Nonprofit Homelessness Services Providers in California Face Challenges Addressing Rising Rates of Homelessness Due to Funding Restraints

Researchers at the University of California, Berkeley’s Terner Center for Housing Innovation, the University of California, San Francisco’ Benioff Homelessness and Housing Initiative, and Abt Associates published a report, “Stretched to Capacity: The Challenges Facing California’s Homelessness Service Providers,” describing challenges facing the main providers of services, shelter, and housing for people at risk of or experiencing homelessness in California. Drawing from surveys and interviews with key stakeholders across the state, the report demonstrates that a continued lack of affordable, accessible housing in California has contributed to a rise in homelessness that nonprofit service providers are struggling to address, primarily due to the inconsistent, inflexible, and often inaccessible nature of public and private funding sources.

The report presents findings from a survey of California-based nonprofit homelessness services providers conducted in 2022. Over 500 direct service providers from 20 Continuums of Care (COCs) were initially invited to partake in the survey, and respondents were encouraged to share the survey with their professional networks. The analysis included 120 of the 148 total responses received, including a diverse set of organizations providing services in 40 out of California’s 58 counties. The report also includes insights derived from interviews with 100 service providers and 79 interviews with people with lived experience of homelessness, local government staff, housing authorities, and other relevant parties.

The report reveals that many providers have been struggling to serve all people in need of assistance because available resources have not kept pace with the growing number of people experiencing homelessness each year. Seventy percent of service providers said their organizations served more people in 2022 than in 2019, a finding supported by statewide data: according to the California Homeless Data Integration System, the number of people served by nonprofit and public homelessness service providers increased from 238,000 in 2017 to 317,000 in 2022. Roughly two-thirds of service providers said their organizations are often unable to serve every person seeking at least one of their main services due to a lack of space or beds, inadequate funding, or insufficient staff or volunteer capacity.

This phenomenon can be attributed to the deficit of affordable rental housing available in California, which has contributed to rising housing instability and rates of homelessness. NLIHC’s 2024 Gap report shows that there are only 24 affordable, available rental units for every 100 extremely low-income renter households in California. Interviewees with lived experience of homelessness also identified the lack of affordable housing as the main barrier to exiting homelessness, as they struggled to find an affordable place to live even when receiving public benefits or housing vouchers.

Most providers surveyed (57%) said that funding for their organization can be inconsistent year to year, complicating long-term planning and development efforts as well as their ability to address the rising demand for services. This unpredictability is common across funding types, from state government sources to philanthropic funds to small donations. Interviewees from service providers shared that although COVID-19 relief funds helped many organizations rapidly expand their services, much of this growth could not be sustained after these funds were expended. Although 87% of service providers surveyed reported receiving public funds, many organizations expressed frustration with the process of applying for, securing, and fulfilling the requirements of federal, state, and local funding, as well as the lack of flexibility in eligible uses for funding. Smaller organizations in particular admitted to struggling with the complicated application processes, detailed compliance and reporting requirements, and competitive nature of federal and state funding programs. Service providers noted that private funding is often more flexible and imposes less of an administrative burden on organization staff but is not equally accessible to all providers. For example, one interviewee explained that California’s Central Valley is underserved by philanthropic funding relative to other regions of the state.

The insufficient and inconsistent funding available for homelessness services complicate nonprofit providers’ ability to address not only housing-related needs but also related concerns like physical disabilities, mental health needs including substance use disorders, exposure to domestic violence and other traumatic experiences, and discrimination that can make it more difficult for clients to secure stable housing. For example, while 86% of providers surveyed said most of the clients they serve present needs related to substance use challenges, only 36% provide services to address these challenges (e.g., addiction recovery services or NARCAN or naloxone for treating overdoses). The report states that “interviewees emphasized that mental health and substance use challenges were the most common unmet service needs that they encountered.”

The report concludes with several recommendations for stakeholders to consider in order to better support the work of nonprofit homelessness services providers in California. Primarily, it urges private and public funders at the federal, state, and local levels to consider increasing the flexibility in eligible uses of funding sources, as well as the duration of award application cycles and performance periods. These changes would provide the versatility providers need to establish and sustain innovative programs that better serve clients’ needs. The report also encourages stakeholders to support nonprofit service providers’ involvement in local homelessness system planning to allow for better coordination and use of available resources.

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