Nonprofit Housing and Service Providers Face Funding Crisis

I’ve often remarked that nonprofits can’t fill safety-net gaps created by cuts in public funding — or even gaps due to current funding levels. Leaders of some of these organizations have publicly — and more persuasively, of course — said the same.

On the other hand, nonprofits do fill gaps that would exist without funding from private, as well as public sources. We individual donors are one of the former. But helpful as our donations are, many nonprofits, large and small, receive significant financial support from foundations.

So you can imagine the shock waves that reverberated through nonprofit communities when they learned that the Fannie Mae and Freddie Mac foundations would cease to exist.

They didn’t abruptly cut off funding. But it’s about to end. Fannie’s already has. Freddie’s schedule calls for last payments some time this year.

Combined funding, though shrunk, was about $50 million in 2011. That’s a lot to make up for from other sources. But if it isn’t, we’ll surely see cutbacks in programs that provide housing and services to low-income residents here in the District, nearby communities and probably elsewhere.

Charitable Giving Phase-Out

How Fannie and Freddie came to withdraw from their roles as major donors is a tad complicated. But I’ll try to briefly tell the story, mainly because it strongly indicates that the funding spigot won’t open again.

Fannie closed out its foundation in an apparent effort to counter accusations that it had used its grants to build support — and lobbying partners — for its business interests.

The CEO said that Fannie itself would pick up the foundation’s charitable function — and spend at least as much. That was in early 2007 — just as the housing bubble began to burst.

Shortly thereafter, both Fannie and Freddie were holding a bunch of bad mortgages and responsible for delivering on promises to investors in securities backed up mortgages — also now bad.

They were, in a manner of speaking, bailed out and control of their affairs turned over to the newly-created Federal Housing Finance Agency. It told them to phase out their charitable giving and set the terms.

Fannie and Freddie in the Washington Metro Area

Up until recently, Fannie and Freddie, through its foundation, were the largest corporate donors to nonprofits in the Washington metro area, according to a report by George Mason University’s Center for Regional Analysis.

They provided support for more than 500 nonprofits during 2007-10 — a total of nearly $100 million. The money supported a wide range of programs and services.

But well over 70% received by the 200 largest nonprofits supported three types of programs and services — homelessness, housing and “human services.”

The first two (obviously related) are hardly surprising. Fannie and Freddie are, after all, in the housing business. And the FHFA directed them to focus their donations accordingly.

However, the corporations donated more to human services than the other two combined. The explanation here perhaps lies in how the analysts decided to classify donations.

What we know is that Fannie and Freddie have provided crucial support for services that can prevent homelessness and, in various ways, help families who’ve become homeless achieve enough economic security to become stably housed.

What’s at Stake

The funding figures I’ve cited understate the impacts of lost Fannie and Freddie funding because the corporations donated much larger amounts before the bailout. Even the recent figures, however, suggest a potential crisis in the making.

Nonprofits in the Washington metro area have reportedly lost — or will soon lose — nearly half their private sector-funding.

The loss will be greater — about 60% — for their programs and services to prevent homelessness and to provide both shelter and housing with supportive services for people who were homeless.

The crisis isn’t ultimately for nonprofits, however, but for the people they serve. It’s also, for this reason, a crisis for state and local governments because nonprofits are deeply woven into our safety net.

They also operate programs that can reduce needs for safety-net benefits by helping individuals and families overcome barriers to self-sufficiency, e.g., domestic violence trauma, substance abuse, lack of marketable skills.

These improve future prospects for low-income children. Other services do as well — for example, by helping parents learn how to keep them healthy and support their development, manage resources and so, in the best of cases, provide a safe, stable home.

These crucial programs and services won’t all vanish, of course. But loss of so much funding will surely mean fewer people served and/or fewer services — unless other funding sources fill the gap.

Well, we can’t look to this Congress. That’s for sure. Doubtful we can look to state and local governments either, though some may increase funding, as the District already has in several areas.

What Next

The GMU analysts recommend that nonprofits develop plans to reduce expenses and/or combine programs. Whether nonprofits can do either or both without curtailing services remains to be seen.

Even coming up with a plan — especially one that would merge nonprofits — seems a challenge at least some will need expert help with. Help perhaps with profound internal culture changes too.

The analysts also note the need for other corporations to “step up and fill the gap.” Interestingly, no mention of individuals who’ve got lots of money to give away. Nor those of us with the wherewithal to do our bit — or bigger bit — once we understand the need.

We don’t have comparable reports to tell us where and how large the gaps will be outside the Washington metro area, but we can be fairly sure there’ll be some, since total Fannie and Freddie donations have exceeded those to metro-area nonprofits in the past.

In short, we seem to have some handle on funding losses here — and some as-yet unpublished indications of impacts. Doubtful other affected communities have even this much. We’re nowhere near solutions, assuming they can be found.

Yet the needs Fannie and Freddie’s donations helped meet can’t be put on hold. A lot of folks have a lot to do PDQ.

 

 

 

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