Over the past decade, California has experienced continued economic expansion accompanied by a massive affordable housing gap that has fueled homelessness. Los Angeles (LA) has been particularly affected by this challenge: in 2019, the city contained the second largest number of homeless individuals - almost 60,000 - after New York City. In recognition of this, federal, state, and local governments are funding homelessness reduction strategies across the country and in acutely affected areas like LA through an innovative housing approach called Permanent Supportive Housing (PSH).  

Citi Community Capital (CCC), the affordable lending subsidiary of Citigroup, is interested in expanding its portfolio to include more PSH projects; thus CCC asked the SIPA Capstone team to assist in its risk assessment of future PSH deals. The team conducted desk research, expert interviews, and data analysis to examine the various financial, policy and operational aspects of Citi’s financing decisions. The Capstone team recommended that CCC should continue financing the most promising PSH projects as they anticipate that funding for homelessness and PSH in California will remain a top priority. They also provided due diligence measures for CCC to assess potential partners. Given the fluid funding and economic environment, CCC should consider partnering with industry and advocacy organizations to support public policies that provide ongoing PSH funding. As it expands its portfolio into developments that are more dependent on public subsidies, it should continue to stay apprised of the federal, state, and local policy landscape, potentially through specialized public policy staff.