If we are committed to ending the crisis of homelessness, we need to prioritize resources to develop more housing designed for youth aging out of the foster care system so that these young adults have the stability they need to succeed.
I’ve spent more than 30 years working in affordable-housing finance, capital markets, and debt and equity structuring, but the issue of foster care housing is personal to me. I was adopted at birth, and I know that if circumstances had been different, I could have been one of those kids aging out of the foster care system. When I work and volunteer with youth in foster care, I see so many bright minds who, with the right support and stable housing, could become successful, fulfilled people — they just don’t have the tools. That’s where specialized housing for people leaving foster care comes in.
Supportive housing, where residents are given access to services like mental health care and job coaching, is an incredibly effective tool for helping teens aging out of the system get back on their feet, alongside other vulnerable groups like domestic violence survivors and people struggling with addiction. The challenge, however, is building it.
To accomplish this goal, you need to assemble the right team. That means a developer with deep expertise in affordable housing and with experience leveraging the range of subsidies required to finance it, and a nonprofit with direct experience serving the population you intend to house that can provide wraparound services. Without that partner, the model doesn’t work. The good news: There are organizations in virtually every community that would welcome the opportunity to pair their expertise with a developer’s capacity to build. Once that team is in place, the next challenge — and often the hardest one — is securing financing.
Most affordable housing in the U.S. is financed through Low-Income Housing Tax Credits (LIHTCs), which are awarded to developers of affordable housing who sell the credits to investors, as well as through tax-exempt bonds, both of which are issued by state and local housing authorities. These are incredibly effective tools, but they are also competitive — not every project can secure them. Since supportive housing developments also require rental subsidy contracts like Section 8 vouchers to ensure that rents stay affordable, there is even more competition, since most states are quite limited in the number of subsidies they can afford. This is the biggest challenge: Even when there is a solid partnership between a nonprofit and a developer, if they can’t get public financing in an incredibly competitive market, the projects will not move forward.
But there are solutions to these financing hurdles. The LIHTCs and rental subsidies that are used to finance affordable housing come from states’ Qualified Allocation Plans, which determine the kinds of developments that receive funding. Many states earmark these funds for supportive housing developments, but rarely are these set-asides specifically for youth leaving foster care. This is where we can make a change: If states allocate a set portion of their LIHTCs and subsidies to develop affordable housing for people aging out of foster care, developers will build this kind of housing.
The timing is on our side. Late last year, President Donald Trump signed an executive order directing federal agencies and private-sector partners to expand support for youth transitioning out of foster care, with housing identified as a central priority. Congress has followed this spring with bipartisan legislation advancing six initiatives to modernize federal foster care programs, including measures to expand housing access for youth aging out of the system. The federal government is paying attention. Now is the time for states and developers to do the same.
There’s no question we need more housing to address our homelessness crisis, and our collective failure to adequately support young adults as they leave the foster care system is a significant and solvable part of the problem. By properly allocating resources and creating more opportunities for developers to build homes for this vulnerable group, we can tackle both problems at once. It’s time for states to give them the tools they need to thrive for themselves.
Jim Gillespie is an executive vice president at the mortgage banking firm BWE, where he specializes in the financing of affordable housing.
Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
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