McKinney Act Programs in Nonmetro Areas:
How Far do They Reach?
Part One: Distribution of Funds 1987-1991

©Housing Assistance Council, August 1995

Permission is granted ONLY to nonprofit community-based organizations to reproduce and/or adapt this document, and only for their own use.

This report examines the participation of organizations in nonmetropolitan, or nonmetro, areas in eight of the original Stewart B. McKinney Homeless Assistance Act programs by assessing the amounts and portions of funds reaching groups in nonmetropolitan counties and differences between nonmetro and metro awards. A companion publication, McKinney Act Programs in Nonmetro Areas: How Far Do They Reach? Part 2: Case Studies, consists of six case studies of organizations in nonmetro areas across the country that have successfully implemented McKinney-funded programs.

The McKinney Act, passed in 1987, created programs providing food, emergency shelter, transitional and long-term housing, health and mental health services, job training, education, and other supportive services to address the needs of homeless people. Most of the programs, which are administered by a variety of federal agencies, have been funded since 1987. Since that time, agencies in rural and nonmetro areas have received funding from the programs but the extent of their participation has been, at best, roughly estimated in some of the programs and unknown in others.

Data on grantees provided by federal administering agencies and the Interagency Council on the Homeless were analyzed for this report. Data for the competitive grant programs were obtained for each fiscal year in which the programs received allocations from 1987 through 1991. The most current fiscal year data available (as of early 1992 when data were collected) were examined for the formula grant programs. The Community Mental Health Research Demonstration Projects and Alcohol and Drug Abuse Treatment Demonstration Projects were not included since they do not fund any projects in nonmetro areas. Adult Education for the Homeless Grants and Homeless Children and Youth Education Grants were also omitted because of difficulties in identifying local recipients and the relatively small amount of money made available by these programs. Data for Projects to Assist in the Transition from Homelessness (formerly the Mental Health Services Block Grant program), a program of supportive housing for mentally ill homeless persons, were not made available for the study. The following table indicates which McKinney programs are included in this analysis.¹

Nonmetro, rather than rural, areas are the focus of the study because metro areas are county-based (except in New England) while rural areas are determined according to sub-county boundaries. Rural areas are located within metro and nonmetro counties.² Small town and rural agencies that receive McKinney program funds often serve an entire county or multi-county area. Identification of a county as metro or nonmetro is based on Census Bureau determinations. According to the Census Bureau, metro areas, or Metropolitan Statistical Areas (MSAs) include (1) at least one city with 50,000 or more inhabitants or (2) an urbanized area of at least 50,000 inhabitants and a total metro area population of at least 100,000. Additional counties are included in an MSA if they are socially and economically integrated with the central county. Nonmetro counties are those which are not part of MSAs.

An attempt was also made to identify agencies located in nonmetro counties with the most rural populations by employing a county coding system, the Rural-Urban Continuum Codes, developed by the Economic Research Service at the U.S. Department of Agriculture. Counties are coded from 0 through 9, based on urban population and proximity to urban areas, with 0 representing the most urban and 9 the most rural. Counties coded 0 through 3 are metro; those coded 4 through 9 are nonmetro. For this analysis, nonmetro counties are divided into three groups, according to the urban population in the county, as follows: urban populations of 20,000 or more persons; urban populations of 2,500 to 19,999 persons; and urban populations of less than 2,500 persons. These divisions correspond to Rural-Urban Continuum Codes 4-5, 6-7, and 8-9, respectively. The term "nonmetro rural" is used throughout this report to describe counties with urban populations of less than 20,000 persons (county Codes of 6 through 9), a definition of rural employed by the Rural Housing and Community Development Service (formerly the Farmers Home Administration), the federal agency that administers rural housing programs.

II. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PROGRAMS

A. Emergency Shelter Grants Program

The Emergency Shelter Grants (ESG) Program can be used to establish and operate shelters, to provide services in shelters, and to prevent homelessness. Funds are distributed on a formula basis to states, Indian tribes, and cities and counties that meet specific population and housing-related criteria (entitlement jurisdictions). States may allocate their awards to local governments and nonprofit organizations throughout the state, including entitlement and non-entitlement jurisdictions. Nonmetro areas receive funding through the state.

Summary information on the portion of ESG funds that went to homeless service providers in nonmetro and nonmetro rural counties, provided in Table 2, is incomplete and therefore must be interpreted with caution. Information on grant amounts is available for $18.5 million (40 percent) of the FY 1989 allocation to states and entitlement communities. These funds were provided to 838 grantees. Approximately 13 percent of these funds were awarded to nonmetro grantees, nearly 60 percent of which were in nonmetro rural areas. Data on the use of funds indicates that nonmetro grantees used a somewhat higher portion for rehabilitation expenses and less for services than metro grantees. Expenditures for prevention services represented less than 2 percent of grants that went to both metro and nonmetro areas.

Table 3 lists the numbers of metro, nonmetro and nonmetro rural ESG grantees during fiscal years 1987 through 1989 by state. Approximately 3,000 homeless shelter and service providers received ESG funds during fiscal years 1987 through 1989 from metro cities and urban counties and the 50 states, Puerto Rico and the territories. Eighteen percent (528) of these homeless providers were located in nonmetro counties. About half of these agencies (9 percent of all agencies) are located in nonmetro counties with urban populations of 20,000 or less (nonmetro rural counties). All but two states used their ESG grant to fund recipients in nonmetro areas during these years. The portion of ESG nonmetro recipients varied from zero percent to 75 percent or more for each state.

Table 3:  Emergency Shelter Grants Program Distribution by State for Fiscal Years 1987 - 1989

B. Supportive Housing Demonstration Program

The Supportive Housing Demonstration Program (SHD) consists of two component programs: 1) Transitional Housing and 2) Permanent Housing for Handicapped Homeless Persons. Funds from both programs are distributed through national competitions. States and Indian tribes are eligible recipients in both programs; local governments and nonprofit organizations can apply for Transitional Housing funds.

Table 4 summarizes the distribution of SHD (including Transitional Housing and Permanent Housing) funds for fiscal years 1987 through 1991. Tables 5 and 6 provide summary distribution data for the Transitional Housing and Permanent Housing components of the SHD program. Five percent of total program funding for SHD went to grantees in nonmetro counties. Approximately 2 percent of total program funds went to grantees in nonmetro rural counties.

Table 4:   SHD Program Distribution Summary for Fiscal Years
1987 - 1991

Table 5:  Transitional Housing Program Distribution Summary for Fiscal Years 1987 - 1991

Table 6:   Permanent Housing Program Distribution Summary for Fiscal Years 1987 - 1991

    1) Transitional Housing Program

The Transitional Housing Program provides grants for developing and operating temporary housing with support services to aid in the transition to independent living, particularly for homeless families and handicapped homeless persons. Funds can be used for acquisition and rehabilitation of facilities, operating costs, and social services.

Tables 5 and 7 present data on Transitional Housing Program funding provided during fiscal years 1987 through 1991. The program made 608 awards totalling $411,052,834. During this period, 55 nonmetro programs -- 9 percent of grantees -- received $19,855,598 or 5 percent of Transitional Housing funds. The data also show that the percentage of funds received by nonmetro areas declined from 19 percent in FY 87 to 8 percent, 5 percent, 3 percent and 3 percent in successive years. The proportion of program grantees operating in nonmetro areas also consistently declined from 27 percent in FY 87 to 11 percent, 8 percent, 8 percent, and 6 percent in the years that followed. About 40 percent of nonmetro grantees are located in counties with urban populations of 20,000 or less. These nonmetro rural grantees comprise about 3 percent of all grantees and received 2 percent of all program funds.

The 55 grants awarded to nonmetro areas were distributed over 29 states, though 44 percent of the grants were awarded in six states receiving three or more grants each. Fifteen states each received one nonmetro grant and eight received two. Two states, New Hampshire and Maine, account for one-fifth of the grants and 35 percent of funds received by nonmetro programs. Grants have been awarded to organizations in metro areas in 44 states, at an average of 12 grants per state. The average nonmetro grant of $361,011 is about half the metro average.

Nonmetro programs are designed to serve families with children (21 percent of programs), chronically mentally ill persons (15 percent), battered women (4 percent), runaway and abandoned youth (4 percent), and combinations of populations (55 percent). Similarly, 20 percent of metro grantees assist families with children, 12 percent serve chronically mentally ill persons, 3 percent serve battered women, and 2 percent serve runaway or abandoned youth. Approximately 3 percent of metro grantees also assist people with substance abuse problems whereas none of the nonmetro programs targets this population.

Table 7: Transitional Housing Program Nonmetro Grant Recipients Location Listing

    2) Permanent Housing Program

The Permanent Housing Program provides funds for acquiring and rehabilitating properties and operating expenses of housing for homeless persons with disabilities. Grant distribution data for the Permanent Housing Program is presented in Tables 6 and 8. From FY 1988 through FY 1991, $78.5 million was distributed to 317 projects in 39 states and the District of Columbia. Thirty projects in nonmetro counties received about $4.8 million, representing 9 percent of grantees and 6 percent of the program's allocations. The average nonmetro grant of $159,798 is 65 percent of the total U.S. average. Forty percent of nonmetro recipients and 4 percent of all grantees are located in nonmetro rural counties. These agencies received approximately 2 percent of program funds.

More than half of the nonmetro recipients were based in six states: Idaho, New Hampshire, West Virginia, Kentucky, Maine, and Ohio. Another 14 states each received one grant. Nearly half of the funds, however, were awarded to three states: Maine, New York, and Ohio, where grant amounts greatly exceeded the average for nonmetro recipients. Thirty-five states received Permanent Housing funds for metro areas, averaging about eight grants per state.

As in the Transitional Housing program, the percentage of allocations made to nonmetro areas declined in each year since the program's inception, from 10 percent in FY 88 to 8 percent, 6 percent, and 5 percent in FY 89, FY 90, and FY 91, respectively.

Table 8: Permanent Housing Program Nonmetro Grant Recipients Location Listing

C. Supplemental Assistance for Facilities to Assist the Homeless

The Supplemental Assistance for Facilities to Assist the Homeless (SAFAH) program was initially used as a flexible source of funding for facility development, operating expenses, and support services for comprehensive efforts to meet emergency or long-term needs of homeless persons. State and local governments, Indian tribes, and nonprofit organizations could receive funding on a competitive basis. In FY 91, HUD targeted assistance for services that stabilize families moving from transitional to permanent housing and applicants were restricted to states.

Table 9 summarizes SAFAH grant distribution data for fiscal years 1987, 1990, and 1991. (SAFAH was not funded in FY 88 or FY 89.) One hundred and twenty organizations received a total of $36.7 million in SAFAH funds during the study years. Over this period, 20 grantees located in nonmetro counties of 13 states received about $2.5 million or 7 percent of program funds. The average award to nonmetro grantees was $125,021. The 100 grants awarded to metro areas covered 32 states and averaged $342,071.

Table 9: SAFAH Program Distribution Summary for Fiscal Years 1987 - 1991

Table 10 lists the city, county, county urban-rural continuum code and state for all nonmetro SAFAH grant recipients for fiscal years 1987, 1990 and 1991. Eleven organizations located in nonmetro rural counties (those with urban-rural continuum codes of 6-9) received 40 percent of the nonmetro awards or 3 percent of all funds. The portion of funds awarded to nonmetro areas was 8 percent in FY 87 and FY 90, and fell to 4 percent in FY 91.

Table 10: SAFAH Program Nonmetro Grant Recipients Location Listing

D. Section 8 Moderate Rehabilitation Program for Single Room Occupancy (SRO) Dwellings

The Section 8 SRO program provides project-based rent subsidies for 10 years to promote rehabilitation of single room and efficiency housing for homeless persons. Public Housing Authorities (PHAs) were the only eligible applicants during the study years.

Table 11 summarizes the distribution of Section 8 SRO funds during fiscal years 1988 through 1991. Of the $256 million allocated by the program, $7,887,840 or 3 percent was awarded to seven nonmetro PHAs to develop 246 units of SRO housing. These projects received an average 10-year subsidy of $1,126,834, or $32,064 per unit. The awards to 112 metro PHAs, consisting of 5,833 units, averaged $42,550 per unit.

Table 11: Section 8 SRO Program Distribution Summary for Fiscal Years 1988 - 1991

Table 12 lists the seven nonmetro PHAs that received Section 8 SRO project funding during the study years. Nonmetro projects were based in six states; two in Arkansas account for 38 percent of the funds awarded to nonmetro areas. Nonmetro rural areas received 42 percent of all nonmetro funding or 1 percent of all funds.

Table 12: Section 8 SRO Program Nonmetro Grant Recipients Location Listing

III. DEPARTMENT OF HEALTH AND HUMAN SERVICES PROGRAMS

A. Emergency Community Services Homeless Grant Program

The Emergency Community Services Homeless Grant Program (EHP) supports a wide variety of activities, including emergency shelter, social services, assistance in obtaining benefits and social services, housing search and move-in expenses, homelessness prevention, and efforts to expand community resources to address homelessness. Case manager positions are frequently created or expanded to provide these services. Funds are allocated by formula to states and Indian tribes, which distribute them to organizations eligible under the Community Services Block Grant program, primarily Community Action Agencies.

It is difficult to assess the extent to which EHP reaches nonmetro areas because states do not consistently identify subgrantees in their reports to HHS and Community Action Agencies often serve multiple counties, particularly in rural areas. In the FY 1990 reports examined for this analysis, 36 states listed recipients and 26 also provided grant amount information. This data is summarized in Table 13 and listed by state in Tables 14 and 15. Designation as nonmetro or metro was based on the location of the agency rather than its service area, since the latter could not be readily determined for most of the recipients.

Of the 691 agencies funded by the 36 states in FY 90, 301 or 44 percent are based in nonmetro counties, about 28 percent of which are in nonmetro rural areas. In six of these states more than three-quarters, and in 20 states more than half, of the recipients are located in nonmetro areas. States tend to distribute grants to every or nearly every Community Action Agency (CAA) in the state; thus the distribution of grantees reflects that of CAAs. Grants totalling about $11.6 million, 53 percent of FY 90 funds for the program, were reported for 484 agencies. Nonmetro agencies received 25 percent of the sample funds and more than 50 percent of each state's funding in Arkansas, Idaho, Mississippi, North Carolina, North Dakota, Oklahoma, and South Dakota. Nevada was the only state of those reporting grant amounts that did not fund any nonmetro agencies. Less than 10 percent of each state's funds went to nonmetro agencies in California, Colorado, Connecticut, Rhode Island, and Utah. Nonmetro rural areas received 14 percent of the total sample funds.

Table 13: EHP Sample Distribution Summary for Fiscal Year 1990

Table 14: EHP Sample Distribution by State for Fiscal Year 1990 Number of Grants

Table 15: EHP Sample* Distribution by State for Fiscal Year 1990 Amount of Funds

B. Health Care for the Homeless Program

The Health Care for the Homeless (HCH) Program provides grants for primary health care, emergency care, street outreach, substance abuse and mental health services, case management, and assistance in obtaining benefits and social services for homeless individuals. Public agencies and private nonprofit organizations are eligible to apply for funds on a competitive basis. In FY 91, about half of recipients were community health centers, one-fifth were public health departments, 17 percent nonprofit organizations, 13 percent nonprofit coalitions, and 3 percent hospital-based programs. Programs are usually refunded each year and few new projects were added between fiscal years 1987 and 1991.

Table 16 summarizes grant data for the 110 health care projects funded from FY 87 through FY 91. Five grantees were located in nonmetro counties, none of which were nonmetro rural. These agencies received about $2.9 million, or 2 percent, of the programs' allocations of $167.5 million.

Table 16: Health Care for the Homeless Program Distribution Summary for Fiscal Years 1987 - 1991

Table 17 lists the location of nonmetro HCH grant recipients. The portion of funds received each year has varied little throughout the history of the program. California has two nonmetro programs and Connecticut, Idaho, and South Dakota each have one. The grantees include three community health centers, one community action agency, and one other nonprofit agency.

Table 17: Healthcare for the Homeless Program Nonmetro Grants Recipients Location Listing

IV. FEDERAL EMERGENCY MANAGEMENT AGENCY PROGRAM:

Emergency Food and Shelter Program

The Emergency Food and Shelter Program provides funds for an array of emergency needs, including prepared food and food supplies, transportation, mass shelter, hotel/motel lodging, shelter repairs, and rent, mortgage and utility assistance. Funds are awarded to counties and cities on a formula basis and administered by local boards composed of public and private voluntary agencies. A portion of funds is distributed through the State Set-Aside program that allows state-convened committees to select areas to receive funding.

Data from the program's $113.2 million allocations for FY 91, summarized in Table 18, show that 46 percent of local recipient organizations (LROs) operated in nonmetro counties, which received 24 percent of funds. More than half of these funds were awarded to the 31 percent of LROs located in nonmetro rural areas. As is apparent from the difference between percent of nonmetro grantees and percent of funds awarded to these agencies, the average nonmetro LRO grant ($6,839) is substantially less than that made to metro agencies ($18,458).

Both nonmetro and metro areas used about 40 percent of their funding for food-related expenses (about 10 percent for meals and 30 percent for other food assistance) and nearly a quarter of funds for rent/mortgage assistance. The portions of expenditures attributed to supplies/equipment, rehabilitation, and administration are also remarkably similar. There are, however, significant differences between nonmetro and metro areas in the use of funds for shelter and utility payments. Nonmetro LROs used only a third as much of their funding for mass sheltering expenses and nearly two and a half times as much for utility assistance. Nonmetro agencies were also somewhat less likely to use funds for other types of shelter assistance (such as hotel/motel vouchers). The most rural jurisdictions used the smallest proportion of funds for mass and other shelter (5 percent compared to 10 percent for all nonmetro areas and 24 percent for metro areas) and the largest portion for utility assistance (29 percent compared to 24 percent for all nonmetro areas and 10 percent for metro areas). The total portion of funds spent for food assistance is somewhat higher in the most rural areas as well, but the difference between funds spent for prepared meals versus other food costs is more notable. The most rural areas attributed 8 percent of expenditures to meals and 35 percent to other food assistance; all nonmetro areas used 10 percent for meals and 30 percent for other food; and metro areas used 12 percent and 29 percent for these purposes, respectively.

Table 18: Emergency Food and Shelter Program Distribution Summary

V. DEPARTMENT OF LABOR PROGRAMS

A. Job Training for the Homeless Demonstration Program

The Job Training for the Homeless Demonstration Program (JTHDP) was established to develop model employment and training programs that improve the skills and earnings of homeless individuals. Funds are awarded on a competitive basis to states, local governments, Indian tribes, nonprofit organizations and privately owned businesses to provide basic skills and literacy instruction, job search, job counseling, work experience, follow-up services and supportive services.

Table 19 summarizes JTHDP funding distribution for fiscal years 1988 through 1991. Nonmetro agencies, whose locations are listed in Table 20, received four of the 103 grants made and $900,134 (3 percent) of the nearly $32 million distributed by JTHDP during the study years. The percentage of funds awarded to nonmetro areas varied from less than 1 percent in the first year to 8 percent in FY 89, 2 percent in FY 90, and zero percent in FY 91. Nonmetro grantees were located in California, Ohio, Kentucky, and Maine. Two of the recipients were Community Action Agencies, one was a domestic violence association, and one was an unaffiliated nonprofit.

Table 19: Job Training for the Homeless Program Distribution Summary for Fiscal Years 1988 - 1991

Table 20: Job Training for the Homeless Program Nonmetro Grant Recipients Location Listing

B. Homeless Veterans Reintegration Program

The Homeless Veterans Reintegration Program provides literacy and remedial instruction, job counseling and training, outreach services, and linkage to community services for homeless veterans. Grants are awarded on a competitive basis to state and local governments. The program distributed $7.8 million from FY 88 through FY 91, most of which was received by projects in the 50 largest cities. In each of the fiscal years 1990 and 1991, $150,000 -- about 4 percent of funds -- was set aside for demonstration projects in rural areas. Potential applicants were identified through DOL's 10 regional offices and awards of $75,000 each were made to two programs for two years. One program served a 10-county area near Columbia, Tennessee; the other worked in Appalachian areas of Ohio. The rural projects were not refunded, however, because the Reintegration Program's funding level declined in FY 92.

VI. SUMMARY OF FINDINGS

As Table 1 (on page 2) illustrates, during the years studied the Emergency Shelter Grants, Emergency Food and Shelter, and Emergency Community Services Homeless Grant programs awarded a much greater proportion of their funds to nonmetro agencies than the competitive grant programs. Though there is some question about the reliability of the financial data examined in the ESG and EHP programs, it is nonetheless clear that these programs reached proportionately far more nonmetro communities than any of the competitive programs. The Emergency Food and Shelter Program reached by far the greatest number of nonmetro grantees but provided them with an average of $6,839 for a year. ESG provided an average of $15,244 to its nonmetro grantees and EHP $9,600. On the average, a nonmetro community receiving all three of these sources of funding during the study years could expect about $32,000.

There are several possible reasons for the very limited participation of nonmetro grantees in the competitive programs: allocations process, program design, and local capacity are three of the most obvious potential barriers. The ability of agencies in small rural communities to compete with urban programs is hindered by factors such as fewer community resources -- both monetary and institutional -- to draw upon, small numbers of persons to be assisted, and emphasis on innovation, which tends to be defined by urban standards. Designs that may be more appropriate in small communities were not envisioned in the development of the McKinney Act. Most of the sheltering programs focus on rehabilitation of multi-unit, high density facilities, which are rare in rural communities. The alternative of using scattered-site single-family housing has not been fully accepted as a transitional housing model, for example. Additionally, small agencies do not typically have the staff capacity to develop expertise in grantsmanship or to apply for the myriad programs that are available for categorical purposes. One criterion on which nonmetro communities may have an advantage is cost-effectiveness; costs per unit or person tend to be substantially lower in these areas. Nonmetro participation in most of HUD's competitive programs has noticeably declined from FY 87 through FY 91, suggesting that capacity may not be the limiting factor.

Uses of the three emergency programs appear to emphasize different types of services, although some of the eligible uses are similar. Half of ESG funds awarded to nonmetro areas during the years studied were used for rehabilitation and 38 percent for operating expenses. EFSP nonmetro recipients spent 40 percent of their funds on food and nearly 50 percent on rent, mortgage, and utility assistance. Though no data were available on the specific uses of EHP funds, many of the allowable services cannot be provided under EFSP and, though ESG allows for some services, a small percentage of nonmetro funds were used for this purpose.