construction must begin within 12 months of receipt of the grant award letter.


53 Ibid., p. 39848.
54 Ibid., p. 39845.
55 Ibid., p. 39854.

Special Activities
A Continuum of Care may qualify for funds in addition to those available
through the final pro rata need process through either the Samaritan Housing
Initiative or the Rapid Re-Housing Demonstration Program. Although the Samaritan
Bonus has been part of the CoC competition since FY2005, until the FY2008
competition, funds for the bonus had been computed as part of the pro rata need
process. FY2008 is the first year in which funds for the Samaritan Bonus are
awarded separately. FY2008 is also the first year of the Rapid Re-Housing
Demonstration Program. Congress included $25 million for Rapid Re-Housing in
the FY2008 Consolidated Appropriations Act (P.L. 110-161). Both programs are
described below.
Samaritan Housing Initiative. HUD’s Samaritan Bonus must be used by
CoCs specifically to create new permanent supportive housing for chronically
homeless individuals. A chronically homeless person is defined as an individual with
a disabling condition who has been continuously homeless for one year or has had56
four episodes of homelessness in the last three years. In the past, CoCs could not
create more than one project with Samaritan Bonus funds, but in FY2008, CoCs may
propose and receive funding for one or more projects. A CoC may qualify for
additional funds under the Samaritan Bonus up to a maximum of 15% of its
preliminary pro rata need or $6 million, whichever is lower. 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 Bonus of
$300,000 (15% of $2 million). In the FY2007 competition, 199 CoCs received the57
Samaritan Bonus totaling $94 million.
Rapid Re-Housing Demonstration Program. Rapid Re-Housing is a
process targeted to assist homeless families with dependent children that have one
or more moderate barriers to achieving and maintaining permanent housing.
Through supportive services to address these barriers, together with short-term
housing assistance, the hope is that families will be able to maintain permanent
housing. Among the moderate barriers that families must face in order to be eligible
for Rapid Re-Housing services are (1) temporary financial strain, (2) inadequate
employment or loss of employment, (3) inadequate childcare resources, (4) an ability
to overcome a low level of education or command of the English language, (5) legal
problems that can be addressed by a service provider, (6) minimal mental health58
issues or prior substance use, and (7) poor rental and credit history.
Rapid Re-Housing grantees will provide supportive services and transitional
housing assistance to help families move to permanent housing as quickly as
possible. Under the Rapid Re-Housing grant, service providers may provide
transitional housing for one of two time periods, to be determined by the service


56 24 C.F.R. §91.5.
57 HUD SuperNOFA Broadcast slides, February 21, 2008, p. 15, available at
[http://www.hudhre.info/documents/2007_debrief_broadcast.ppt].
58 FY2008 NOFA, p. 39846.

provider at the time it assesses the needs of a given family. These two time periods
are either 3-6 months or 12-15 months. Grantees may not use more than 30% of
funds for supportive services.59
Rapid Re-Housing grants are awarded through a separate, 100-point competition
in which each CoC may apply for only one grant. HUD will do a threshold review,
much like the one HUD uses to determine eligibility of projects in the competition
for the three competitive grants. Then, eligible applicants are scored on five factors:
(1) experience in operating rapid re-housing projects, (2) the ability to assess the
needs of families, (3) the applicant’s relationship with other service providers in the
community, (4) the ability to maintain affordable housing stock, (5) the existence of
centralized intake, and (6) a threshold level of shelter beds that are reported in a
homeless management information system within the CoC.60 A CoCs score on the
application for Rapid Re-Housing funds will be added to its CoC score in the
competitive grant process to determine which projects will be funded.


59 Ibid., p. 39843.
60 Ibid., p. 39852.

CRS-18
Figure 1. Distribution of the HUD Homeless Assistance Grants


iki/CRS-RL33764
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Source: Chart prepared by CRS on the basis of 42 U.S.C. §11373, “HUD FY2008 Notice of Funding Availability,” Federal
Register, vol. 73, no. 133, July 10, 2008. Percentages are based on the FY2007 distribution of the Homeless Assistance Grants.

Legislation and Other 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 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 and giving more discretion to local communities, 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.
McKinney-Vento Reauthorization Legislation
in the 110th Congress
Two bills have been introduced in the 110th Congress that would reauthorize the
McKinney-Vento homeless assistance grants. In the Senate, the Community
Partnership to End Homelessness Act (S. 1518) was approved by the Committee on
Banking, Housing, and Urban Affairs on September 19, 2007. In the House, the
Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act
(H.R. 840) was approved by the House Financial Services Committee on July 31,

2008. Both bills would authorize the Homeless Assistance Grants at $2.2 billion,


beginning in FY2010 under H.R. 840 and FY2008 under S. 1518. Many of the
differences between the two bills as introduced were resolved when the House
Financial Services Committee marked up H.R. 840. This section describes the
contents of the two bills after markup by their respective committees.
Consolidation of the Competitive Homeless Assistance Grants.
Both S. 1518 and H.R. 840 would remove the distinctions among the three
competitive homeless assistance grants. Applicants would no longer have to apply
for one of three grants, depending on the type of housing and services they wanted
to provide. Instead, one consolidated grant would provide funds for permanent
housing, transitional housing, supportive services, and homelessness prevention
activities). In S. 1518, the consolidated program would be renamed the “Community
Homeless Assistance Program;” in H.R. 840, it would be called the “Continuum of
Care Program.”
Both S. 1518 and H.R. 840 would maintain some aspects of the current
Continuum of Care application system and codify the system in law. Under both
proposals, HUD would review applications from Collaborative Applicants — local
entities that would determine funding priorities and jointly submit a single
application to HUD on behalf of all local applicant organizations (much like the
Continuum of Care). Currently, although CoCs submit one application, HUD must
still review the individual project applications from organizations seeking funding.
This change from separate project applications to a single CoC application would
mean the difference between HUD reviewing hundreds rather than thousands of
applications. However, H.R. 840 and S. 1518 would also allow individual
organizations to apply directly to HUD for funds in certain circumstances. After
reviewing the applications, HUD would then award funds directly to Collaborative
Applicants to be distributed to individual organizations rather than to each individual



service provider (although in S. 1518, Collaborative Applicants would have to meet
certain additional requirements in order to qualify to disburse funds).
Both bills would require certain set-asides to provide housing for homeless
populations. H.R. 840 and S. 1518 would require that at least 30% of funds (not
including those for permanent housing renewals) be used to provide permanent
supportive housing to disabled individuals or families with an adult member who has
a disability. This requirement would be reduced proportionately as communities
increase permanent housing units for those individuals and families. S. 1518 and
H.R. 840 would also both require that at least 10% of funds be used to provide
permanent housing for families with children. Communities that are successful in
reducing or eliminating homelessness through permanent housing would receive
bonuses that they could use for any purpose, including homelessness prevention. The
two bills would also institute a new program that would allow certain high-
performing communities to have greater flexibility in the way that they use their
funds. To be designated high-performing, a community would have to meet
requirements regarding the average length of homelessness in their communities,
repeat instances of homelessness, outreach activities, and effectiveness in reducing
homelessness. Communities could then use funds for any eligible activity, without
regard to the bill’s requirements for permanent housing.
Although both H.R. 840 and S. 1518 would initially continue to use pro rata
need to determine how funds are distributed, S. 1518 would require HUD to create
a new formula for determining need within two years after the bill’s enactment.
HUD would be required to consider using the following factors in its formula: the
number of homeless individuals in a geographic area, housing shortages, severe
housing problems among extremely low-income households, and poverty rates.
Another difference between the bills is that S. 1518 would renew all permanent
housing contracts through the Section 8 project-based account, whereas H.R. 840
would make renewal through Section 8 optional if sufficient funds were available for
year-long renewals of all Section 8 project-based contracts.
Definition of “Homeless” and “Chronically Homeless”. Both H.R. 840
and S. 1518 would expand the definition of “homeless individual” in that is codified61
in the McKinney-Vento Homeless Assistance Act. Under current law, a homeless
individual is defined as an individual who lacks a fixed, regular, and adequate
nighttime residence and who resides in a temporary shelter (including welfare hotels,
congregate shelter, and transitional housing for the mentally ill), an institution (with
qualifications), or a place not designed for human habitation.
S. 1518 would change the current definition of homeless individuals to include
those residing in campgrounds and in transitional housing (not just transitional
housing for the mentally ill, as in current law), as well as persons living in hotels or
motels paid for by a government entity. In addition, S. 1518 would include in the
definition persons or families who are sharing housing, but only if they (1) lack the
resources to pay for decent and safe housing, (2) are permitted to remain in the shared
housing for a short period of time, (3) have moved three or more times in the past


61 42 U.S.C. §11302.

year or at least two times within the last 21 days, and (4) are not able to make a
significant financial contribution toward the shared housing. S. 1518 would also
include among homeless individuals those persons residing in a hotel or motel, with
the same reservations as those sharing housing, however.
H.R. 840 makes similar changes to the definition of homeless individual.
Initially, the version of H.R. 840 introduced in the House would have expanded the
definition of homeless individual to include persons who are sharing housing due to
economic hardship; those living in hotels, motels, or campgrounds due to a lack of
alternative accommodations; and those living in substandard housing. However, at
markup, the House Financial Services Committee adopted a definition of
homelessness in H.R. 840 similar to the definition in S. 1518. A person or family
would be considered homeless if they are being evicted from their residence within
14 days, if they are residing in a hotel and do not have the resources to stay for more
than 14 days, or if they are living with another family and there is credible evidence
that they will not be able to stay for more than 14 days. The bill would also consider
homeless anyone who is fleeing a situation of domestic violence or other
life-threatening condition. In addition, H.R. 840 would allow communities to serve
families with children or unaccompanied youth who are defined as homeless under
other federal programs under certain circumstances (for example the Education for
Homeless Children and Youth program, Head Start, and the Runaway and Homeless
Youth program).
Both H.R. 840 and S. 1518 would expand the current definition of “chronically
homeless,” which is defined in regulation.62 Under the regulation, the term currently
is defined as an unaccompanied individual who has been homeless continuously for
one year or on four or more occasions in the last three years, and who has a disability.
The two bills would include in the definition homeless families with an adult member
who has a disability. In addition, the definition in both H.R. 840 and S. 1518 would
include persons released from institutions as long as, prior to entering the institution,
they otherwise met the definition of chronically homeless, and had been
institutionalized for fewer than 90 days.
Homelessness Prevention. Both S. 1518 and H.R. 840 would expand the
opportunities for grantees to engage in homelessness prevention activities. Currently,
only ESG funds may be used for homelessness prevention. H.R. 840 and S. 1518
would expand the eligible activities and funding level of the Emergency Shelter
Grants Program and would rename it the “Emergency Solutions Grants Program.”
Both bills would allocate 20% of funds made available by Congress for the homeless
assistance grants to the newly named program (currently somewhere between 11%
and 15% of funds are reserved for the ESG program). H.R. 840 and S. 1518 would
expand the list of supportive services that could be provided with ESG program
funds, and would allow funds to be used for short- or medium-term rental assistance
and housing relocation and stabilization services for individuals and families at risk
of homelessness. Under the updated ESG program in S. 1518, not more than 60%
of funds could be used for emergency shelter and supportive services related to
emergency shelter and street outreach, reserving 40% of funds for rental assistance


62 24 C.F.R. §91.5.

and rehousing services for those at risk of homelessness. Under H.R. 840, at least
50% of funds would be reserved for activities such as rental assistance and housing
relocation for persons at risk of homelessness.
Rural Homelessness. In the area of rural homelessness, both H.R. 840 and
S. 1518 would retain portions of McKinney-Vento’s rural homelessness grant
program (Title IV, Subtitle G of McKinney-Vento), a program that has not been
funded, as the Rural Housing Stability Assistance Program. The program would
reserve not less than 5% of Community Homeless Assistance Program/Continuum
of Care Program (CHAP/CoC) funds for rural communities and allow grantees in
rural communities to apply separately for funds that would otherwise be awarded as
part of the consolidated grant program. Unlike the CHAP/CoC program, however,
rural communities would be able to serve persons who do not meet HUD’s definition
of “homeless individual”; S. 1518 provides that HUD may award grants for the costs
of assisting those in the worst housing situations in their geographic area, those in
imminent danger of losing housing, and the lowest-income residents in the
community. H.R. 840, would allow rural communities to assist those at risk of
homelessness, those in imminent danger of losing housing, and the lowest-income
residents in the community. Under H.R. 840, the term “at risk of homelessness”
means an individual or family with income at or below 30% of area median income,
who has insufficient income to attain housing stability, who has moved frequently for
economic reasons, and who lives in unstable housing (examples of unstable housing
are enumerated in the bill).
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.63 Currently a large percentage of
competitive homeless assistance grant funds are used to renew existing SHP and S+C
contracts. For example, in FY2007 more than 85% of competitive grant funds were
used to renew existing contracts. (For the percentage allocation of the FY2007
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 needs64
of chronically homeless individuals. The “chronically homeless” are defined as


63 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 andthst
Urban Development, and Independent Agencies Appropriation Act, 107 Cong., 1 sess.,
November 6, 2001, H.Rept. 107-272. HUD has provided these estimates in its FY2003,
FY2006, and FY2007 Congressional Budget Justifications.
64 See, for example, Senate Committee on Banking, Housing and Urban Affairs,
(continued...)

disabled individuals who have been homeless continuously for a year or more, or
have had at least four episodes of homelessness in three years.65 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. In FY2007, 25% of competitive grants —
approximately $330 million — funded projects for chronically homeless
individuals.66 In the same year, HUD estimated that 20,000 chronically homeless
individuals moved into permanent supportive housing.67
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
the funds that otherwise would have been directed toward renewals to be used to
create new permanent housing projects.68 Although 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.


64 (...continued)
Subcommittee on Housing and Urban Development, HUD’s Fiscal Year 2003 Budget andthnd
Legislative Proposals, 107 Cong., 2 sess., February 13, 2002, S. Hrg. 107-839, pp. 14-16,
available at [http://banking.senate.gov/_files/107839.pdf].
65 Federal Register vol. 71, p. 6961.
66 HUD FY2007 Summary of Competition Awards Report, available at
[http://www.hudhre.info/documents/2007_NationalHomelessAwardsSumma ry.pdf].
67 HUD SuperNOFA Broadcast slides, February 21, 2008, p. 16, available at
[http://www.hudhre.info/documents/2007_debrief_broadcast.ppt].
68 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.



Figure 2. FY2007 Percentage Allocation of Competitive Grants


New SHPNew SRO.12%New S+C
6.9%7. 0%
Renewal S+C
21 . 9%
Renewal SHP
64. 1%
Source: HUD FY2007 Summary of Competitive Awards Report, available at
[ h t t p : / / www. h u d h r e . i n f o / d o c u m e n t s / 2007_Natio nalHomelessAwardsSummary.pdf].
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 chronically69
homeless individuals. In FY2007, more than 60% of competitive grant funds went
to provide housing for homeless persons.70 Of the Continuum of Care funds
distributed in FY2007, nearly 25% funded projects for chronically homeless
individuals.71 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.72
69 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.
70 HUD SuperNOFA Broadcast slides, February 21, 2008, p. 14, available at
[http://www.hudhre.info/documents/2007_debrief_broadcast.ppt].
71 Ibid., p. 15.
72 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.

The CoC application process awards additional CoC points to project applicants
in Continuums that emphasize housing needs over supportive services. Through
FY2007, the number of points in the “emphasis on housing” category increased as
a proportion of total points. Beginning with the FY2002 competition, 8.3% of
available points were awarded in this “emphasis on housing” category, in FY2003
and FY2004, emphasis on housing made up 16.7% of total points, and in
competitions from FY2005 through FY2007, 20% of points were awarded in this
category. In FY2008, the 18 points available for emphasis on housing activities
represent 18% of total points. Applicants receive more points the higher the
percentage of funds their CoC proposes to devote to housing activities.
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 severely mentally ill individuals who are chronically homeless
is less expensive than allowing them to remain on the street.73 HUD has incorporated
the needs of chronically homeless individuals 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.74
In addition, under the Samaritan Housing Initiative, CoCs can receive additional
funds for permanent supportive housing projects for chronically homeless
individuals.
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 services for homeless
persons 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 best way to target funds to areas that most need homeless assistance75
funds. 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


73 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].
74 FY2008 NOFA, p. 39851.
75 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].

development of a method for counting homeless individuals.76 HUD responded with
a report that proposed alternative methods for determining community need for
homeless assistance.77 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).78 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).79 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.80
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
grants.81 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.82 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


76 S.Rept. 106-410. The statement was made regarding the competitive homeless assistance
grants.
77 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.
78 42 U.S.C. §§5306(a) - (d).
79 42 U.S.C. § 5306.
80 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/ Publica tions/pdf/CDBGAssess.pdf].
81 Ibid., p. 46.
82 Ibid., p. 47.

neglect.83 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.84 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.85 In May 2006, HUD released proposed legislation that
would change factors in the CDBG formula and the way funds are distributed.86 The
proposed legislation would have added 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 also would have excluded college
students from the number of households living in poverty, and the population and
growth lag factors would have been eliminated. 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.


83 Ibid., pp. 48-50.
84 House Committee on Government Reform, Subcommittee on Federalism and the Census,
A Top to Bottom Review of the Three-Decades-Old Community Development Block Grantth
Program: Is the CDBG Program Still Targeting the Needs of Our Communities, 109 Cong.,st

1 sess., March 1, April 26, and May 24, 2005 (Washington: GPO, 2005).


85 House Committee on Government Reform, Subcommittee on Federalism and the Census,
Bringing Communities Into the 21st Century: A Report on Improving the Communitythnd
Development Block Grant Program, 109 Cong., 2 sess., H.Rept. 109-365 (Washington:
GPO, 2006) p. 66.
86 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].