A $5B Turning Point for Reducing Homelessness

An influx of federal coronavirus relief funds and a downturn in travel allowed cities and states to buy or lease hotel and motel properties at the beginning of the pandemic and turn them into shelters for homeless populations. 

When the next round of federal funding targeting homelessness—the American Rescue Plan Act’s nearly $5 billion for HOME Investment Partnership Programs—is sent to state and local governments this fall or winter, hotel and motel acquisitions and other plans jump-started by federal funding could be part of long-term efforts to reduce homelessness once the pandemic has passed.

“Even though this money is somewhat temporary, I think there is a big effort at the local level to not only address the short-term impacts of the pandemic but also the long-term,” said Eryn Hurley, associate legislative director at the National Association of Counties.

The federal money can also be used for rental assistance and various homeless prevention services, but states and local government are finding the most long-term benefits developing noncongregate shelter, including by purchasing hotels and motels. 

The nearly $5 billion in emergency funding could be a turning point for reducing homelessness in the United States. Nationwide, about 600,000 people are without homes on a given night, according to the National Alliance to End Homelessness. The federal funding could provide housing for about 100,000, Nan Roman, the group’s president and CEO, said.

“I have my fingers really crossed that we’re going to be looking at it as having been a significant contribution to reducing the number of homeless people,” Roman said. “That money could end up developing somewhere between 20,000 and 30,000 units of housing. And that’s a significant number.”

Buying Hotels and Motels Provides Long-term Benefits

The HOME program, a 30-year-old grant program administered by the federal Department of Housing and Urban Development, is meant to help local governments address homelessness by providing services and acquiring temporary shelter and permanent housing. 

The $1.9 trillion American Rescue Plan Act provides an additional $5 billion for the program, with all but $75 million of that amount going to grants. The sum represents a major boost for the program, which in a typical year receives around $1 billion. Congress provided $1.35 billion for the program in the most recent fiscal year.

Because the American Rescue Plan Act funding provides one-time money and cities and states must balance their budgets, the influx is not a great match for expanding services and rental assistance—ongoing programs with no end dates. 

But using the money for big line items like buying hotels, motels and other housing stock could have lasting benefits, Roman said. California showed that approach could work, acquiring 6,000 units of hotel and motels from April 2020 to the end of the year.

The country is seven million units short of having enough affordable units for low-income households that need it, Roman said.

“We have a big, big hole to fill so this is a good step in that direction,” she said. “We need to create stock, and this is a way to create stock quickly. … The housing acquisition and development is really what has the potential to add affordable units.”

The funding could be even more effective if it were more quickly sent to states and local governments, Roman said. The governments are still waiting for both money and HUD guidance for the HOME funding in the $1.9 trillion spending law enacted in March. 

As private-sector investors expect the hospitality industry to rebound, the costs of acquiring hotel and motel units is rising, Roman said.

Minnesota Housing Commissioner Jennifer Ho said her state’s acquisition of hotel and motel stock was possible because of money provided by the Federal Emergency Management Administration during the pandemic.

“When there are disaster resources available that are scalable, you can do things that you can’t do with the way the regular programs operate,” she said. “When you get these kinds of resources that otherwise wouldn’t be available to communities and use them in strategic ways, you can suddenly move the needle on something.”

Speeding Up Existing Plans

Housing officials at every level of government in Minneapolis had been focused on increasing shelter and permanent housing, and reducing barriers to people who needed to use them, before the pandemic.

“The pandemic created an urgency around something that always should have felt urgent,” Ho said. “Homelessness is a racial justice crisis; homelessness is a public health crisis every day. But we didn’t have federal and state resources targeted to it as such until we had a pandemic.” 

Katie Topinka, manager for policy, research and outreach with the Minneapolis Community Planning and Economic Development Department, said the city has aimed to use federal funds to “improve our system both in the immediate term to respond to Covid, and to make strategic investments that will be lasting beyond the pandemic and improve our homelessness response system moving forward.”

Two new low-barrier shelters—shelters that aim to reduce common barriers to service including curfews, background checks and prohibiting pets—focused on Native American residents also opened in Minneapolis during the pandemic. 

The city, Hennepin County and state of Minnesota used parts of previous federal funding allocations to open a 50-bed shelter owned and operated by the nonprofit American Indian Community Development Corp.

Another partnership with nonprofit Avivo opened a facility with 100 indoor tiny homes, also targeting Native American people, who are overrepresented in the Twin Cities’ homeless population.

“Often, housing development projects can take years, and these are two examples that happened in a matter of months,” Topinka said. 

In the case of the Avivo facility, a plan had not been in the works before the pandemic. But the city, county, state and nonprofit were able to go from the planning to operation in mere months, Topinka said. The local governments had strong working relationships with each other and the homeless advocacy community, she said, and were able to quickly put the federal money to work.        

The city council of Hillsboro, Oregon, a city of just more than 100,000 residents outside Portland, set its annual goals in February that included addressing homelessness, including buying a new shelter. 

The city had options for funding additional homeless services, including using its general fund and asking Washington County for help. Those sources, and a tax from a multicounty planning agency, will still likely be needed to run an expanded homelessness program, but the federal funds provide a jumpstart, Assistant City Manager Rahim Harji said.

“We’re not looking at this federal funding as making a huge dent in our homelessness issue,” Harji said. “We’re looking at this as a start to be able to make that dent long term.”