Permanent Supportive Housing: California Offers Successful Templates

As America’s homelessness crisis deepens, California has become a national model for successful Permanent Supportive Housing (PSH) projects. Drawing on both local and state support, these PSH projects provide critical pathways to safety for people at risk of homelessness or for those already living on the streets.

California’s success in PSH is grounded in evidence-based social service techniques and a commitment by state and local leaders to bring needed housing and health services to people living on the fringes of society.

Tax Credit Advisor spoke to a developer of PSH projects in California, as well as officials with a social service agency that provides services to tenants in PSH communities. The professionals describe which practices work best in this space and ways to improve PSH in California. Both say PSH has come a long way in recent years, primarily due to increased focus by political leaders, developers, and social service providers throughout the state. They also add that the supportive services for tenants must be highly focused, thoroughly outlined, and communicated, and involve coordination among service providers, property owners, and property managers.

“Owners, property management, and the service providers – those three parties need to collaborate and all be on the same page,” explains Jonathan Taylor, vice president of asset management at Affirmed Housing, a San Diego-based developer of supportive housing. “One of the challenges of supportive housing is that property management can be on one side of the table and the service provider on the other side. They really need to be on the same side.”

Beth Southorn, executive director of Sacramento-based LifeSTEPS, Inc., a social service provider to PSH communities, stresses that PSH done right not only saves lives but also saves money in the long term in health, emergency, and even incarceration costs. A 2023 Rand study on PSH supports this statement.

“The intensive case management cost is a lot more because you are pulling them up from the streets,” says Southorn. “But at the same time, you are creating more stabilization for the individual, which reduces all sorts of other costs…, such as police and incarceration. It’s a lot cheaper to put them in housing.”

PSH Comes into Statewide Focus
Taylor says that PSH moved into statewide focus about ten years ago, when, in response to the state’s mounting problem with unhoused people, the California Tax Credit Allocation Committee (CTCAC) moved to strengthen supportive housing by providing incentives for projects that provide supportive services and target individuals at risk of homelessness, or who are already on the streets. State funding was also bolstered through funding initiatives, like No Place Like Home, Homekey, and CalAIM.

In ensuing years, several counties throughout California, including Los Angeles and Alameda, also increased their funding for supportive housing and the services needed in the communities, often through bond measures. The result has been an increased focus on PSH and the residents who need the services.

“We, as the development community, then embarked on the project of building more supportive housing. Once we got into operations, and even beforehand, there was a lot of due diligence that was done,” explains Taylor.

Taylor says his company, Affirmed Housing, looked at PSH communities across the country and coordinated with local public housing authorities to collect best practices in providing services to the formerly unhoused. This study helped them to develop their own procedures.

“Once we got into operations, we really got to see how well we did with our assumptions,” he adds.

Best Practices in PSH
When working with tenants, both Taylor and Southorn say that clearly stated community policies work best in moving people who have once lived on the streets into supportive housing. Motivational interviews and highly trained social workers also ease the transition and enhance tenant retention.

Affirmed Housing developed a Housing Retention Process that is a coordinated and “support-heavy process to help tenants who are having trouble living under our roof,” says Taylor.

The four-step retention process is used when house rules clearly outlined in the lease are broken. It involves a listing of policy violations and the repercussions that will happen if the pattern of offensive conduct continues. The steps involve a series of warnings until the last step, which may initiate the legal eviction process.

The policies and potential breaches of policies are clearly outlined not only for the tenants but also for the property managers, owners, and social service providers.

Southorn explains that the expertise of the social service providers is key to successfully keeping tenants in their apartments. LifeSTEPS maintains a 98 percent success rate with the tenants it works with. Success is defined as the tenant still housed in the PSH after one year.

“That means they have not returned to homelessness,” she says.

To be eligible for HUD funding and tax credits, PSH developers and operators must agree to the Housing First policy, meaning “we take people as they are and move them into homes,” explains Southorn.

“Then we can work on the needs, the life skills, to stabilize them,” she adds. “These are evidence-based practices, case management techniques that have been proven to work. So, we use harm reduction, motivational interviewing, and critical time intervention.”

Harm reduction promotes safer practices, particularly regarding substance use management. Motivational interviewing is a collaborative, goal-oriented style of speaking with clients designed to motivate people to change their behaviors. Critical time intervention involves focusing social services on an individual during the crucial time that they are first transitioning out of homelessness.

Southorn says all of LifeSTEPS’s case managers are trained in these techniques. In particular, PSH communities in Los Angeles County are well-versed in these techniques because the city and county of Los Angeles passed local tax increase measures to fund this form of intensive case management to lessen homelessness.

Southorn says people who move from the streets into PSH often arrive with the hyper-vigilance required to stay alive on the streets.

“Once you’ve been traumatized on the street that long, you become like the street,” she says. “In order to make changes, you have to be treated as a human being.”

Mixed-Income Housing
Many of the PSH communities must include different affordable income levels, as per CTCAC’s requirements. That means people at up to 80 percent of area median income live next door to people formerly unhoused. A commonly used ratio is 75 percent PSH and 25 percent regular affordable.

Taylor says mixed-income properties can experience challenges when renting affordable housing to clients who are not homeless. Once they learn the formerly unhoused are living in the community, some people do not want to live there. Taylor says Affirmed works to increase its marketing efforts on these projects and bolster the amenities in the communities.

“We do whatever we can to amenitize the property so that it becomes less about the fact that their neighbor was formerly homeless and more about the fact that they have this great community room and also have services available to them,” explains Taylor.

Southorn says mixed-income communities “offer equity, not discrimination.” She adds that having people of different incomes can be an “uplifting, positive experience.”

“They can experience their neighbors being successful,” she says of the formerly unhoused.

Taylor adds that PSHs, mixed-income communities, are often a boon to the neighborhoods in which they are located.

“We’ve seen over and over again that there’s an economic boost because there are huge fees we pay into the school and park systems,” he says. “We upgrade streets, we upgrade sidewalks, we upgrade public transportation.”

PSH Not a Fit for All
Both Taylor and Southorn say that PSH does not work for about one to three percent of the people living on the streets experiencing homelessness. Often, these are people with severe mental health or physical problems who need an institutional setting.

“In California, where it’s really challenging to evict somebody, that can become a problem for your community really fast,” says Taylor, adding that a delineated tenant retention policy can help deal with this issue.

Southorn says it’s important for property managers and case workers to track tenants early who might not be a fit for the community.

“Find a way to identify them and find resources to actually place them in care that’s more appropriate. It could be transitional housing,” she says.

Taylor advises that developers of PSH realistically assess the cost of social services during underwriting, so all parties are aware of the true cost of running the projects. He says Affirmed can keep some of its costs lower because of economies of scale, such as insurance billed across the portfolio.

Taylor says an operating standard estimated the cost of social services per resident to be about $6,500 or $7,000 a year.

“What we’re finding is that in order to have a really robust program, on average, it’s going to have to be a higher number than that,” Taylor says, declining to place a more precise figure on the cost.

Taylor says he knows of other projects that are struggling because they underestimated the cost of services. He believes that underwriting standards should be strengthened to avoid low estimates.

Both Taylor and Southorn stress that PSH projects, with their unique operational requirements, are still important to pursue because they are so transformative to people’s lives.

“When you start relaxing in your environment, you start becoming the person you are always meant to be,” explains Southorn.