Homeless service providers face huge debt, threatening to undermine their work

Gerald Hall’s apartment sits in the Los Angeles neighborhood notorious for its homeless encampments: Skid Row.
“There used to be more people actually over there,” he said, gesturing to a bare patch of sidewalk between rows of tents and makeshift shelters across the street from his apartment complex.
He’s like many others there, skeptical about whether state and local leaders will ever find a real solution to a problem that’s plagued the city for generations. When asked if he thinks it will get better, he responds, “What is better?”
“Fewer people living on the street,” Scripps News Correspondent James Packard said.
“It’s going to look that way. They’re definitely going to make it look that way,” Hall responded.
Skid Row is surrounded by service providers working every day to do more than make it “look” better. They are trying to make a real dent in the homelessness crisis. But John Maceri, who runs The People Concern, a nonprofit in Los Angeles, says organizations like his are up against a challenge they have no clear path out of, and it’s not homelessness; it’s debt.
“Every month we’re going deeper and deeper in the hole,” he said. “Frankly, I’m not anticipating in the short term that we’re going to see any significant relief.”
Organizations often contract with the government to provide services like housing. The government agrees to pay a portion of that cost, usually most of it. But it doesn’t pay upfront. It reimburses receipts on the back end.
That means the organization turns to a bank for a line of credit. The problem is that the government reimbursement is slow to materialize.
“Often what happens is that payment doesn’t come for three to four months in arrears,” Maceri explained. “So we’re on this continual cycle of fronting money, waiting to be paid and going in debt at the same time.”
Maceri said The People Concern can be contracted to do work costing twice what it has available through its $9 million line of credit.
“We’re paying $63,000 a month in interest,” he said.
That’s money the organization has to raise privately. Instead of raising money to provide more services to homeless people in Los Angeles County, it’s raising money to pay interest — interest the government won’t be reimbursing.
The People Concern is far from alone. Other nonprofits face the same challenge. For organizations tackling homelessness, the problem has become particularly pronounced since Los Angeles County voters passed Measure H, a funding source for homelessness solutions that took effect in 2017.
“Measure H obviously brought a lot more resources to the homeless service system in Los Angeles County and providers ended up carrying more and more of those costs to the extent that it can impact their cash flow and their ability to maintain healthy balances,” Paul Rubenstein, deputy chief external relations officer for the Los Angeles Homeless Services Authority said. LAHSA administers government money to organizations tackling homelessness.
It jeopardizes work like that at Lamp Lodge, a permanent supportive housing complex near Skid Row, run by The People Concern.
“I feel like a lot of the time, this population is… it’s very easy for them to fall through the cracks,” Ivette Little, Program Manager at Lamp Lodge, said.
Little showed Scripps News one of the units Lamp Lodge provides, containing a mattress, dresser, table with chairs and minimally equipped kitchen.
“It is income-based,” Little explained. “They do pay for 30% of their income, so that could be, you know, 0 income, they pay 0.”
But the speed of reimbursement for services won’t necessarily be solved by adding more staffing to the administrative work, according to Rubenstein.
“Staffing doesn’t play into it as much as the number of steps that it needs to go through,” he said.
Rubenstein said a new model of advancing money to contractors could alleviate the strain.
“They’re still required to submit the invoices and all the documentation that they were before, and if they fail to submit timely documentation, then the advances cease,” He said. “The accountability is maintained, but the impact on their cash flow, their ability to make payroll, is notably reduced.”
The nagging question for John Maceri is: Will it be enough?
“I’m very concerned that, you know, among our partners and our colleagues, all organizations are assessing what they are able to continue doing,” he said.
A measure on the ballot in Los Angeles County Tuesday could direct $1 billion a year to homeless services indefinitely, but experts like Maceri say it won’t be enough to solve the debt problem.
But Paul Rubenstein thinks this new approach could be the ticket.
“We are actually very hopeful that the new advanced model will address the payment delay issues, and it will account for the scaling up of resources because as contracts increase then the advance amounts will also increase,” he said.
The question is whether Los Angeles is finally on the verge of finding the recipe to solve a generations-old crisis and placate skeptics like Gerald Hall.