Corruption Exposed: Housing Nonprofits Misappropriated Tax Funds to Hinder Affordable Development

HomeRise, a nonprofit housing developer that has received over $200 million in grants and loans from San Francisco, states its mission on its website as assisting homeless individuals in finding housing and achieving self-sufficiency.

However, an independent audit in April uncovered questionable spending of the organization’s funds. Due to incomplete record-keeping, the full extent of inappropriate expenditures was unclear, but the audit revealed that a significant portion of grant money was used for staff salaries, including substantial bonuses that violated the city’s grant agreement.

Many cities allocate substantial public funding to nonprofit housing developers annually. The nonprofit sector has historically played a crucial role in developing and maintaining affordable housing, with multiple studies indicating that nonprofit-built housing is more affordable for low-income households compared to for-profit developments backed by public resources.

Nevertheless, HomeRise is just one recent case illustrating financial mismanagement and corruption within nonprofit housing initiatives. Oversight and regulation of nonprofit organizations vary widely across jurisdictions, often lacking adequate safeguards against the misuse of taxpayer funds.

Beyond financial mismanagement, some nonprofit housing projects have been criticized for poor living conditions and unresponsive management. Lobbying efforts by certain nonprofits have also obstructed affordable housing initiatives proposed by other developers, ostensibly to safeguard their funding, which has sometimes been redirected towards executive compensation rather than public benefit.

With the affordable housing crisis worsening, many states and cities are increasing funding to nonprofit housing organizations to expand affordable housing units. Some states are exclusively directing federal housing grant funding to nonprofits. The Biden administration has also taken steps to prioritize nonprofit housing organizations in bidding for foreclosed properties and HUD-held vacant property mortgage notes.

While many nonprofit organizations serve the public interest, being mission-driven doesn’t inherently make them more trustworthy than for-profit developers. Regulators should prioritize enhancing oversight to prevent fraud.

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