To End Homelessness in North Carolina, Give Tax Credits to Businesses

The local and state governments of North Carolina should implement tax deductions for local businesses that hire homeless individuals to help end chronic homelessness in North Carolina.

In 2005, the North Carolina Council for Coordinating Homeless Programs determined that nearly 13 percent of these homeless people were considered chronically homeless. Chronic homelessness is generally characterized by insufficient housing, income, and services, much of which can be mitigated by adequate employment.

In 2002, the University of Pennsylvania calculated that a single homeless person in the United States needed $40,451 per year in services. In fact, Orange County, NC alone contributes up to $1,600,000 every year to the chronic homeless population. The current Ten Year Plan by Orange County proposes savings of $860,000 per year through the implementation of shelters and vocational training. This Ten Year Plan is insufficient to end chronic homelessness, as it focuses more on affordable housing, which does not address the root of chronic homelessness. 

In a recent study, sample business leaders reported that they are wary of hiring homeless employees because of their spotty work records, inability to produce references, and lack of experiences in the line of work. These sentiments indicate that businesses need an incentive to hire homeless individuals. Recently, the Obama administration signed the Returning Heroes Tax Credit that offers $2,400 to businesses that hire unemployed veterans. A similar policy approach can help end chronic homelessness in North Carolina.

Analysis

Using the Returning Heroes Tax Credit as a standard for comparison and Orange County, NC as an example, a tax credit to businesses for every homeless person in Orange County will cost the municipal government approximately $568,800 in tax dollars. Along with the cost reductions proposed by Orange County, the municipal government could still save up to $300,000 every year.

In the early 2000s, Los Angeles implemented a similar strategy called LA HOPE, offering tax credits to businesses that hired clients of LA HOPE and job training for the homeless. A 2005 study of the program showed that over 54 percent of LA HOPE clients worked either full-time or part-time in competitive employment within three years. Some regional LA HOPE centers had up to 67 percent employment. Building off the LA HOPE model, the North Carolina state government can implement similar homeless mitigation centers in each municipality to help end chronic homelessness. Additionally, as a significant failure of the LA HOPE program was the inability to provide adequate shelter to applicants before HOPE certifications were issued, the North Carolina state government must consider temporary housing options to prevent applicants from leaving the program before the process unfolds. Such a housing policy will ensure the sustainability of the program. 

Next Steps

It would be beneficial to the state of North Carolina if the legislature created a pilot homelessness mitigation center that would allow the state to test the proposed model: tax breaks for business that hire clients of the mitigation center and job training programs. The pilot program will be set in a municipality with high homelessness rates (i.e. Raleigh or Durham) and tracked over two years. Upon completion, the municipal government would analyze the effects and suggest further actions for the state government, either to change monetary allocations for the program or expand the program to other municipalities.