NOFA Analysis Part 2: Ranking and Tiering

written by Norm Suchar
December 20, 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 the process of ranking projects and deciding which ones will go into Tier 1.

One aspect of the NOFA that has everybody nervous is deciding which projects to place in Tier 1. To recap, CoCs prioritize projects by dividing them up into two tiers. Projects they place in Tier 1 are almost certain to be funded, provided they meet project quality thresholds. (This is true whether it is a new project created through reallocation, a planning project, or a renewal.) Projects not placed in Tier 1 can be placed in Tier 2 if the CoC wants them to continue, and the funding for these projects is very much at risk. Unlike last year, there is very little chance that HUD will be able to fund most or all of the Tier 2 projects. Unfortunately, CoCs can only place projects equal to 95 percent of the amount needed to renew all of their existing projects into Tier 1, meaning at least 5 percent of their renewal projects will have their funding put at risk.

So how is a CoC to decide what projects to prioritize, and what are the odds that Tier 2 projects get funded? Neither question is easy to answer, but here are a few important factors.

First and foremost, CoCs should be prioritizing projects that help them reduce homelessness by quickly and cost effectively housing people. This sounds obvious, but it is a challenging task during the application process. Many CoCs enter the application process concerned about ensuring that as little harm as possible is done to existing projects. When CoCs don’t have an objective ranking process, providers and other stakeholders in existing projects have an outsized influence in which projects get funded, and there is little opportunity to shift resources to more productive projects. That’s why it is crucial to have an objective and performance-based ranking process. (You can find some examples of tools that communities are using here.)

Having a performance-based ranking process helps make a CoC’s current and future applications stronger, partly because the NOFA includes scoring criteria based on whether CoCs use performance measures to evaluate projects, and partly because it will lead to better outcomes that are becoming increasingly important for scoring well in the application.

Here are some additional factors to consider:

  • To what degree are projects serving people with the highest barriers to exiting homelessness? The NOFA includes factors related to prioritizing people experiencing chronic homelessness, and to achieve better outcomes in the future, CoCs will have to focus on households most likely to remain homeless if they do not receive assistance, particularly those with no incomes and with longer and more frequent histories of homelessness.
  • Are there other ways to fund existing activities? Some CoC funding is used for activities such as employment, substance abuse recovery services, and health care. These may be important for a CoC, but there may be other resources available in the community to address these needs.
  • Avoid across the board cuts. Although they are the easiest way to spread the pain evenly, they have several disadvantages. CoCs are likely to lose points for using performance metrics in evaluating projects and for not having an objective ranking and selection process. The CoC will also minimize their opportunity to improve performance that could help in future applications.

That brings us to the question of how likely it is that Tier 2 projects will get funded. We have tried to do some projections of how much funding HUD will have available for Tier 2 projects, but there are many variables that make it impossible to make a precise estimate.

It is certain that HUD will have at least some funding for Tier 2, meaning that at least some CoCs are very likely to have their Tier 2 permanent housing renewals funded. Lower priority projects such as Transitional Housing and Supportive Services Only projects are at great risk, especially for CoCs that score poorly. A decision to reallocate a Transitional Housing project in Tier 2 to a permanent housing project (either Permanent Supportive Housing or Rapid Re-Housing) significantly improves its chances of receiving funding, even if the reallocation project is placed in Tier 2.