On Solid Ground?

Supportive housing model faces challenges in Wisconsin

May 2024


Communities throughout Wisconsin are turning to permanent supportive housing as a strategy for addressing homelessness, but funding challenges threaten their ability to sustain the on-site services that are fundamental to this approach. Challenges exist even in Milwaukee and Dane counties, where some local funding has been directed to this model, and where a majority of the state’s supportive housing is located. Neighboring states offer examples of more sustainable funding approaches, including some that Wisconsin policymakers are exploring.

Affordable housing advocates and human services experts say that pairing housing with on-site supportive services like case management can prove critical to meeting the needs of the chronically homeless. This model is known as supportive housing.

Unfortunately, in April 2021, we found in Expanding the Blueprint that a lack of reliable funding was leaving supportive housing providers in Milwaukee struggling to pay for those services. In this report, we explore how providers are faring today in Wisconsin’s largest city, as well as how other communities across the state are using this tool and whether they are facing similar challenges. We define “supportive services” throughout this report as on-site case management or service coordination as opposed to health care, employment, or other types of direct services individuals may also need.

We find that supportive housing units in Wisconsin are concentrated in Milwaukee and Dane counties, but providers in communities of all sizes lack dependable funding sources to pay for supportive services from year to year, while program costs rise. In contrast, at least three neighboring states (Illinois, Indiana, and Minnesota) have developed more sustainable funding approaches that Wisconsin’s elected officials could consider.

Notably, state officials here are now pursuing a similar approach to Minnesota by negotiating for the ability to bill supportive services to Medicaid. That is important given the costs that would need to be incurred to fund such services at a large scale. Scaling up the service side of the equation would appear to be an imperative if the state continues its recent efforts to provide public incentives to spur more supportive housing development in Wisconsin.

These findings surface from interviews with local government officials, supportive housing providers, and other housing experts. We also analyzed data from the U.S. Department of Housing and Urban Development (HUD) and the Wisconsin Housing and Economic Development Authority (WHEDA). WHEDA awards federal Low-Income Housing Tax Credits in Wisconsin, a key funding source used to help finance the development of supportive housing units. This source does not help to cover the costs of service provision, however.

Supportive Housing Most Common in Urban Centers

Wisconsin’s two most populous counties have the highest concentrations of supportive housing, with Milwaukee County home to over half of the state’s total units and Dane County ranking second, according to HUD’s 2023 Housing Inventory Count Report. The higher concentrations of supportive housing in those counties is likely influenced by several factors, including population size, rates of poverty and homelessness, and greater prioritization and dedication of resources to housing solutions for individuals and families experiencing homelessness.

Milwaukee County is home to 1,766 of the state’s 3,246 supportive housing units (54%), while Dane County accounts for another 627 units (19%) and Racine County has 124 units (4%), as shown in Figure 1. The balance of the state has 729 units (23%). Throughout Wisconsin, the vast majority of supportive housing units are for individuals (88%), with the remainder designed for families.

These data were reported to HUD by the state’s four Continuum of Care organizations, which receive funding from the federal agency to address homelessness and coordinate the distribution of that funding to local agencies that serve homeless families and individuals. Milwaukee, Dane, and Racine counties each have their own Continuum of Care organization, while the Wisconsin Balance of State organization covers all of the state’s remaining counties.

While various forms of permanent supportive housing exist that serve a range of household types, this report focuses specifically on supportive housing for people transitioning out of homelessness, which aligns with the data included in HUD’s report. Our previous research showed that Wisconsin’s homeless population grew in both 2022 and 2023 after declining in each of the previous five years, and permanent supportive housing is seen as one strategy that could help reverse that trend.

To understand where new supportive housing units are being developed in Wisconsin, we also examined data on federal and state Low-Income Housing Tax Credits awarded by WHEDA. Those credits are an important source of financial support for the development of supportive housing. Overall, the data show that developments with supportive housing units in Wisconsin that were awarded tax credits between 2017 and 2023 are also concentrated in the state’s two most populous counties.

WHEDA incentivizes the use of tax credits for supportive housing in two ways: a supportive housing “set aside” and a scoring incentive. With regard to the former, WHEDA each year reserves a portion of its federal tax credits (at least 10% since 2007 and 12.5% as of 2023) for developments that designate at least 25% of their units as supportive housing for the homeless. Since 2017, eight developments have been awarded credits under that set aside, including seven in Milwaukee County and one in Racine County (see Figure 2). Those applying under the set aside only compete against other supportive housing developments.

In addition to the set aside, WHEDA’s supportive housing scoring category also encourages the integration of a small number of supportive units within other affordable housing developments. Most if not all developments eligible to earn points in this category do so. Between 2017 and 2023, 179 projects awarded tax credits earned points in the supportive housing scoring category, including 41 in Dane County and 34 in Milwaukee County (see Figure 3). Many of these units are serving individuals or families who were not previously homeless, however, because they are made available to a broader population in need of supportive services, including seniors and people with disabilities who are not homeless.

Data limitations preclude us from knowing who is living in the supportive housing units contained within each of these developments, or the extent to which these units are included in HUD’s Housing Inventory Report.

Financial Obstacles to Sustaining Supportive Housing Services

According to housing leaders we interviewed in several Wisconsin counties, while at least some resources are available to support the construction of supportive housing units in Wisconsin, there is a shortage of resources in communities of all sizes to cover costs for supportive services like case management or service coordination. Providers told us they struggle each year to secure enough funding for those services, relying on a mix of government, philanthropic, and internal funding sources, which they described as inadequate, uncoordinated, and unreliable.

Adding to the challenge, supportive service costs keep rising from factors like the need to boost employee pay and benefits in light of inflation and the tight labor market. Those we interviewed said financial constraints related to services also limit the potential to create additional supportive housing units in the state.

Both federal and state government programs provide funding that may be used for supportive housing services, but it is limited in scale. For example:

  • In 2022, Wisconsin’s Continuum of Care organizations provided $17.3 million in federal funding from HUD’s Continuum of Care Program to supportive housing projects. While that funding can be used for supportive services, it also can and is used for a variety of other purposes, including rental assistance, building construction and rehabilitation, and leasing, operating, and administrative expenses. Based on our analysis of 2022 funding applications, approximately $3.6 million of the $17.3 million awarded was used for supportive services, or roughly 20% of the total.
  • The Housing Assistance Program, a program funded by the state that is administered by Wisconsin’s four Continuum of Care organizations, also provides funds that can be used for supportive services. In 2023-24, it distributed $900,000 in state general purpose revenue funds, which were used not only for those services, but also to cover housing and administrative costs associated with efforts to help homeless individuals and families live independently.
  • In 2022, the federal Centers for Medicare and Medicaid Services approved a pilot program for Wisconsin that allows housing supports to be reimbursed by Medicaid, a joint state and federal program that provides health coverage to low-income individuals. Under the pilot, Medicaid can cover services tied to supportive housing for low-income families and pregnant individuals who are homeless. Grants were given by the Wisconsin Department of Health Services to eight communities in Wisconsin to initiate the pilot program.

To understand what resources are available from local governments, we interviewed housing stakeholders in Milwaukee, Dane, and Racine counties. We were told that while Milwaukee and Dane counties have dedicated some resources to supportive housing, local funding is insufficient to cover all of the costs associated with supportive services in the units located in those communities. Meanwhile, our interview with the developer of Racine County’s first tax credit-awarded supportive housing project highlighted challenges in securing funding for services.

In 2024, Milwaukee County has budgeted $1.5 million in property tax levy funds for services within supportive housing developments. In light of the county’s fiscal constraints, however, county officials told us that funding likely will not increase from year to year, meaning supportive housing providers are unlikely to receive additional funding as their expenses increase. Providers we interviewed also said the county’s funding is not enough to cover the full cost of supportive services for all providers; most must seek additional funds from other sources.

In 2024, the city of Madison directed $1.65 million in general purpose revenue to more than a dozen programs that provide housing services for homeless and special needs populations, including some that provide services within supportive housing developments. As in Milwaukee County, those we interviewed in Madison said the city’s funding is insufficient to cover all service costs for the existing supply of supportive housing, and that many providers struggle to pull together enough resources from elsewhere.

In Racine County, an 84-unit senior housing development last year became the first project in the county to be awarded tax credits through WHEDA’s supportive housing set aside. While the project received tax credits and project-based rental assistance vouchers from the Housing Authority of Racine County, no service funding plan was in place when those resources were secured. Developer Gorman & Company initially was only able to offer a dedicated space within the building for a nonprofit service provider to use. Struggling to find funding to cover on-site services, the developer ultimately was able to secure additional funding from WHEDA through its use of National Housing Trust Fund dollars. While that fund does not pay for supportive services directly, it gave Gorman & Company the flexibility to include service costs in the project’s operating budget, allowing them to pay a nonprofit to provide on-site services.

Neighboring States Offer Potential Solutions

Examples in several nearby states illustrate a range of approaches that could be considered in Wisconsin to make service funding more available and reliable for supportive housing providers. These examples were informed by interviews with supportive housing leaders in those states and national experts.

State Funding in Illinois

For many years, the Illinois state budget has included line items for supportive housing services. As each state budget is crafted, the nonprofit Supportive Housing Providers Association advocates for this funding based on the supply of supportive housing units statewide. In 2023, the state directed $42 million to these services through the Illinois Department of Human Services’ Division of Mental Health and Bureau of Homeless Services. In 2024, the association is requesting an increase of $14.5 million to cover service costs for 1,026 new supportive housing units and cost-of-living increases for providers.

The Supportive Housing Providers Association, which was created in 1994 as an advocacy organization for providers in Chicago, now has over 100 member organizations statewide. Wisconsin does not have a similar association.

While Wisconsin does direct $900,000 to the Housing Assistance Program, and a portion of that is used to help pay for services within supportive housing developments, it is not scaled to the total number of supportive housing units in the state and is not adjusted for cost-of-living increases as is done in Illinois.

Supportive Housing Institute in Indiana

Unlike in Wisconsin, proposed supportive housing developments in Indiana must have service plans in place to be awarded Low Income Housing Tax Credits by the Indiana Housing and Community Development Authority. To ensure the quality and sustainability of new supportive housing, developers, property managers, and service providers are required to complete training as a team during the tax credit application process through Indiana’s Supportive Housing Institute, which includes creating a service plan and assessing project budgets. The training is run by both the state housing authority and the national Corporation for Supportive Housing, which also offers assistance throughout the life of the project.

Indiana also requires tax credit-awarded supportive housing projects to establish capitalized service reserves, which set aside $5,000 per unit at the beginning of a project to cover potential service funding deficits over time. WHEDA currently does not require supportive housing developments in Wisconsin to have service plans or capitalized service reserves.

Like WHEDA, the state housing authority in Indiana utilizes a supportive housing set aside, reserving 10% of its tax credits annually to supportive housing (compared to WHEDA’s 12.5% set aside). Both states also use scoring incentives to encourage developers to include a small number of supportive units in other affordable housing developments awarded tax credits, but Indiana reserves those units exclusively for individuals experiencing homelessness while Wisconsin does not. Indiana also requires a service plan to be in place for those units.

Housing to Recovery Fund in Indianapolis

Indianapolis’s Housing to Recovery Fund is overseen by city government but funded from a mix of public and private resources. The fund provides financial support for services in developments awarded tax credits through Indiana’s Supportive Housing Institute. The fund only invests in projects if predetermined outcomes are achieved, including a requirement that at least 90% of participants must remain in housing for at least one year. If that goal is not achieved, then a portion of the funds must be returned. Service plans and budgets developed through Indiana’s Supportive Housing Institute process are intended to help developments meet this and other objectives.

The Central Indiana Community Foundation and the city of Indianapolis partnered on a $4 million fundraising goal in 2019 for the Housing to Recovery Fund, growing that to $10.5 million in a campaign launched in March 2024. While the city has contributed federal funds, including $2 million in American Rescue Plan Act dollars in 2022, the Housing to Recovery Fund also relies heavily on philanthropic and corporate donations. For example, the Indiana University Health Foundation contributed $400,000 in 2022, and the Richard M. Fairbanks Foundation kicked off the recent campaign with a $500,000 donation.

Since its creation in 2020, the Housing to Recovery Fund has provided over 400 of the top utilizers of Indiana’s emergency shelters, hospital emergency rooms, and criminal justice systems with supportive housing, according to the Central Indiana Community Foundation. Those individuals were identified through data sharing efforts between the local sheriff’s department and housing providers. A similar data tracking effort is underway in Wisconsin through Dane County’s Familiar Faces Initiative, which utilizes data from the county’s behavioral health, housing, and justice systems.

The Housing to Recovery Fund also uses data to measure the impact of supportive housing on the individuals served. The Central Indiana Community Foundation has reported that since 2020, 97% of residents have remained housed for at least one year after being placed in supportive housing. Residents are also relying less on emergency systems and are receiving more appropriate care. According to the foundation, over 75% of residents are enrolled in a healthcare plan, nearly 70% of residents are going to at least three behavioral health or primary care physician appointments each year, and police run-ins and jail time have been reduced by roughly 75% since residents were placed in supportive housing. While the Familiar Faces Initiative is starting to track data in Dane County, no data tracking in Wisconsin currently is measuring the impact of supportive housing to this degree.

Medicaid Funding in Minnesota

Following federal approval of a Medicaid 1915(i) State Plan Amendment in 2020, service providers in Minnesota can obtain Medicaid reimbursement for supportive services to assist the homeless. The waiver allows billing to Medicaid for pre- and post-tenancy support services, such as assistance to find housing, eviction prevention, and relationship support with landlords and neighbors.

Meanwhile, Minnesota’s Housing Stabilization Service Technical Team helps supportive service providers overcome challenges in obtaining reimbursement under the Medicaid waiver by offering training and technical assistance. Twenty-five other states plus the District of Columbia also use Medicaid funding for supportive services, according to a recent Corporation for Supportive Housing report.

The Wisconsin Department of Health Services has applied for a state plan amendment like Minnesota’s, which would expand the population eligible to receive supportive services in Wisconsin from those currently allowed through the state’s existing pilot program. That would include all Medicaid recipients who are homeless or at imminent risk of homelessness and who also have a behavioral health or substance use disorder diagnosis. From our interviews with current supportive providers in the state, we learned that some are concerned over the administrative burden of adopting Medicaid billing. The creation of a technical assistance team like Minnesota’s could help supportive housing providers in Wisconsin adopt the Medicaid model.


Wisconsin communities are increasingly pursuing permanent supportive housing as one way to reduce homelessness, but providers say they lack effective tools to pay for the supportive services that are central to this strategy. Efforts are underway to draw on new resources to bolster those services, including through Medicaid reimbursement, but examples from neighboring states highlight additional strategies that policymakers could consider.

Like Illinois, Wisconsin could consider aligning state funding to the supply of supportive housing units, ensuring that funding is sufficient to support existing and new supportive housing developments and that it increases as costs increase for providers. An organization like the Supportive Housing Providers Association in Illinois could be created to connect providers and track supportive housing units across Wisconsin. The state also could consider ensuring that new supportive housing developments have service funding plans in place before receiving public incentives.

Through WHEDA’s set aside, tax credits are used to help finance the development of supportive housing in Wisconsin, but Indiana provides an example of how other states also help to ensure that supportive services are included and sustained within those developments. As previously discussed, Indiana’s state housing authority requires projects applying for tax credits under its supportive housing set aside to include service plans, budgets, and capitalized service reserves. WHEDA could consider implementing these practices to strengthen the likelihood that its tax credits are awarded to developments with the tools and resources needed to effectively serve people transitioning out of homelessness.

Wisconsin, or local communities within the state, also could consider creating a public-private funding pool like Indianapolis’s Housing to Recovery Fund to help tax credit-awarded supportive housing developments pay for supportive services. This could help to reduce the need for providers to scramble each year to access uncoordinated resources from multiple sources. The Indianapolis fund also gathers helpful data that help to evaluate whether the funding represents a worthwhile investment.

The benefits of permanent supportive housing have been recognized in Wisconsin for many years. Yet, while several mechanisms are in place to help developers finance new supportive housing units, and while WHEDA, the state’s Continuum of Care organizations, and some local governments direct some resources to help pay for supportive services, many providers continue to struggle to fill service funding gaps. This struggle, in turn, threatens the sustainability of existing supportive housing units and limits the potential to expand the supply.

To be sure, state and local governments have limited resources and will face challenges of their own in finding funding within their budgets for ongoing supportive housing services. Yet those very budget constraints also represent a compelling reason to ensure that the state is not using public incentives to help develop more supportive housing without a plan to ensure that those units can operate successfully. With homelessness starting to rise and federal pandemic relief funds running out, now is a critical time for policymakers to consider ways to ensure that current and future supportive housing units in Wisconsin are on a solid financial footing.