City Paying Less In Homeless Shelter Costs While Homeless Numbers Reach Record Highs; Legal Aid Raises Concerns About City Policy That Favors Shelter Over Permanent Housing
MONDAY, MARCH 18, 2013

A Wall Street Journal article today revealed that the City is paying less in homeless shelter costs because the federal government's share has increased even though the number of homeless families in the shelter system has increased substantially since Advantage, a rent subsidy program that had helped families and individuals leaving homeless shelters pay their rent for two years, ended in the Spring of 2011.

The Legal Aid Society sued the City in an attempt to continue the Advantage rent supplements for families and individuals who had already been relocated to permanent housing through the program. Although court orders continued the Advantage rental assistance through February 2012 for thousands of families and individuals who were already in the program in order to avert their evictions and repeat homelessness, the Court of Appeals ruled in June 2012 that the City could end the rental assistance if it chose to do so. At oral argument before the Court of Appeals, the City argued that because the City receives more reimbursement for shelter placements than it does for permanent housing rent subsidies ending the Advantage rental assistance for families in Advantage-subsidized apartments would not increase the City's costs if those families eventually had to enter the shelter system.

"They told the court that, 'It's actually not more expensive for us if these people [in the Advantage program] get evicted because these other branches of government are going to pick up a greater portion of the tab,'" Steven Banks, the Attorney-in-Chief of The Legal Aid Society, told the Wall Street Journal. "That's a pretty stunning argument. No administration has argued that in court before," he added.

Banks also expressed concern that the City allowed so much time to pass without any means to move people out of shelters, causing the homeless population to explode through inaction. "The City had a terrible case of tunnel vision," he said.

The Wall Street Journal
Homeless Costs Shifted
March 18, 2013
By Michael Howard Saul

The controversy over the record number of homeless New York City families has obscured a surprising fact: The state and city have saved millions of dollars on housing the burgeoning ranks of parents and children seeking refuge in local shelters because of an increase in federal funding.

Families have slept at city shelters at an increased pace since a rent subsidy for recently homeless people ended in spring 2011, their numbers rising by 35% since the program's demise eliminated part of the city's social safety net. The program, known as Advantage, had helped people leaving homeless shelters pay their rent for two years. City officials and advocates have blamed the end of the program, in part, for a record 50,000 people living in city shelters, including 21,000 children.

Yet as the city has raced to build shelters and provide services to more parents and children, its annual tab to run family shelters has decreased, dropping to an estimated $152 million in fiscal year 2013, from about $153 million in 2011. The city's cost was $137 million in 2012. The state's share has dropped even more dramatically: to about $34.5 million in 2013, compared with about $68 million in 2011.

The reason: The federal government is picking up a larger share of the cost of family shelters—60% in 2013 compared with 47% in 2011. Overall, including federal funding, the cost of running the city's family shelters has increased more than 10% since 2011.

The city and state saved even more when the loss of the Advantage program is taken into account. When the program ended, the city was spending $48 million and the state $65 million on Advantage. By contrast, the federal government paid less than 20% of the Advantage program.

Nothing has replaced the Advantage program, which was made up of mostly families.

The city's homeless policies are expected to receive renewed scrutiny Monday at a City Council budget hearing. The total number of homeless people has increased 61% under Mayor Michael Bloomberg, a nagging problem for the administration, and elected officials and advocates are planning a rally on the steps of City Hall Monday morning to demand the restoration of social-service program funding.

The family-shelter savings highlight how the city and state governments have taken advantage of complex federal funding formulas to shift costs as homeless numbers have boomed.

The Advantage program has been at the center of the dispute over who is responsible for the growing number of families without homes. The program was started in 2007 and used a mix of federal, state and city money to help people make the transition from shelters to permanent housing.

Over the city's vigorous objections, Gov. Andrew Cuomo and state lawmakers cut the state share of the program in 2011, helping to close a $10 billion budget deficit and eliminating its federal funding. Albany leaders, who have discretion over some federal money, shifted some federal funds to family shelters and limited how much it would pay for single adults, said Seth Diamond, the city's commissioner for the Department of Homeless Services.

"The message from the state, which is tragic, is we'll pay you for shelter but we won't pay you for rent subsidy," he said.

A spokesman for Mr. Cuomo, Matt Wing, said the city was given $30 million to keep the Advantage program alive, and it chose to end it. The city said the $140 million a year program was too costly to continue. Federal officials didn't respond to messages seeking comment Sunday.

Last spring, when advocates for the homeless unsuccessfully sued the Bloomberg administration to force it to continue Advantage, a state Court of Appeals judge asked the lawyer representing the city a question: Isn't it more expensive for the city to pay to shelter the homeless than to help these families pay rent on a permanent home?

"It may be more expensive as a total cost, but the portion of the cost paid by the city would not be as great," the city's attorney, Eric Rundbaken, replied at the May 2012 hearing.

Asked if the city gets more reimbursement for shelter costs than it does for rent subsidy, Mr. Rundbaken told the court: "Yes."

The exchange raised eyebrows among homeless advocates.

"They told the court that, 'It's actually not more expensive for us if these people [in the Advantage program] get evicted because these other branches of government are going to pick up a greater portion of the tab,'" said Steve Banks, lead attorney at the Legal Aid Society, a nonprofit group at the forefront of homeless issues for decades.

"That's a pretty stunning argument," Mr. Banks added. "No administration has argued that in court before."

City officials said that was an unfair way to characterize what happened. Mr. Diamond said the city was left with an "untenable situation" when the state cut Advantage.

"It's making it sound like we made the decision to favor shelter when, in fact, we did just the opposite," Mr. Diamond said. "We favored Advantage, even though it was more expensive because we believed in the expense, and we were willing to pay it even though it cost more."

The same local savings haven't materialized for shelters for single adults, who are housed separately from children and childless couples. Their numbers have risen 15% from June 2011 to January, and the city's cost of providing adults with shelter has ballooned to about $240 million in 2013 from about $212 million in 2011. The state and federal costs remained basically flat.

Losing Advantage was especially difficult for families. About 20% of families renting in that program have since returned to shelters. Since 2011, the city has brought on 11 new shelters for families with children.

Advocates say the Bloomberg administration's missteps on homeless policy predate the Advantage program. In 2005, the city stopped giving homeless people leaving shelters preference for public-housing options such as New York City Housing Authority apartments or Section 8 vouchers.

Mr. Diamond said the state deserves the blame for the city's increase in homelessness. Albany ended Advantage and "insulated themselves from the consequences of that decision by either capping their exposure with the adult shelter system or using federal money for the family shelter system," he said.

Mr. Banks said the city is to blame because it allowed so much time to pass without any means to move people out of shelters, causing the homeless population to explode through inaction.

"The city had a terrible case of tunnel vision," he said.