NOFA Analysis Part 1: Reallocation

written by naehblog
December 18, 2013

HUD's Continuum of Care NOFA came out November 22, and it includes some interesting changes and features. We are currently analyzing the CoC NOFA, and we plan to publish several blog posts on different aspects of the application. In this blog post, we focus on reallocation.

The CoC NOFA allows for reallocation to two different types of projects: permanent supportive housing (PSH) that serves people experiencing chronic homelessness and rapid re-housing (RRH) that serves families with children. The only other types of new projects allowed are planning grants and grants for Unified Funding Agency costs (which would only be allowed for the very few CoC leads designated as Unified Funding Agencies). In other words, the only way to create new homeless assistance projects is through reallocation.

The NOFA includes many incentives for reallocation.

  • Points are available for CoCs that demonstrate that they are increasing the number of units of PSH for chronic homelessness and RRH for families with children.
  • HUD will fund projects based in part on the type of project. All other things being equal, a PSH or RRH project, even a new one funded through reallocation, will be funded before transitional housing, supportive services only, and other types of projects.
  • CoCs will receive points in this NOFA and in future ones for the degree to which they can reduce homelessness, and both PSH and RRH have proven to be good strategies for achieving homelessness reductions.

At the same time, reallocation is challenging for a number of reasons. Many existing transitional housing projects are administered by nonprofit organizations. Converting those projects to RRH requires that the nonprofit enter into an agreement with a Public Housing Authority or State or local Government entity to administer the rental assistance. (Administering rental assistance means that the Public Housing Authority or Government entity must conduct unit inspections and enter into contract with the landlords for payment.) The same is true of TH projects that are converting to PSH with a rental assistance component.

We at the Alliance are working hard to get Congress to enact a change to the HEARTH Act to allow nonprofits to administer RRH rental assistance, and we are optimistic that will happen soon, but for the time being, it remains a hurdle.

Another challenge is that when a project is converted through reallocation, there can be a gap of several months between when the old grant ends and the new grant begins. This funding gap can be a significant challenge for communities. Yet another challenge is that the individuals being served in a transitional housing program are typically not eligible for the new program, so there is the potential for a disruption is assistance for current program participants.

One strategy to deal with these challenges is to do a reallocation in two parts. Here’s how it would work. A grantee could commit to reallocating half their program in the current (FY 2013) application and the other half in the next (FY 2014) application. During the current application, the grantee would apply for a renewal of half their current grant amount, and the other half would be reallocated to a new PSH or RRH project. The grantee would use the renewal amount to wind down the transitional housing program.

When their new reallocation grant is finalized they could begin serving households with the new grant. During the FY 2014 NOFA application, they would reallocate the remaining TH grant into a new PSH or RRH grant while applying for a renewal of the grant they newly received through reallocation in the FY 2013 process.

This process requires having two grants in place for a two-year period, but these could then be merged in the FY 2015 application process. While complicated, this does have the advantage of minimizing disruptions in assistance for households currently served by the program and also minimizing the impact of funding gaps for the organization.