Introduction to the Crisis

The failure of one of Skid Row’s largest homeless housing providers represents a dire warning for the viability of supportive housing in Los Angeles, according to a new report on the organization’s demise. Released Wednesday, Redesign Required: Lessons for Permanent Supportive Housing from Skid Row Housing Trust Buildings, concludes that low and inconsistent rental subsidies and other structural problems in L.A.’s homeless housing systems played a key role in the trust’s 2023 collapse.

Background of the Trust’s Failure

Without major changes, other supportive housing providers remain at risk, imperiling housing for thousands of the region’s most vulnerable residents and exposing taxpayers to further bailouts, said Claire Knowlton, a Los Angeles-based financial consultant for nonprofits and the report’s lead author. Once considered a national leader in homeless housing, the trust announced in early 2023 it could no longer manage its 2,000 units across 29 properties, many of which were renovated, century-old single-room occupancy hotels in and around Skid Row.

The Trust’s Downfall

The decision came after years of financial trouble with buildings in disrepair and disarray, replete with squatters, crime, nonfunctional elevators and clogged and broken toilets. City of Los Angeles leaders pushed the trust into receivership and, after 18 months, all the properties were transferred to new owners. The city allocated nearly $40 million to finance the receivership, though the new owners reimbursed some of the money upon taking control. The trust declared bankruptcy and dissolved in January.

Root Cause of the Problem

Researchers received access to the trust’s internal financial data and interviewed more than 30 people, including former trust executives and those knowledgeable about its operations, to produce the report. The root of the trust’s problems, the report determined, was that tenants’ public rental subsidies did not provide enough revenue to manage the buildings, including costs needed to assist those dealing with mental illness and drug addiction.

Inconsistent Subsidies

Not only were the rental subsidies insufficient to cover costs, but also the funding came through multiple programs that paid the trust wildly disparate rates for rooms without any clear way to increase them. Similar trust buildings received subsidies priced at a difference of up to $600 per unit per month. The report called the calculation of these rates “cryptic” and their variability “indefensible.”

Impact of the Coordinated Entry System

The report cites 2015 as a turning point for trust properties. That year, the region implemented a new coordinated entry system for placing homeless residents into trust buildings and other supportive housing through a process designed to prioritize rooms for the neediest. After its implementation, vacancies in trust buildings skyrocketed, which further sapped the organization’s revenues.

Security Concerns and Vacancies

Spending on security immediately jumped from $50,000 annually prior to 2016 to well over $500,000 after, and ultimately soaring above $1.4 million by 2022. Knowlton said she could not determine that the coordinated entry system was the source of these problems as other factors played a role. The portfolio’s vacancies were stabilizing until staffing and maintenance woes amid the COVID-19 pandemic in 2020 sent them spiraling.

Recommendations for Change

Knowlton is pushing to overhaul the region’s system for funding supportive housing, noting that the problems she identified were universal. Rent subsidies, Knowlton said, should be set to the cost of providing supportive housing, including social services. Doing so, however, would require significant and ongoing funding boosts at the federal level, which she deemed “extremely ambitious.”

Need for Standardization

In the short term, she argued government agencies should increase and standardize the subsidies to reduce their variability. “That’s going to give us the time and the cushion that we need to really set that longer term vision around how these buildings are stewarded as public assets, as community assets, because that’s what they are,” she said.

Conclusion

The failure of the Skid Row Housing Trust serves as a warning for the viability of supportive housing in Los Angeles. The report highlights the need for changes in the funding system, including standardized and increased subsidies, to ensure the long-term sustainability of supportive housing. Without these changes, other providers may face similar challenges, putting thousands of vulnerable residents at risk. The city and federal government must work together to address these issues and prevent further crises in the supportive housing system.

FAQs

• Q: What was the main reason for the Skid Row Housing Trust’s collapse?
  A: The main reason for the trust’s collapse was the insufficient and inconsistent rental subsidies, which did not cover the costs of managing the buildings and providing services to tenants.
• Q: What is the recommended solution to the funding problem?
  A: The recommended solution is to standardize and increase the subsidies to cover the actual cost of providing supportive housing, including social services.
• Q: What are the potential consequences of not addressing the funding issues?
  A: The potential consequences include the risk of other supportive housing providers facing similar challenges, putting thousands of vulnerable residents at risk of losing their housing.
• Q: What role did the coordinated entry system play in the trust’s collapse?
  A: The coordinated entry system, implemented in 2015, contributed to the increase in vacancies and subsequent financial struggles of the trust, but it was not the sole cause of the collapse.