Being homeless is tough. Being homeless with children is something I do not even want to imagine. Yet, in its 2015 study of homelessness in Minnesota, the Wilder Foundation counted 3,296 homeless children with their parents. This is considered an undercount as these were children who were found and counted. In that same year, Ramsey County Shelter Intake screened more than 700 families looking for emergency shelter. About 200 were able to be placed in shelter. Shelter Intake screens families and then triages them. The neediest – those actually sleeping outdoors or in a car, as well as those referred by police or Child Protection Services, receive priority on the shelter waiting list. Even so, the typical time spent on the waiting list is more than a month. Hennepin County has a right to shelter, meaning families are vouchered into a hotel and there is no waiting list for emergency shelter.
The 200 families in Ramsey County placed in shelter are considered the lucky ones. The other 500, non-prioritized families receive very little. These families are often still very much homeless (why else apply for emergency shelter?), but do not meet criteria for prioritization. Often they are doubled-up with friends or relatives, meaning they could be outdoors if a landlord finds out about the lease violation. They stay in hotels, using up nearly all of their income for shelter. Some are close to eviction. Many have jobs or other income and are otherwise doing okay, but cannot find a home due to a past eviction, a criminal record, or poor credit.
According to the Minnesota Housing Partnership (MHP), the Twin Cities had a rental vacancy of 2.3 percent in the fourth quarter of 2015. For units with rent less than $1,000 per month, the vacancy rate was 1.7 percent. In Ramsey County, there were only 36 units of affordable and available rental housing for every 100 low-income renters. According to the MHP, permits for new housing units in the Twin Cities fell by 13 percent from 2014 to 2015. In this market, landlords can be selective and seldom rent to families seen as risky when there are many other families without those histories.
Most human services programs focus on the family. Emergency assistance can pay for a damage deposit or past due rent. There is help available for utility shut-off. Rental subsidies are difficult to get, but they exist. Specialized housing programs exist that offer supportive services along with lower-cost or subsidized rent. Case management services help coordinate services to help a family overcome addictions, access mental health treatment, or connect with employment assistance. The overall idea is to address the issues that result in homelessness so families can either get into a rental property or housing program. All of these programs emphasize the family for the intervention.
Other approaches look to building developments, either with a certain percentage of units set aside as below market-rate or as supportive housing programs, through things like tax incentives for the developer or property manager. But building new buildings or rehabilitating old ones is expensive. Local politics and neighbor concerns about low-income housing can derail projects. And even if the project is built, families must know about it and fit the rental criteria. Those 500 families at shelter intake with past problems still often do not qualify and are competing against other families with low incomes for the same units.
A Different Approach
What if we could expand the market without building new buildings or starting new programs? What if we could use fewer public resources spent on financial assistance and social service programs? Rather than intervening with families, like a purely case management model, how can we make families more attractive to landlords, thereby increasing the supply of market-rate housing available to them?
Four cities in the U.S. are trying a model that exists already in Australia, New Zealand, and the United Kingdom. A risk mitigation fund or rent bond is a risk pool where the agency (often a local government) offers landlords a financial guarantee that potential losses incurred due to renting to the family will be covered, thereby lowering the landlord’s risk. A rent bond is similar to employment bonding, where the federal government offers risk pool insurance to employers who hire people not covered by fidelity insurance due to a criminal background.
What the rent bond covers and the amount varies by site. Denver, Colorado, has a program where the risk mitigation funds cover up to $1,000 in property damage and half of monthly rent to a maximum of $600 to hold the unit. Orlando, Florida, has a fund to cover up to $300 of property damage without inspection and up to $3,000 in a multi-bedroom with inspection and covers unpaid rent and holding fees. Portland, Oregon’s program is capped at $3,000 and covers unpaid rent, damages, and costs incurred in finding new tenants. The program in Seattle, Washington, has no set amount and covers property damage, unpaid rent, and legal fees associated with eviction.
All programs help families connect to landlords and have staff liaise with landlords, help mediate issues prior to eviction, and take any claims. Denver reports only one claim since it began in 2015, Orlando no claims, and Portland reports one claim since it began in 2014. Seattle’s program is the oldest, starting in 2009. They report that while claims have been paid, the original funding from seven years ago is still intact.
Rent Bonds as a Solution?
Rent bonds would not be the solution for every family facing homelessness. It would be a poor risk on the part of both the local government and a landlord to accept a family facing too many or too complicated hurdles. Those 200 families accepted to Ramsey County emergency shelter? Many are not only homeless, but have mental health concerns, domestic violence, no income, chronic health problems, and very little employment history. These families are probably better served through programs that offer more intensive supports, as well as a rental subsidy. The risk must be equal to the guarantee.
However, for many of the 500 families turned away from shelter intake who have jobs or other income and for those who are homeless largely due to issues from the past, a rent bond would be a good bet. If the results from the four other sites are the same in Minnesota – only one claim out of hundreds served – it could also be incredibly inexpensive. Offering a guarantee is not the same as having to pay on it.
A rent bond could also be used in conjunction with other housing programs. While opening up the private rental market would be a possible benefit, families receiving the bond could rent from property managers who offer units below market rate, subsidized housing programs, or supportive housing offered through management companies.
Helping lots of families on the cheap? Expanding a slice of a tight rental market? Diverting lower need families from other scarce resources? Rent bonds are a bet I’d like to make.