Permanent Housing and How to Fund It

Braided Rope Stock photos by Vecteezy

Research, practice, and lived experience all point to the same conclusion: people exit homelessness and stay housed when they can access safe, decent, affordable, permanent housing with the right level of support. Shelters, outreach, and supportive services are all essential, but we cannot end homelessness without also having an adequate supply of permanent housing resources.

This blog provides an overview of why permanent housing is critical to reducing homelessness and examines strategies Mecklenburg County and other communities can use to fund, scale, and sustain permanent housing when federal resources are insufficient to meet local need.

THE ROLE OF PERMANENT HOUSING IN ENDING HOMELESSNESS

Permanent housing, including permanent supportive housing (PSH), is an evidence-based, cost-effective, humane, and scalable solution to homelessness. Research consistently shows that when people regain access to safe, affordable, permanent housing with the level of support they need, they remain housed, decrease use of crisis systems, and experience improved health and stability. In Mecklenburg County, 2024 System Performance Measure data show that 82% of people who exit the homeless services system to permanent housing do not return to homelessness within two years. These data suggest that permanent housing is one of the interventions most directly associated with lasting exits from homelessness in Charlotte-Mecklenburg. Permanent Supportive Housing combines affordable housing with voluntary, flexible supportive services. It is especially effective for individuals experiencing chronic homelessness, persons with disabilities, and individuals with complex medical or behavioral health needs. PSH also stabilizes individuals’ ability to manage medications, maintain income, access treatment, and connect with community support.

HOW COMMUNITIES CAN FUND PERMANENT HOUSING WITHOUT FEDERAL DOLLARS

Due to limited federal funding for PSH, housing vouchers, and supportive services, communities must rely on local, state, health sector, and philanthropic resources to fund both capital and ongoing operations. While Mecklenburg County and the City of Charlotte have made significant investments in permanent housing, additional funding and more diversified funding streams are necesscary to meet the local need. The following are strategies communities have implemented to successfully expand permanent housing, stabilize long-term PSH operations, and reduce local homelessness.

Local Dedicated Revenue

Local governments can create predictable revenue streams used for long-term rent subsidies, operations, and services. These include:

• Property tax set-asides: Local property tax revenue permanently reserved to fund affordable or supportive housing.
• Sales tax allocations for rental subsidies: Portion of sales tax revenue dedicated to rental subsidies that keep housing affordable for low-income households or people exiting homelessness.
• Hotel or short-term rental taxes: Local taxes collected on stays in hotels, motels, or short-term rentals that are dedicated to housing.
• Local housing bonds that explicitly allow operating subsidy use: Financing tools that let localities borrow money to legally use for ongoing operating costs like rental subsidies and supportive services.
• In-lieu developer fees: Payments that developers make to local governments instead of building required affordable housing units. These fees can be used to create or support rental subsidies or provide organizations with operating support.

These revenue streams can create recurring sources of funding that can support local voucher programs, shallow subsidies, and ongoing PSH operations. They can also be used to fund local rental subsidy programs.

Local rental subsidy programs are an essential tool for expanding permanent housing options, especially in high-cost markets where federal assistance is insufficient. The types of programs described below give communities the ability to shape their own housing response while decreasing homelessness.

• Local housing vouchers: Locally funded rent subsidies that work like Housing Choice Vouchers, helping households afford market-rate housing when federal vouchers are unavailable.
• Shallow subsidies: Small ($200-$500 per month) rental subsidies that cover part of the rent to keep housing affordable for households with low or fixed incomes.
• Longer-term rapid rehousing: Locally funded extensions of rapid rehousing that provide rental assistance and case management for longer than 2 years to help households stabilize after exiting homelessness.
• Short-term stabilization funds: Flexible funding that helps households cover unexpected costs like missed rent, utility arrears, or emergency expenses so that they can remain housed.

Health Care System Investments

Hospitals and health care providers are increasingly investing in housing because it improves health outcomes and reduces high-cost, avoidable health care use. Stable housing lowers emergency room visits, inpatient stays, and use of crisis services, which ultimately benefits health systems financially. Health care providers have invested in housing systems in the following ways:

• Hospital community benefit dollars: Funds that nonprofit hospitals are required to invest back into the community. The funds can be used to support housing programs that improve health outcomes.
• Managed Care Organization (MCO) community supports: MCOs pay housing providers or service organizations to deliver supports that help their members get and keep housing.
• Value-based care arrangements: Health care payment models that reward providers for improving health outcomes and lowering costs. When stable housing reduces emergency care and hospitalizations, health care providers reinvest the savings into housing-related services.
• Direct hospital investment in rental subsidies: Hospitals provide rental assistance for patients who frequently use emergency or inpatient services because stable housing significantly reduces repeated high-cost care.

Philanthropic and Community Foundations

Philanthropic and community foundations play a critical role in expanding housing subsidies by supplying flexible dollars that fill gaps federal and local programs cannot cover. Their investments often make it possible for local housing programs to launch, stabilize, and operate effectively while longer-term revenue streams are developed. Examples include:

• Covering initial operating deficits: Philanthropic funding can help fill early funding gaps while new programs build occupancy, stabilize operations, and secure long-term revenue.
• Local voucher pools and shallow subsidies: Foundations or donors contribute funds that function like a local rental assistance program providing the gap funding needed to help low-income households afford market-rate units.
• Bridge rental subsidies: Philanthropic organizations provide temporary rental support for households waiting for vouchers, income, or Medicaid-funded services, preventing shortfalls that could lead to homelessness.

STRENGTHENING HOUSING SYSTEMS WITH BRAIDED FUNDING

A braided funding approach is when a community combines multiple funding streams in a coordinated way so that each source supports a specific and essential part of the housing system. This approach results in more flexible and responsive resources and helps build housing systems that are more complete, stable, and sustainable. Braiding local revenue with health care investments and philanthropic dollars creates a more resilient and stable funding structure than relying on any single source of funding. When these and other sources of funding are intentionally aligned, they create a durable foundation for permanent housing by ensuring that capital, rental subsidies, operating support, and supportive services are consistently funded. Communities that use braided funding are better able to respond to fluctuations in federal support, maintain and expand PSH, and sustain long-term housing stability for their residents. The braided funding approach reduces vulnerability to budget cuts, strengthens provider capacity, and supports a more robust and effective homelessness response system.