SUPPORTIVE

Ends , Reduces Use of Institutional Care and Saves Taxpayer Dollars

An Integral Part of Governor Cuomo’s New Agenda

Core Principle Supportive housing – permanent, affordable, nonprofit-operated rental housing linked to services – is the most humane housing option for homeless and ill-housed people with special needs. It is also the most cost- effective.

Faced with an extraordinary structural budget deficit, the State must transform the way it cares for its most vulnerable (and expensive) citizens: chronically homeless individuals and families living with HIV/AIDS, mental illness and/or substance abuse; individuals leaving prison or other institutions; youth aging out of foster care; and now, veterans returning from combat.

Supportive housing has had consistent success serving these diverse populations, while reducing both immediate and long-term public expenditures on them. It offers the best, most viable strategy for maintaining New York’s safety net for vulnerable people in face of the State’s new budgetary limitations.

In his recent “Urban Agenda,” Governor-elect Andrew Cuomo proposes to transform New York’s response to prisoner reentry, recidivism and juvenile justice using many of the community-based strategies pioneered by supportive housing providers. Other pillars of Governor Cuomo’s agenda – relying on primary care over emergency treatment, maximizing federal Low Income Housing Tax Credits, using nonprofit community groups to drive neighborhood development, to name a few – are hallmarks of the supportive housing approach.

Supportive housing can help the new administration achieve its ambitious goals for New York, while reducing Medicaid and State general fund spending on expensive emergency services for individuals and families with high service needs. This brief provides some background information on supportive housing, as well as specific policy recommendations to improve coordination and targeting of supportive housing to:

1. Devote more of the State’s permanent housing resources to supportive housing 2. Break generational cycles of homelessness and institutionalization 3. Reduce dependence on institutional care 4. Maximize federal resources by coordinating local homeless efforts 5. Make New York a leader in ending veteran homelessness. Supportive Housing Network of New York - 2 -

Background Executive leadership and broad, bipartisan support for the model has allowed New York to lead the nation in the development of supportive housing, creating over 42,000 units of permanent, nonprofit-operated supportive housing statewide since 1980. As a result of these efforts, tens of thousands of formerly homeless and at-risk individuals and families now receive the modest social services they need to transform their lives, remain stably housed, and, for about a quarter of the population, become employed.

However, as many as 200,000 people become homeless across the state each year. Over ten thousand more leave incarceration, psychiatric or recovery programs, age out of foster care or flee violent domestic situations on an annual basis. Tens of thousands of others are ill-housed or languish in institutionalized settings that greatly increase healthcare and social services costs to the State.

Not all of these New Yorkers require, or would prosper, in supportive housing. But the model can safely and successfully a substantial percentage of each of these groups, providing a better quality of life to the individuals served, while reducing costs to the public.

Specifically, supportive housing is the answer for the neediest homeless individuals and families (about 40% of all homeless single adults, and 15-20% of homeless families), as well as about 20% of the reentry population at highest risk for homelessness and re-incarceration. Supportive housing is also the answer for the most independent residents currently stuck in unnecessarily service-rich and institutional settings like nursing homes, psychiatric centers and proprietary adult homes.

New York State can achieve immediate savings by transferring people and State resources from these expensive systems to safe, healthy and less costly supportive housing.

What is more, this shift makes sound State economic development strategy. The building of supportive housing is one of the most efficient job creation tools available to the State; its operation provides numerous job opportunities for formerly homeless and other people facing employment challenges. And because almost all supportive housing development is now green, supportive housing can also help the new administration achieve important energy efficiency goals.

A Proven Record of Success Consistent research results have gained supportive housing a broad, bipartisan consensus of support. In 2002, a University of Pennsylvania study measured the fiscal impact of housing more than 4,600 homeless mentally ill individuals under the groundbreaking 1990 New York/New York Agreement, an initiative led by Governor Mario Cuomo and Mayor David Dinkins that created 3,314 units of supportive housing. The results were startling and led to a sea-change in the way we respond to homelessness.

The study found that the average homeless person with mental illness cost New York taxpayers $40,449 a year – just to remain homeless. Placing that same individual into supportive housing achieved a dramatic decrease in his/her use of shelters, hospitals, prisons and psychiatric centers. Even though placement into supportive housing increased use of outpatient Medicaid to treat substance abuse and long-deferred medical conditions, the average annual cost to the public of caring for this most challenging population dropped significantly, to $28,303 per person. The $12,146 annual savings realized by each placement covered all but $743 of the annual cost of building, operating and providing services in the housing.

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Subsequent studies have shown that by further targeting the most vulnerable members of the homeless population, supportive housing achieves actual savings. New York City has acted on this research by reserving NY/NY supportive housing placements for its most costly, chronically homeless individuals and families. The savings can be considerable:

• A supportive housing program operated by Harlem United serves critically-ill persons with AIDS who are certified for nursing home care with a combination of affordable and intensive on-site and off-site supports. It saves the public $103,000 per tenant per year, by keeping them out of expensive nursing homes and reducing the frequency and length of their stays. • Another pilot program, the FUSE Initiative, provided permanent supportive housing to frequent users of shelters and jails, reducing shelter use by 92% and days in jail by 53%. Over 90% of the participants remained housed one year later, at a savings of $20,000 to $24,000 per supportive housing unit created. • Evaluations of families in supportive housing for high-need families provided by Albany Catholic Charities Housing Office showed dramatic annual cost savings as high as $34,000 per family from reductions in both shelter and child welfare costs.

The 2005 NY/NY III Supportive Housing Agreement builds on the successes of the original initiative. Under this 10-year pact, ten City and State agencies will create 9,000 units of housing for nine different vulnerable populations. While this latest agreement’s capital development is lagging behind schedule, the initiative has already created 3,565 units. The initiative’s focus on chronic homelessness allowed New York City to reduce its long-term shelter stayers by half in just three years.

The NY/NY III Agreement requires a high level of interagency cooperation that can provide a foundation for consolidating other, similar operations and programs across agencies. It points to a number of strategies for speeding development and lowering the cost of creating supportive housing. There are also opportunities to streamline government management of the ongoing operation of these housing programs.

Today’s Challenge, and Opportunity Reducing unnecessary Medicaid and State general fund expenditures on high-need, frequent user populations must be a primary focus of the new Cuomo administration. But this can only be done by reshaping incentives and redirecting pathways in the systems through which New York’s neediest citizens cycle – from streets to shelters, hospitals to prisons in an endless circuit, at tremendous human and economic cost. Other forces are already doing this: for example, federal health care reform will impose additional disincentives for repeated acute care hospital re-admissions. Supportive housing’s proven capacity to reduce frequent readmissions can help the State to avoid negative fiscal impacts from these changes.

Access to supportive housing can be the ‘game changer’ for people stuck in many of these systems. By coordinating many disparate local efforts, and targeting supportive housing to the most vulnerable populations, the next governor can make a significant, positive impact in short order – both on the State budget, and on people’s lives.

The following policy recommendations represent policy shifts and “quick wins” that can be accomplished over the next four years to help end homelessness, reduce institutional care, and save taxpayer dollars.

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POLICY RECOMMENDATIONS

1. Devote more of the State’s permanent housing resources to supportive housing development has been proven to provide many economic and social benefits. But investment in supportive housing achieves these same outcomes, even as it also reaps documented cost savings in other State agencies’ budgets. In the current fiscal crisis, how can the State afford not to direct a larger percentage of its housing resources to supportive housing? Here are three ways the State’s supportive housing stock can be expanded to bring these cost savings to scale, without increasing State capital or operations spending:

• Direct more of the existing State-financed affordable housing stock to tenants with special needs. The State currently manages a portfolio of almost 37,000 affordable housing units built with a combination of tax credits and capital grants. In return for this financing, many developers promised to set aside 15% or more of their units for people with special needs, including formerly homeless families, substance abusers in recovery, and frail elderly tenants, to name a few categories. However, the State does not aggressively track compliance with this requirement. More active enforcement, combined with efforts to link landlords to tenant referrals from social service agencies (that could then provide ongoing supportive services), could return vacancies in these already-constructed – and paid for – units to the persons with special needs for whom they were intended. While private developers may have concerns about now being held to their initial promises, and we must ensure that tenants are linked to services, this action could produce approximately 300 vacancies a year for people with special needs.

• Use State-controlled vouchers to house homeless households in supportive housing. State HCR controls over 40,000 mostly tenant-based Section 8 Housing Choice Vouchers. In any given year, anywhere from two to four thousand vouchers are returned and made available to new low-income households on locally-administered waiting lists. The State can use these vouchers more efficiently, by amending its PHA plan to create a homeless priority, allowing it to redirect some portion of these vouchers to homeless households. The vouchers could be linked to OTDA SRO Support Services or Supported Housing for Families and Young Adults (SHFYA) funding, or to OMH supported housing subsidies. With Section 8 now paying for the cost of rent and operations, the agency subsidies could then be used entirely to fund services, allowing State general funds to be stretched to cover twice as many individuals. By targeting this resource to more vulnerable populations, the State could house at least 1,000 chronically homeless people in supportive housing this year, once again at no additional cost.

• Increase the percentage of NYS Homes & Community Renewal (HCR) capital dollars going to supportive housing development. From 2005 thru 2007, 6% to 10% of the units financed by the HCR Unified Funding Round (UFR) were supportive. In the past three years, supportive housing’s portion of the UFR rose to 11% to 17%. Further increasing the proportion of HCR UFR capital funds allocated for supportive housing to 35% would achieve three objectives: 1) increase HCR UFR supportive housing production from 250-335 to 500-750 units per year; 2) help the State get its NY/NY III Agreement development back on schedule; and 3) reduce spending on emergency services by anywhere from $5,000 to $100,000 per year per unit constructed (depending on population targeting).

Together, these three actions would create approximately 6,400 more supportive housing units over the next four years that would not otherwise exist – without increasing state capital and operations spending. Depending on the populations housed, some redirection and/or modest increase of service funding streams would be required, but this would be outweighed by the resultant savings. Supportive Housing Network of New York - 5 -

2. Target resources to the homeless individuals and families with the highest needs Research shows how chronically homeless individuals and families typically ‘cycle’ between substandard housing, institutions and homelessness. Breaking this cycle can have a multi-generational impact for at least three specific populations: frequent users of prison, youth aging out of foster care, and chronically homeless families, often with a disabled head of household or family member. By expanding on successful pilot initiatives, the Cuomo administration can prevent long-term, exponential growth in costly negative impacts in these three high-risk groups, while generating savings in the prison, foster care and shelter systems.

• Re-entry Population – Research shows that 20% of persons released from prison are at high risk of homelessness and re-incarceration. An expansion of supportive housing models pioneered by the Fortune Society and other providers would allow many more prisoners to reenter their communities safely and successfully, or be diverted from incarceration in the first place, freeing up State funds spent on prisons. The Cuomo administration should direct 20% of any remaining and future funding for Rockefeller Reform implementation to subsidize supportive housing placements for those most in need.

• Youth Aging Out of Foster Care– Each year, approximately 1,000 to 1,600 youth age out of foster care in New York City. They, and their peers in other urban communities, are at high risk for homelessness, teen pregnancy, unemployment, and substance abuse. For many of these youth, the wraparound services and housing stability offered by supportive housing during the critical years of 18 to 26, will make the difference between educational and vocational success and failure: young adults in supportive housing have up to 90% participation rates in employment and/or education activities. As the Cuomo administration transforms the way the State serves troubled youth, funding should be dedicated to proven supportive housing interventions for high-risk young adults.

• Children & Families – Best estimates are that some 10-15% of homeless families are ‘chronically homeless’ – prone to unusually long or recurrent shelter stays, as well as involvement with the child welfare system. Emerging research indicates that when supportive housing is provided to the highest- need families, their housing retention rates reach 90%, children’s academic achievement improves markedly, and 60% of the open child welfare cases can be closed. Providers who have cobbled together funding to provide stable supportive housing to youth aging out of foster care have seen similar outcomes reducing teen pregnancy rates and increasing employment. The Cuomo administration should reserve a larger portion of OTDA TANF funding and untapped resources at OCFS to provide supportive housing to chronically homeless families, following OTDA’s model Supportive Housing for Families and Young Adults (SHFYA) program.

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3. Reduce dependence on institutional care With community-based housing options for poor and disabled people in short supply, many vulnerable people end up in institutional settings that provide inappropriate or unnecessary services, at great public cost. While many individuals require nursing home or adult home care, psychiatric institutionalization, or imprisonment, a significant percentage do not. By restructuring perverse incentives that direct people to more expensive modalities of care, the State can achieve substantial cost savings while improving vulnerable people’s quality of life, without compromising their safety.

• Nursing Homes – For years, the State has attempted to reduce reliance on nursing homes, one of the most expensive settings paid for by the State. A combination of safe, affordable housing, on-site case management and home health aides can allow many nursing home residents to remain housed in the community. In recent years, the State has reduced reimbursement rates for healthier nursing home residents to incentivize operators to move them to community-based settings. But efforts to create assisted living program beds have gone slowly, and operators have few linkages to the community-based alternatives that do exist. An initiative to assist some percentage of the 113,000 nursing home residents statewide to move to supportive housing would produce immediate Medicaid savings. It would also obviate the need for plans to develop over 9,500 additional nursing home beds in New York City over the next five years. This community placement and diversion initiative would coordinate service and housing options, facilitate the creation of these options by nonprofit community-based groups (rather than by nursing home operators and hospitals), and link them to nursing home residents ready for less intensive levels of care.

• Adult Homes – Over 12,000 individuals with mental illness are similarly trapped in proprietary adult homes, where they live in institutional settings, lose independent living skills, and become increasingly isolated. At least half could live in community-based housing, greatly reducing their Medicaid costs and improving their quality of life. As the result of a recent federal court decision, the State now faces an open-ended commitment to provide a subsidized, scattered-site with services to any current – or potential – adult home resident with mental illness who wants one.

Whether it wins the case on appeal or not, the outcome will be problematic for the State. Losing the appeal would cement in place a housing entitlement that will attract individuals with mental illness to adult homes in order to get access to independent apartments, even as many adult home residents forgo this model. The State would be forced to provide ever-increasing, court-mandated services that will skyrocket in cost, and draw resources away from homeless and other vulnerable populations. On the other hand, winning the appeal would leave in place a substandard, obsolete mode of care that generates a major scandal for governors about once every decade.

While making a good faith effort to comply with the federal decision, the State should revisit its defense and appeal to bring the federal government to the table. An agreement could be devised that would modify federal and State policies that presently prioritize Supplemental Security Income and Medicaid resources to adult homes, rather than to the more efficient and appropriate community-based housing models sought by plaintiffs. The State should argue that, along with scattered-site supported housing apartments, adult home residents should also be offered the option to choose to live in congregate models of supportive housing as well. The federal case presents a unique opportunity to develop new alternatives to the proprietary adult home model. It offers a chance to close and redevelop some large adult homes into residences that integrate the adult home population with tenants in mainstream affordable housing. Supportive Housing Network of New York - 7 -

4. Maximize federal resources by coordinating local homeless efforts Diffuse local homeless responses can be better coordinated by the NYS Office of Temporary and Disability Assistance (OTDA). Improved coordination of local, State and federal resources would better meet the needs of homeless individuals and families, while drawing down additional federal resources and providing greater cost savings to the public. The State can take two steps now:

• Establish a New York State Interagency Council on Homelessness that includes government partners, advocates and providers to coordinate the activities and resources of all State agencies that serve homeless individuals and families, modeled after the U.S. Interagency Council on Homelessness. The council would be charged with developing a New York Statewide Plan to End Homelessness consistent with the U.S. Interagency Council on Homelessness’ document, “Opening Doors: Federal Strategic Plan to Preventing and Ending Homelessness.” The plan would ensure that scarce State resources are directed to those most in need. It would also allow the State to incentivize localities to coordinate their local, State and federal resources in more effective ways that could improve outcomes, even if spending is not increased.

• Improve and standardize local homeless data collection efforts to better inform statewide policy efforts. Importantly, this would allow OTDA to submit a “Balance of State” application for approximately $6 million of HUD Continuum of Care funding left on the table each year by localities that do not have the resources to apply on their own behalf.

5. Make New York a leader in ending veteran homelessness According to the U.S. Department of Veterans Affairs there are an estimated 14,000 homeless veterans in New York State, the majority of whom are suffering from mental illness and/or substance abuse. Over the last three years, the federal government has allocated 30,000 vouchers nationwide through the HUD-VASH program (Veterans Affairs Supportive Housing), which combines Section 8 vouchers with services from local VAs. But the lack of a coordinated effort between different government agencies slowed New York’s ability to utilize this important resource. As a result, New York City saw its first year allocation of over 1,000 vouchers get reduced to 280 and 300 vouchers in the following years. The Cuomo administration can provide the leadership necessary to maximize New York veterans’ access to VASH and other federal resources to ensure they have the housing and services they need and deserve.

• Establish a statewide task force that encourages and facilitates authorities and VA Centers to increase New York’s share of VASH Vouchers. • Promote the practice of project-basing VASH vouchers in order to create new housing. To date, only one nonprofit developer in the country – HELP USA – has thus far project-based VASH. • Use OTDA Homeless Housing Assistance Program and HCR capital resources to leverage federal and private resources like VASH and other veteran-directed funding streams for services. • Encourage subcontracting VASH service funds to community-based nonprofit providers. • Leverage HUD McKinney-Vento rental subsidies that are currently prioritized for homeless veterans by providing a small State service funding match, as has been piloted by the Albany Housing Coalition.

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CONCLUSION The State has a unique opportunity to use the budget crisis to develop the political will to shift resources from ineffective emergency interventions and systems in order to expand community-based supportive housing linked to services. Additional efficiencies can be gained by streamlining financing and contract awards processes: for instance, awarding service and operating subsidies at the time that capital awards are made. A true statewide housing trust fund with a dedicated revenue stream (like in other states) would also help speed the process, especially if the National Housing Trust Fund is funded and distributed through this new mechanism. Lastly, the State must define the roles of OTDA HHAP and OMH capital programs, now that other housing agencies have been consolidated. Both the OMH and HHAP programs operate quite differently than HCR’s funding streams, to the benefit of nonprofits and homeless people. In order to keep supportive housing efficient and a priority, these two agencies must retain control of these capital resources and maintain their active roles in the State’s housing development activities.

Finally, one last bold step: The new administration can take advantage of the moment to justify an actual increase in its investment in supportive housing development. Certainly, the State must reduce its overall debt. But borrowing to make a cost-saving investment like supportive housing is justified today. Funding is available: at present, the State Office of Mental Health (OMH) has approximately $300 million in capital appropriations for supportive housing ready for disbursement to upstate projects that have been “frozen” by the Division of Budget. Bond capital and 4% tax credits from HFA and SONYMA are also available. If OMH were authorized to spend $300 million over the next two years, it would create 1,500 new supportive housing units, and achieve even greater reductions in State, local and Medicaid spending on expensive emergency interventions.

And while supportive housing’s cost-savings are compelling, a substantial investment in supportive housing would also provide discernible economic development benefits. The $300 million in State bonds would cost the State less than $17 million in annual debt service. But the investment would leverage $60 million in private investment in 4% federal low income housing tax credits – investment that would not come to New York without the bonds. Using standard industry benchmarks, the $300 million invested would generate 2,250 construction jobs in an industry that has seen residential construction spending in New York City drop 74% in the past two years. It would generate approximately $22.5 million in State and local taxes during the initial year of construction, and approximately $10 million each year after buildings open. Depending on the level of need of the tenants occupying the housing (and hence, the cost savings achieved by their placement in supportive housing), the investment could pay for itself.

In conclusion, there are both short and long term investments that the Cuomo Administration can make in supportive housing that are either cost-neutral this year or within four years of the outlay. Given the budgetary challenges that New York State is facing, supportive housing offers the best, most viable strategy for maintaining New York’s safety net for vulnerable people while strengthening those individuals and their communities.

Supportive Housing Network of New York For more information, call Ted Houghton 646-619-9641 or Maclain Berhaupt 518-465-3233.