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Housing program for mentally ill struggles in rural counties

California Housing Finance AgencySix units at Vida Nueva Apartments in Rohnert Park house mental health clients.

For nearly all his adult life, Fernando drifted between Mexico and the United States, his typical bed a couch in a friend's or family member's house. Battling anxiety, obsessive-compulsive behavior, depression and alcohol abuse, he was kicked out everywhere he went.

But since last year, for the first time since high school, the 44-year-old has a home to call his own. He lives in a cottage at Sacramento's Martin Luther King Jr. Village, where 30 one-bedroom houses are dedicated to formerly homeless tenants suffering mental illness.

The village is just one of 21 projects statewide that house 220 formerly homeless mental health clients – including Fernando. The projects are funded by $400 million set aside from the Mental Health Services Act, a 2004 voter initiative that taxes millionaires to pay for mental health services.

The housing program, launched in 2007, is on track to house and support about 2,500 Californians. But to reach its goal of eventually helping 10,000 homeless people with mental illness, state and county officials will need to maintain their investments in "permanent supportive housing" projects, and rural counties will need more flexibility under the state's program rules.

Those are among the findings of a report released Thursday by the Senate Office of Oversight and Outcomes, which interviewed formerly homeless tenants such as Fernando and surveyed 50 counties participating in the Mental Health Services Act housing program. The report [PDF] is the first comprehensive examination of the housing program, which has succeeded in many urban counties but is struggling to take off in several smaller rural ones.

Under the housing program, tenants live in new or rehabilitated apartments or houses and receive services and support. The practice, known as permanent supportive housing, has a proven track record of helping people stay housed and move closer to recovery and of reducing use of emergency rooms, jails, psychiatric clinics and police, the report said.

In Sacramento County, for example, among 333 people enrolled in supportive housing programs, the number of days they spent homeless plummeted by 95 percent. The number of days they spent in a psychiatric hospital fell by 75 percent, the number of days in jail or prison by 64 percent.

The housing program is in its fourth year and is intended to last for one more. As of April 2011, the report found, counties had spent $146 million – 36.5 percent of program funds – to create and maintain for at least 15 years 870 units of housing. Another $83.5 million is pending for 610 more housing units.

But 18 counties have yet to apply to use their housing funds. Collectively, they are holding more than $50 million that is intended to provide stable homes and mental health services to the chronically homeless, the report found.

About 33,800 Californians are chronically homeless – without a home for a year or more, or have had at least four episodes of homelessness in the past three years. An estimated one-third of the chronically homeless suffer from severe mental illness.

Many of the counties with unused housing funds have small chronically homeless populations. Colusa County, for example, counted just one chronically homeless individual among its 22,000 residents. It has $312,200 in housing funds available.

"I don't have the staff time or the staff expertise to meet all the administrative burdens to use it," Bill Cornelius, the county's interim mental health director, told Nancy Vogel, principal consultant for the Senate Office of Oversight and Outcomes and author of the report. "And I don't have the money to buy the expertise to do it."

Cornelius would like to buy and refurbish a four-unit apartment building for mental health clients. But the housing program requires the California Housing Finance Agency to disburse funds as loans, requiring extensive underwriting and documentation. As a result, "the whole thing got quashed because county counsel didn't want the county on the hook for a loan," he said.

Such cases are why the oversight office recommends allowing 11 counties, whose small populations mean their housing allocations are less than $1 million each, to bypass the housing finance agency. These counties have struggled to attract nonprofit housing developers, find government housing experts and comply with the state's rules.

"The funding model is incorrect for small counties," Rita Downs, behavioral health services director in Calaveras County, told the oversight office.

Nonprofit housing developers have turned down the county, Downs said, arguing that its $639,500 allocation could not fund a large enough project. The county also lacks a housing authority that could help disperse federal rental subsidies and create and manage affordable housing.

Downs would like to partner with the Amador-Tuolumne Community Action Agency, a 30-year-old joint powers agency that uses federal funds to help low-income residents. But under the state's rules, which require developers have at least five years' experience creating affordable housing, the agency does not qualify. Downs plans to seek an exemption.

"There are no developers who exist who meet their criteria in our county, and no big developers want to come to a small county," she said.

When the program's $400 million runs out, counties, whatever their size, will have to contend with continuing long-term investments in housing projects and growing demand for immediate services, all as their mental health budgets shrink.

In the 2009-10 fiscal year, Mental Health Services Act revenue comprised 71 percent of county mental health budgets, according to the report. Four years earlier, the funds were just 9 percent of budgets.

Pressure to use their shrinking funds to serve clients immediately, a lack of experience in housing development, and a rigorous application and approval process mean that many counties are unlikely to voluntarily invest funds in supportive housing when the program ends, the oversight office concluded.

Under existing program rules and at the current pace of housing construction, the office said, it would take about 50 years and $2 billion to house the state's chronically homeless population suffering from severe mental illness.

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