The TYP held a public conversation last night, Wednesday, May 19, 2010 at the Cansler YMCA about the cost of permanent supportive housing (PSH). Bill Lyons, the City of Knoxville’s Senior Director of Policy & Communication, acted as moderator. Jon Lawler, Director of the TYP, delivered a presentation about the cost of PSH in the context of the Flenniken Housing development. The meeting was well attended, and the conversation, once again, was respectful and helpful on several different levels.

I’ve transcribed my notes from the conversation below, edited for clarity, with absolutely no concern for brevity. I’ve incorporated information from the PowerPoint slideshow Jon Lawler used to support his presentation.

Notes

[These are my notes. I tried to capture as much of what was said as I could. If I've misrepresented anything here, or left out something you believe to be significant, please mention that in the comments below this post.]

Attendees included several City Councilpersons (Marilyn Roddy, Nick Pavlis, Nick Della Volpe) and at least one County Commissioner (Finbarr Saunders). Apologies if I’ve missed anyone. Also in attendance were several members of the staff of the City’s Community Development department. The format of this meeting was one hour. The first half hour was mostly used for presentation, the second half hour was for conversation with attendees.

Bill Lyons, Senior Director of the City’s Policy & Communications Department, acted as moderator. He focused this meeting’s topic on the cost of permanent supportive housing (PSH), and mentioned that this meeting is the second in a series to fully explain and dialog about the components and strategies connected with our community’s efforts to end chronic homelessness.

Dr. Lyons also mentioned that it would be inappropriate to begin this discussion without mentioning that we have a baseline of cost already. We’re not starting from zero. The costs we presently incur are counted in places like the Knox County Jail, hospital emergency rooms, etc., and the tax dollars presently being spent in our community to cover those costs. Part of the impetus behind the TYP, and behind the development of more supportive housing in the community, is the great cost we already bear.

Jon Lawler presented the agenda:

1. Introductory Comments by Dr. Bill Lyons
2. Presentation of the Cost Components of Permanent Supportive Housing (PSH)
   1. Development Cost
   2. Operational Cost
   3. Case Management Cost
3. Questions from the Audience

The majority of those who’ve been placed in housing in connection with the TYP have been placed in already-existing housing in the community. Our TYP has the ambitious goal of ending chronic homelessness in ten years, mainly by providing housing with support. We have enough affordable housing stock to meet some of the need, but not all. New housing will need to be developed. Since housing with support is the means to end chronic homelessness, we want to address the cost of providing housing with support, and we’ll do this by examining what it will cost to develop and operate a new PSH project.

PSH is essential to end chronic homelessness, but the TYP does not have access to unlimited resources to develop affordable housing. Our office must ensure that PSH units could be developed by an entity that could utilize all of the sources of funding that are available for this type of development. Southeastern Housing Foundation (SHF), a 501(c)(3) non-profit affordable housing developer, offers its services as development partner of the TYP. A key part of SHF’s role is to increase the stock of PSH by aggressively assembling multiple layers of funding for each development.

This task is very challenging, and is undertaken by developers with a mission to develop this type of special needs housing. SHF has a deep commitment to that mission. What is the methodology SHF or any other PSH developer uses to fund the development cost of PSH? Flenniken Housing is a good example of how these developments are put together.

Development Cost: The Flenniken Example (Cost: approximately $7,050,000)

Low-Income Housing Tax Credits (LIHTC): $3,100,000
The federal government created the LIHTC program in 1986 to stimulate the development of affordable housing. Developers compete for award of tax credits which they then sell to a for-profit tax credit investor. These are typically banks and other financial institutions like them. This investment becomes equity in the development, so the investor is a financial stakeholder in the development.

Federal Home Loan Bank (FHLB) Grant: $1,000,000
The FHLB system is composed of 12 regional FHLBs with many member banks. “[Its] Affordable Housing Program (AHP) is one of the largest private sources of grant funds for affordable housing in the United States. It is funded with 10% of the Federal Home Loan Banks’ net income each year. The AHP allows for funds to be used in combination with other programs and funding sources, like the Low-Income Housing Tax Credit. These projects serve a wide range of neighborhood needs: many are designed for seniors, the disabled, homeless families, first-time homeowners and others with limited resources. More than 623,000 housing units have been built using AHP funds, including 391,000 units for very low-income residents.” (Here’s the source link for the quoted material.)

Federal Pass-thru Dollars
These funds are appropriated by Congress and come to local governments as federal grants to be spent at local discretion within established parameters in support of federal spending priorities. Flenniken has the following federal monies in its funding mix:

• CDGB (Community Development Block Grant) Funds: $100,000
• HOME (HUD’s HOME Investment Partnerships Program) Funds: $250,000
• NSP (Neighborhood Stabilization Program) Funds (Stimulus Funds): $800,000

TCAP/Monetization Funds: $1,500,000
TCAP (Tax Credit Assistance Program) provides funds directly to state housing finance agencies, like the Tennessee Housing Development Agency, to disperse to existing tax credit developments in need of additional gap funding. This program came into existence in response to bad conditions in the tax credit market that began to create serious difficulties back in 2009 for developers with tax credits in their developments. TCAP funds make up the difference between the value of tax credits and what those tax credits could actually be sold for in the market subsequent to the economic troubles of late 2008 and thereafter.

First Mortgage (CITC Loan): $300,000
This will be the only permanent debt carried by Flenniken.

Jon stopped at this point for questions, acknowledging that this had been a very complex part of the presentation. This is fairly typical of an affordable housing development’s funding package. All of these funds must be on the table to make deals like this work, and it is very difficult to put all of this together.

Barbara Disney asked which of these funding sources has to be paid back. Jon said that every source here is a grant, except for the first mortgage. That is the one source that, like any loan, must be repaid.

Joe Minichiello asked how else the money represented here could have been used. Jon replied that all of the funding represented here except the federal pass-thru dollars have to be used to develop affordable housing. David Arning added that affordable housing development was a focus of the NSP program.

Will these developments always be this expensive?

Jon next addressed the issue of costly developments. Will PSH projects always carry the high price tags associated with Minvilla and Flenniken? No, they won’t. But let’s look at why these two are particularly expensive compared to new construction.

Minvilla: The old 5th Avenue Motel was designated as a historic rehab before it ever was considered as a site for PSH. Historic preservation creates design inefficiencies that increase cost. PSH in general, and Minvilla specifically, has more common area than typical affordable housing, and this adds cost. There’s also more office space necessary due to the onsite presence of case managers and a management company.

Flenniken: Classified as an adaptive reuse project: an old school is being converted into apartments. Adaptive reuse commonly generates a higher per-foot rehab cost than new construction. KCDC’s Eastport School development (elderly housing) has a similar if not higher price per square foot. Certain design elements also add cost: 12 foot corridors, generous community space (gymnasium), and extra office space. Certain construction factors add cost: the dilapidated condition of the building and the extensive amount of environmental abatement work that needs to be done there.

New construction of PSH will not be as expensive as these two exceptional examples. New PSH can be developed at very close to the done at market rate for typical affordable housing plus a little more for necessary additional common area.

Who are the residents and what do they pay?

It is estimated that:

• 40% to 50% of the chronically homeless population qualify for Supplemental Security Income (SSI), which currently pays $674 per month
• 10% of the chronically homeless do not qualify for SSI but earn an income equal to or greater than SSI
• 40% of the chronically homeless do not qualify for SSI and earn less than what SSI pays.

None of our residents have sufficient income to pay fair market rent on their own, which means they need rental assistance. This rental assistance is provided in the form of a Section 8, Tenant-based voucher. In our community, the Section 8 program is administered by Knoxville’s Community Development Corporation (KCDC).

Operating Costs

Operating costs are a little bit higher in PSH than they are in typical affordable housing. On average, it costs about $3,200 per year to operate a typical affordable housing unit. It costs closer to $4,500 to operate a typical PSH unit for a year. Why is this? It costs more to staff PSH because the needs are a bit more intensive. For example, at Flenniken, an overnight staff presence every day adds cost. Utilities, repair and maintenance, and taxes and insurance would be very similar to typical affordable housing. The management cost will be higher than typical because of the level of expertise required to manage a PSH development. The role of the manager is to maximize revenue, control expenses, and preserve the value of the physical asset.

About developer risks and rewards

Jon mentioned that it’s been said that developing PSH is about easy money and no risk. Quite the opposite is true. This is very hard work, and it’s also quite risky. Tenant revenue is highly unpredictable, and the majority of expenses are fixed as opposed to variable. Folks who have been chronically homeless means are tenants who never have enough personal income to pay fair market rent, and even fair market rent does not ensure cushiony surpluses of funds. PSH providers in Knoxville/Knox County are dependent upon a working relationship with KCDC to have access to tenant-based assistance when it is needed. If assistance isn’t available, then providers are going to be housing someone without the ability to collect sufficient rent, which decreases operating reserves. Additionally, PSH providers are staffing and operating a property with higher than normal fixed operating costs and must maintain higher than normal reserves so they can do things like fund those tenants who are still working on gaining access to sufficient funds to pay rent. This is an extremely challenging operational model, and it takes a special kind of mission-driven company to meet it.

Case management cost

Case management cost is an expense beyond the operating budget of a PSH development, Funds for case management come largely via philanthropic support from the community. HPRP (HUD’s Homeless Prevention and Rapid Re-Housing program) funds; other grants from government sources like SAMHSA (the Department of Health and Human Service’s Substance Abuse and Mental Health Services Administration); and, potentially, pay for performance from the Knox County Sheriff’s Office based on savings realized by the jail (the largest provider of mental health services in Knox County) through housing people who have been chronically homeless.

Discussion

Bill Lyons moved the conversation into its second half. There aren’t many ground rules here, but let’s keep this more to questions and less to extended comments.

Bill Murrah spoke. A lot of concern has been expressed by people saying “not in my back yard.” Wouldn’t it be wonderful if we could have access to people who live in neighborhoods close to the kinds of people and facilities we’re talking about? I’m one of those people who lives in a neighborhood like that. I raised my kids in 4^th and Gill and nobody has ever bothered them. Our area is not a high crime area, and I challenge anyone to find an area whose property values have increased more than ours have. Our neighborhood is safe, even though it’s right next to the mission district. I have a brother who is schizophrenic, and who lived in a supportive housing situation. He lived as full a live as possible because of the support he got there. I want to allay the fears that people attach to this issue.

Joe Minichiello said that the $800,000 development fee for Flenniken was a lot, and that it seems that Southeastern Housing Foundation will become the owner of Flenniken without incurring any risk. Who determines what kind of development fee a developer is entitled to? Bill Lyons replied that the fee is suggested by THDA (Tennessee Housing Development Agency, the agency that administers the Low-Income Housing Tax Credit program, the Housing Trust Fund, and many other programs designed to stimulate development of affordable housing). The developer fee is essential to maintain and operate PSH facilities. SHF is a nonprofit, and their developer fee has to be channeled back into their mission, which is development of affordable housing. David Arning stated that the developer fee cannot exceed 15% of “eligible expenses” as stipulated by the IRS, and that these expenses are less than the total project cost. This fee looks fat on paper, but there’s a risk that you’ll never see it. The risk is in the recapture of funds. The developer makes certain guarantees to investors and if the developer fails to deliver on those, the investors will come after the developer. LIHTC is the single most important incentive to the development of affordable housing, and the developer fee is the lone incentive to the developer, besides the fulfillment of a charitable mission. These fees are critical to building reserves and are the sole source of income for a non-profit developer like SHF.

Nick Della Volpe asked whether or not it was easier to get money for Flenniken and Minvilla because the buildings were old. Jon Lawler responded that their age really didn’t’ have anything to do with making it easier to get money into the projects. He mentioned that Minvilla has Historic Tax Credits, but that Flenniken does not. Bill Lyons said that the City tried without success to find private developers for Minvilla. The development of PSH there will preserve a significant structure that will be a very attractive gateway between downtown and the surrounding neighborhoods.

Dan Smith asked a question about the ratio of clients to case managers in PSH. He said that we seem to have moved from a 10:1 to a 25:1 ratio and seemed to be asking if, even with this higher ratio, we could afford to pay all of the required case managers. Bill Lyons said that these developments don’t happen at that kind of pace. They come online one at a time at the rate of about 50 units per year or so, which means two new case managers at a time, and that organizations providing case management services in them have to step up and meet the challenge of raising funds to support case management delivery. If at some point over time an organization reaches what it believes to be the limit of its capacity to support this activity, we will not try to push beyond that. Sustainability is addressed on an ongoing, project-by-project basis. How do we know we can always raise the money to provide these services? We don’t have a guarantee that we can do any of these things going forward. Nothing comes with that kind of assurance attached to it, but we still move forward and do the very best that we can.

A gentleman named Tim spoke about the need to address the spiritual needs of people who experience homelessness. You can’t just give them a place to stay. People become homeless because of very bad things that occur in their lives, and we must show them compassion.

Ron Peabody asked how many chronically homeless people have been identified in HMIS (Homeless Management Information System, the main database used by service providers to gather data about homeless people in our community). Jon Lawler replied that approximately 1000 people designated in the database as chronically homeless received services in the last year. Mr. Peabody asked what the goal for PSH development is. Jon said that SHF can do one project per year, and that existing stock is being used on a regular basis, and that we’re developing a better understanding of what we need to develop in our community. Mr. Peabody said that 500 people are on KCDC’s waiting list for Section 8 vouchers. Jon responded that the wait list has been revised to a smaller number since Mr. Peabody got his information from KCDC two weeks ago, and that there is not a limitless supply of vouchers. [We met with KCDC the morning of May 19 and the wait list has been revised to approximately 270.] There is an art to making vouchers work. KCDC is not simply handing them out. This is one reason the developer of PSH must have sufficient reserves—to cushion against the unpredictable revenue from PSH tenants.

Stephanie Matheny asked David Arning what SHF has risked, so far, at Flenniken? David replied that SHF has $95,000 in Flenniken so far, of non-recoverable dollars that would be lost if the project fails to go forward.

Someone asked if any surplus funds would be reinvested in local projects, or would SHF develop outside the Knoxville/Knox County community? David Arning responded that SHF’s focus is on this community.

Nick Della Volpe asked if we could mimic the nursing home care continuum, in the sense that residents of a relatively costly kind of supportive housing could be helped to the extent that they’d be capable of moving into less-expensive housing. Jon Lawler answered that PSH isn’t the only kind of supportive housing and that it’s not appropriate for everyone. Tenants are not just put into housing, and residents of a particular development are not all at the same place with regard to the level of their disability and need. Barbara Disney added that residents who have Section 8 vouchers can take those vouchers with them to less expensive environments if they want to.

Duane Grieve asked if it is realistic to think that we can do away with existing cost as we fulfill the mission of the TYP. Jon Lawler responded that the TYP calls upon us to end chronic homelessness, but that it also calls upon us to do a lot of work to prevent homelessness in the first place. Mr. Grieve asked if we wouldn’t be adding new chronically homeless people each year. Bill Lyons responded that it’s not like there are slots that people move out of when they’re housed that are immediately occupied by some new chronically homeless person. Every person who is not stuck in the cycle of chronic homelessness is one person who is not adding to the cost borne by the community. We want to minimize the number of disabled people stuck in homelessness because it’s the right thing to do and because when they’re living on the street they are utilizing so many costly services.

Dave Gartner expressed disappointment that we didn’t provide a spreadsheet with costs of actual operations broken down into dollar figures.

Ron Peabody mentioned that TennCare is making major cuts and dropping people from its rolls. He asked how this will effect service delivery for mental health and basic healthcare. Ginny Weatherstone acknowledged that this places a burden on the service provider community. She indicated that she had been in contact with Cherokee Health Systems and Helen Ross McNabb Center to discuss this issue and that both of them are committed to continuing to serve their patients and clients who lose insurance provided by TennCare. She said that all agencies like these will continue the aggressive pursuit of other sources of funding, as in the example of the City’s recent submission of a Mental Health Transformation Grant to SAMHSA in partnership with Volunteer Ministry Center and Helen Ross McNabb. The bottom line is that there are people in the community who need this kind of help, and those who are committed to serving them will have to work harder to make sure they can deliver that help.

Suggestions

I had a very good conversation with an attendee after the meeting. She recommended, among other things, that a good topic for a meeting like this one might be the rationale behind the scattered site approach to PSH development. That approach is advocated in the TYP. There are good reasons for it, and she would like to hear them explained and opened up for dialog.

Another attendee offered some recommendations about presentation and materials that might be made available at these public conversations. We employed far too many acronyms in our speech and presentation materials, and this creates confusion and misunderstanding. Acronyms hurt. Spell things out. Point taken.

Some folks (I don’t think Dave Gartner was alone in this) wanted to see much more financial detail. This kind of material should be put on our website, along with images and reports on progress. Minvilla’s budget info has been up for a while. I need to update it, I’m sure. I’ll check on that and adjust as appropriate. I’ve not created a similar resource for Flenniken, but I will have it up within the week.

We need to create a handout for each of these meetings, and it seems reasonable to think we should make the same content available online.  The suggestion is for a two page piece printed double-sided on one sheet that contains links to additional information online.

All good suggestions. I’ll follow through on them.

Next meeting

The next public conversation will be held at the Deane Hill Recreation Center from 6-7pm on Wednesday, June 23. The topic will be how the Ten-Year Plan came about. Dr. Roger Nooe, our community’s recognized expert on the subject of homelessness, Mike Dunthorn of the Ten-Year Plan office, who helped write the plan, and Linda Rust, of Knox County’s Community Development Department, who facilitated Community Concerns working groups’ input in the TYP’s formation for a period of about a year, will present as a panel. We’ll follow the same basic format. First half hour presentation, second half conversation about the subject.

Check out WATE’s story on the cost of emergency medical transportation, and its heavy utilization by people who are homeless. Since April of this year, as of air time for this story, ambulances responded to 523 emergency calls from the 400 block of Broadway, where many people who are homeless seek shelter, food, and other services.

The story points out that Knox County spends over half a million dollars a year just to transport indigent people to the hospital, not inclusive of the care they receive once they arrive.

People who are chronically homeless are by far the heaviest consumers of emergency medical services like ambulance services. For a more complete look at the costs associated with letting a person who is chronically homeless continue to live on the streets, look at this study. It’s as brief as it is shocking.

And as Mike Dunthorn points out, we’re all paying the bills accrued by people who don’t have housing. We know that those costs go down when we help people off the streets and into a safe, secure, permanent home, and provide them with professional case management services. It is only then that they can really begin to effectively address the issues that led to their homelessness in the first place.

This approach is called Housing First. It provides a safe, secure environment for the most vulnerable people on the streets. It reduces costs to the community. It is humane, and it works.  That’s why the Ten-Year Plan is such a strong advocate for this approach.

The national figures demonstrate that the number of homeless people experiencing chronic homelessness — our most vulnerable and disabled neighbors — dropped from nearly 176,000 in 2005 to fewer than 124,000 in 2007, a decrease of nearly 30 percent.

People who are chronically homeless are unaccompanied disabled individuals who have been continuously homeless for over one year or who have had at least four episodes of homelessness in the past three years. They make up perhaps 10-15% of the entire homeless population, yet they consume about half of all resources directed towards all people who struggle with homelessness.  (Our FAQ will help you learn much more.)

“Why have these numbers fallen?” Mangano asks. He locates the answer in a paradigm shift from managing homelessness to ending it.

Cost studies that have tabulated the expenses to keep someone in homelessness indicate that those costs are actually more expensive than providing the solution: housing with the needed support services.

In fact, studies done in many communities tell us that the costs range from $35,000 to $150,000 per year for each person. People experiencing chronic homelessness are “high fliers” in many community systems.

The cost of supportive housing in those communities ranges from $13,000 to $25,000 per year for each person. You don’t need to be Warren Buffett or a hedge-fund manager to figure out which is the better investment. Housing is the central antidote, both morally and economically.

It costs us approximately $40,000 per year to maintain a chronically homeless person on the street here. Most of that cost is related to law enforcement activities and other emergency services. All of them are expenses paid for by taxpayers.

As the Ten-Year Plan gains traction, and as our community changes its approach from paying to maintain street homelessness to investing to end it, we should see our community’s experience line up with what’s going on nationwide.

Ending homelessness is the right thing to do, economically and morally. It’s encouraging to see these numbers come down with regard to people who are chronically homeless.

““Probably about $400,000 a year is what we spend just on psychotropic drugs to treat the mentally ill. I’ll tell you, we are the largest mental health facility in East Tennessee,” says Jones.”

That quotation comes from a story (Sheriff: 1 in 5 Knox Co. inmates is mentally ill) published at WATE yesterday.

Sheriff Jones advocates an overhaul of the present system, one that includes permanent supportive housing, which is the cornerstone of the Ten-Year Plan. Our plan commits us to permanently housing homeless people as rapidly as possible while providing those now-housed people with customized supportive social services to ensure that the greatest possible number of them stays successfully housed and moves towards independence. This model is humane, it is tested and proven, and it is cost-effective. You can learn much more about it here.

Permanent supportive housing reduces the amount of money a community spends to serve homeless people. People in permanent supportive housing dramatically reduce their need for, and consumption of, psychiatric inpatient services, and other emergency services, such as emergency rooms, jails, and emergency shelters.

In communities in which the model has been applied, the cost of Permanent Supportive Housing is offset by savings in emergency services, jails, and law enforcement.

Permanent supportive housing is the right thing to do. As Sheriff Jones points out, people who are mentally ill need treatment, not incarceration. Some of the Knox County jail’s most frequent repeat inmates are chronically homeless people who are mentally ill, and jail’s not the best place for them to be. We’re glad to have such a strong advocate in Sheriff Jones.

The old 5th Avenue Motel on the corner of 5th & Broadway has been a rough spot for a long time. You can find all kinds of stuff about it in the press, online, and on the tips of the tongues of people who are interested in the renascence of the Broadway and 5th corridor.

A lot of that info is recent. Some of the most germane is below. This post is related to cost and purpose: what this project will cost, who’ll pay for it, and what it’ll do. If you’re interested, you may have more questions. If so, comments are welcome. So are phone calls. As long as they’re not in the middle of the night.

Cost: well below $200/sf.

There’s been a lot of speculation about the cost of this project. It’s definitely not cheap. Minvilla is an expensive project because it’s historic rehab. When early estimates hit the papers and the pixelverse, they were very low. The former developer made the best estimate that he could with the information he had at the time. We now have much better information (completed construction documents, for one thing) and a firm estimate. It is much higher than the preliminary one to which people indexed their expectations, but it is also realistic. Based on revised cost estimates and post-rehab square footage, the cost is well below $200 per square foot.

Where will the money come from?

Corporate investors will supply approximately 75% of this project’s funding. The investors who purchase the equity generated by historic tax credits and low-income housing tax credits, the bank issuing the mortgage, the Federal Home Loan Bank, all of those are ultimate sources of funding for this project and others like it. These investors see this project as a good investment in our community, and their dollars could come to Knoxville from anywhere.

Another 25% of the funding for Minvilla will be public funds set aside by the Federal Government for the purpose of making housing available to those who otherwise couldn’t afford it. Other dollars are set aside by the Feds to be disbursed by local entities like the City and County, both of which are committed to ending chronic homelessness.

Why not do this somewhere else? Aren’t developers interested in developing a market rate project at Minvilla?

Nobody involved with this project is seriously entertaining notions of developing some other permanent supportive housing project in lieu of Minvilla or of selling the property to a private developer. Any professional developer who considers purchasing this property is probably going to be aware that prior to its transfer to Volunteer Ministry Center, at least two different developers tried to make a go of something there and couldn’t make the numbers work. That was in a much stronger real estate market with much lower construction costs than today’s. If Minvilla were such an attractive property to developers, VMC would not own it right now.

Too, Minvilla has access to low-income housing equity to the tune of about $2 million. That’s around a third of this project’s financing. That money goes away if you do a market rate project there.

Expansion of what?

Minvilla does expand the footprint of VMC in 5^th & Broadway. That is a technical fact. But Minvilla’s not a business-as-usual expansion of homeless services in the mission district. And that is the truth.

Minvilla is permanent supportive housing, which is the proven, effective approach that we will use to end chronic homelessness in Knoxville. Minvilla’s not going to be a shelter or transitional housing or a feeding program or a street ministry or a sidewalk-strangling swarm of panhandlers. Instead, it’s going to be an apartment complex that will house rent-paying residents.

All of Minvilla’s residents will have some things in common: relationship with a case manager, some form of income, accountability, healthier relationships. The most significant of those things they’ll have in common? They won’t be homeless anymore. They’ll be like this guy.

Gary Waddell is the kind of resident who’ll be at Minvilla. He’s one reason that it’s fair and true to say that Minvilla does not represent an expansion of service to homeless people. Minvilla is about ending homelessness.

This project at Flenniken was to have been permanent supportive housing for people who are chronically homeless, one small part of addressing another part of a huge complex of issues.

Our focus is on one fraction of people who are homeless. The people that permanent supportive housing will help are people who have been homeless for a long time due to serious disabilities.

Disability does NOT mean they’re just bums, or that they just lack gumption or drive or people skills or that they’re simply lazy. These are people who struggle with various kinds of mental illness and substance abuse, much of the latter being due to their attempts to self-medicate for their mental illness.

These are also people who who have decided to leave homelessness. They need help. They know they need help. A lot of help.

And we should give it to them. Why?

Simple economics, for one thing. It costs less money to give them this help than it does to keep on doing what we’re doing now. It costs less to place these folks in a safe, secure, permanent environment and supply them with social services than it costs to leave them on the street where they’ll cycle through jail, rehab, the emergency room, and the streets on a perpetual, costly treadmill.

Those of you who are talking about your tax dollars being wasted are right. The way we do things right now is a waste of your tax dollars. You’re spending about $40,000 per year, right now, to keep a chronically homeless person on the street. Jail is no place to house people who are mentally ill, but that’s what it’s become, and you’re paying for it. Emergency rooms are no place to go for primary care at an average of around a thousand bucks a pop, but that’s where chronically homeless people go. You’re paying for that too. The list goes on, and it doesn’t do anything to end homelessness.

That’s the status quo: your tax dollars at work. Who wants to keep doing things that way?

Permanent supportive housing changes things for chronically homeless people. It ends their homelessness. It’s being done in other cities on a large scale, and it’s demonstrated by ample evidence to be cost effective. It also, not surprisingly at all, reduces the number of people you see hanging out in the streets in those cities.

Our office is not going to solve all the ills of the streets. We’re here to help this community tackle the issue of chronic homelessness, and that’s enough of a challenge all by itself. If we can meet it, we’ll end up saving public funds because chronically homeless people on the streets consume so many resources. We’ll make our city a better place to live. And we’ll give some of our most vulnerable neighbors their best opportunity to become healthy members of our community.

I said these things because, as you can see for yourself, some of the comments on this story got a little bit away from what we were actually trying to accomplish at Flenniken. I wanted to make at least an attempt to bring them back to the issue of what we’re actually trying to do: end chronic homelessness.

One commenter said

If they where from here, then we should help. Most are from other states (95%).

To which I replied

This statement is false.

Actually, when the last survey was completed in 2006, over half were Tennesseans. That’s been very consistent as long as this issue’s been studied here.

You’re repeating a little urban myth that’s common everywhere there are people who are homeless.

We hear this kind of assertion all the time. Even if it were true, it seems to me that it’d be irrelevant. To paraphrase a famous and obviously successful campaign meme of relatively recent vintage, “It’s about the economics, stupid.”

It doesn’t really matter where people who are chronically homeless come from. If they wash up on our shores, and start camping on our beach, they’re still going to cost us forty-thousand bucks per person per year to maintain them the way we do it now. Although maybe they should, the jail and the emergency rooms and the rehab programs and the ambulances don’t give us a discount just because people who are homeless in our community are born inside the boundaries of Knox County.

Anyway, we’ve got some thinking to do about how we’re thinking. I get the sense that many people are so frustrated with the issues of homelessness and panhandling and perceived increases in crime and violence and the obviously negative impact these things make on the livability of some parts of our community that they lump all of these problems together into a big emotional ember they carry around in their bellies. It feels like “a problem” when really it’s a whole system malfunction.

We can change the ways we think about this system. It’s not a problem to be solved by one agency or another. It’s a complex system that must be addressed in a different way, a much more holistic way, by our whole community–private citizens, faith-based organizations, service providers, law enforcement and other government types alike.

Dr. Roger Nooe is the leading expert on homelessness in our area. Every two years he and a team made up of homeless services providers, students, government types, and others who are just interested conduct extensive field research on people who are homeless in our community. Dr. Nooe authors a biennial study based on that research. The last one telescoped back to 1986, providing a detailed examination of homelessness here for the past twenty years. Click here to download your own .pdf copy.

But one barrier to housing homeless people is neighborhood opposition. Many people are not happy to hear that permanent supportive housing is going to be developed in their neighborhoods. They are concerned with the effect on crime, vagrancy, and property values, among other things. Many people think permanent supportive housing and homeless shelters are the same. They’re not.

As it turns out, permanent supportive housing might just have a positive impact on neighborhood property values. Check out Daniel Rubin’s article from The Philadelphia Inquirer, republished below since it was taken down at the Inquirer’s website.

Project HOME confounds property-value naysayers

By Daniel Rubin, Inquirer Columnist

One day last summer Sister Mary Scullion promised me a heart-warming Man Bites Dog story.

We were standing outside Project HOME’s offices at 1515 Fairmount Ave., and she was noting with
some satisfaction how properties in the next block were going for $900,000.

“I think real estate values actually increase when we put a facility for the homeless in a neighborhood,”
she said, eyes twinkling.

That would be news if you could prove it, I told her. Patience, she counseled.

Well, now it can be told. After a year of study, Econsult is about to release an analysis of the way
Project HOME’s 15 facilities affect local real estate values.

The summary: Where homes in Philadelphia have risen in value an average of 5 percent since 1993, they
have risen 6.8 percent within a quarter mile of Project HOME sites.

How could this be?

Every one of those facilities attracted neighborhood opposition, none louder and uglier than at 1515
Fairmount, where federal judges twice had to order the city to stop its obstruction.

Property values would plunge, residents predicted, and crime would rise. One neighbor, a lawyer,
prophesied that “crudeness and evil” would visit the good citizens of Fairmount and Spring Garden.

Econsult’s findings don’t chart crudeness and evil, although there is a lot of talk about hedonic regression
and dummy variables.

Sharper eyes

Eager for expert opinion, I called the Wharton School of Business at the University of Pennsylvania. A
research fellow there named Kevin Gillen called me back. The name rang a bell.

“Aren’t you the author of the report?” I asked.

“I am,” he replied. “I wear two hats. I’ll be the first to admit, and on the record, that even I was surprised
by the results.”

Gillen, an Econsult vice president, said he warned Sister Mary during their first conversations that she
might not like the results of the study. Then the numbers started coming in.

While Econsult found some initial dips in property values, they quickly recovered, then rose higher than
in the rest of that zip code.

The reason, Gillen said, is that Project HOME typically moves into economically distressed
neighborhoods and improves the buildings, which often had sat vacant.

Better than the alternative

“No one necessarily wants a recovering homeless person or a recovering drug addict in their
neighborhood, but the alternative might be an active crack dealer.”

Wanting another view, I found Dennis Culhane, a social policy professor at Penn who has studied the
effect of public housing on Philadelphia real estate prices. He said Econsult’s findings were similar to
what he’d found looking at property values and public housing.

Culhane credits Project HOME’s savvy in selecting neighborhoods to invest in. “Even if these sites alone
are not driving the better-than-average property-value increases, they certainly are not dragging these
property values down,” he said.

“Sister Mary has some acumen when it comes to real estate investment.”

So heads up, speculators. You might want to be buying where Project HOME buys.

What would happen in pricey Chestnut Hill, where an opponent of housing for a few homeless families
last summer said approval of the project would make him feel as if he’d written a $100,000 check?
Gillen said he isn’t sure.

He says there aren’t enough data to gauge the effect of Project HOME’s three Center City facilities. But
Sister Mary notes that across the street from Kate’s Place, a shelter for low-income people at 18th and
Sansom, an Irish developer bought a vacant lot for $36.7 million.

“What I know is that since we’ve been there, we’ve had a very positive impact. Maybe the rise in
property values is all coincidence. Maybe we do have a good record picking neighborhods. What
matters is that everyone is on board to pitch in and improve quality of life.

“It doesn’t matter if you’re wealthy or poor. It’s are you really committed to improving the quality of
life?”

Contact Daniel Rubin at 215-854-5917 or drubin@phillynews.com.

We have every reason to believe that crime, vagrancy, and other negative issues will decline in areas where permanent supportive housing is developed. We know that cost declines. It’s good to see evidence that property values might increase when permanent supportive housing comes to a neighborhood.

The Parkway’s efficiency units were to have provided permanent supportive housing for formerly chronically homeless people. Every resident would have paid rent, and every resident would have been intensively case-managed. Most importantly, every resident would have been off the street and in their own homes.

Permanent supportive housing is demonstrated to save cost. Right now, it costs our community something in the neighborhood of $40,000 per year to maintain a chronically homeless person on the street. When those folks move into permanent supportive housing, the costs to the community fall dramatically. Increasing numbers of studies back that up. Here’s a link to one from Portland, Maine.

The Parkway, located at 3701 Chapman Highway, is very suitable for permanent supportive housing. Prior to its closing, it had historically been used as low-income housing; it’s located close to multiple, appropriate employment opportunities; and its proximity to service providers and bus lines makes its location excellent.

The Ten-Year Plan office was working with a nonprofit developer of low-income housing to pursue funding from the Tennessee Housing Development Agency and the Federal Home Loan Bank. No local funds were anticipated in the budget for this rehabilitation of the Parkway, but timing was critical. THDA’s application deadline for Low-Income Housing Tax Credits is March 19. The Parkway deal broke down at the acquisition stage.

Permanent supportive housing is provided in low-income rental housing and is an essential component of the Ten-Year Plan to End Chronic Homelessness. Knoxville faces a shortage of low-income rental housing. The Ten-Year Plan will continue to work hard to change that situation, so that we can move chronically homeless people off the streets and into homes of their own.

As Mayor Haslam mentions in the article, many chronically homeless people are mentally ill and became homeless after discharge from mental health facilities. These people don’t have family capable of meeting their needs, and they don’t have anywhere else to go, so they are effectively discharged into the streets.

Think about it this way. Those homeless folks you see, over and over, when you go downtown? A lot of them would have been institutionalized 30 or 40 years ago. They’re not institutionalized anymore. The State has been reducing its institutional capacity since the 1970s. Most of the severely mentally-ill live among us now. A lot of them live on the street.

It costs us a lot to support a chronically-homeless person. We spend an average of about $40,000 per year to do that, not including food and emergency shelter. Click here to learn more about estimated costs in Knoxville. When chronically homeless individuals gain access to permanent supportive housing, this cost declines dramatically. Click here to learn more about that. The cost discussion is about halfway down the page, but all of it’s worth reading.

There’s a shortage of affordable rental housing in Knoxville, and we need more of it to house chronically homeless people. “Affordable” means rental housing that costs up to 30% of the income of a renter who makes at or below 80% of the Area Median Income (AMI). For chronically homeless people, we need to be even more affordable than that: up to 30% of an income that is at or below 50% of AMI.

One thing we’ll be working very hard on over the next several years is building more affordable rental housing. That’s where permanent supportive housing happens. There is money available from outside the local community to build and operate affordable housing. It comes in the form of grants and loans from agencies like HUD, the FHLB, and THDA. The monies that come from those agencies originate with the Federal government.

Why do we need help from the state budget, then? Mostly we need it to help us provide supportive services.

Remember, chronically homeless people are disabled, by definition. Many of them are disabled specifically by mental illness and addiction. They will not succeed in housing by themselves. They need to maintain a strong relationship to a case manager who works to connect them with other appropriate supportive services.

That’s part of the reason Mayor Haslam is asking the State for help. We would like the State to invest along with us in delivering solid case management and other supportive services to people in Permanent Supportive Housing. The Mayor and his colleagues are asking the State to invest specifically in ending chronic homelessness in our local communities.