IE 11 is not supported. For an optimal experience visit our site on another browser.

Will housing bust trickle down to poor, hungry?

The housing market bust has punished homebuilders, lenders and investors. Now the homeless and the hungry may be victimized.
Housing Crisis Charities
Collleen Galy of Brooklyn shops for food at the BedStuy Campaign Against Hunger, part of the New York Food Bank in the Brooklyn borough of New York, on Nov. 15. Nonprofit executives are nervously watching the economy's housing-related malaise because of the impact it could have on charitable giving. Dima Gavrysh / AP
/ Source: The Associated Press

The housing market bust has punished homebuilders, lenders and investors. Now the homeless and the hungry may be victimized.

Charity executives are nervously monitoring the mortgage debacle while food and energy costs continue to rise. Food banks and homeless shelters are already grappling with reduced federal aid as fears grow that more people will need help just as charity giving starts to decline.

Shelters and food banks are already reporting more need among households. One shelter in Minneapolis served as many people by the end of September as in all of last year. In New York, food banks are serving 24 percent more people, but receiving half as much federal aid as in 2004.

"There is some growing concern" about the effect of the housing slowdown on charitable donations, said Michael Nilsen, a spokesman for the Association of Fundraising Professionals.

The backbone of those charities — U.S. households with $200,000 or more in annual income or more than $1 million in assets — are also the ones most likely hit by the recent drop in stock prices sparked by the mortgage mess, according to research.

Most likely donors expected to feel pinch
Those households make almost two-thirds of charitable donations, according to Bank of America Corp.-funded study. But research also shows stock prices have more of an effect on their giving than income changes, said Patrick Rooney, director of research at Indiana University's Center for Philanthropy, which carried out the Bank of America study in 2006.

Despite the roller-coaster ride stocks have taken in recent months, the Standard & Poor's 500 is up 2.9 percent so far this year. But as of Nov. 16, the benchmark index was 6.3 percent lower than a record high hit in October.

There are anecdotal reports the mortgage mess is forcing corporations to pull back too. Carol Schneider, media relations manager for the Food Bank for New York City, said a major U.S. bank — she wouldn't name the company — has reduced its donation by 60 percent this year, citing the fallout from mortgage losses.

If a recession can't be avoided, look out. The inflation-adjusted level of private donations fell in 2001-2002 — amid the aftermath of the Sept. 11, 2001, terrorist attacks and Internet stock bubble bust.

Unfortunately, when giving falls, it's most often when demands on charitable groups are rising, said Rick Belous, United Way's vice president of research.

Food pantries around the country are scrambling to meet rising demand from households that can't afford food because of rising housing costs.

The crisis also affects renters, who are heading for emergency shelters after landlord-owners foreclose on apartments and houses, said Steve Berg, vice president of the National Alliance to End Homelessness.

Foreclosures doubled in third quarter
Nearly 500,000 mortgages nationwide were foreclosed in the third quarter, double the number in the same period last year, according to housing data company RealtyTrac Inc. Some experts estimate 2 million homes could be foreclosed in 2007 and 2008.

Other factors are pushing more people toward emergency shelters and other forms of aid. High oil prices have increased transportation and heating costs, forcing many low-income families to choose between heating or eating, advocates said.

Federal data show food costs up 4.5 percent this year, with even bigger price increases in staples like milk and eggs, said Stephanie Nichols, public relations manager at the Greater Boston Food Bank.

For the first time in 10 years, a homeless shelter in Joliet, Ill., is full, said Lorri Nagle, director of development at the Catholic Charities USA agency there.

A Catholic Charities overnight shelter in Minneapolis served as many people through Sept. 30 as it did in all of 2006, said John Keightley, the group's executive vice president.

"We're definitely seeing more people coming to emergency food programs," said Aine Duggan, vice president for government relations at the Food Bank for New York City.

Almost 1.3 million New Yorkers visited food pantries, soup kitchens and similar programs in 2007, up 24 percent from 2004, according to a report prepared by Duggan's group.

Federal aid to food banks down
Meanwhile, food banks are receiving less aid from the federal government, resulting in empty shelves at food pantries and soup kitchens across the country.

Food from a commodity surplus program run by the Agriculture Department has declined 70 percent the past three years, the nonprofit America's Second Harvest said, due largely to increased demand that has boosted farmers' sales and what they can charge.

Funding for another Agriculture Department program has remained flat, at $140 million annually, since 2002. But Duggan said that high energy costs, as well as inflation, have eroded its buying power.

New York's food banks have seen federal food aid drop by almost half, to 17 million pounds last year from 29 million pounds in 2004, Duggan said.

Other food banks face similar shortfalls. Darren Hoffman, a spokesman for the L.A. Regional Food Bank, said federal food supplies have dropped to 12 million pounds last year from 25 million pounds in 2003.

Hunger relief groups are urging Congress to approve a new farm bill that would boost annual funding for emergency food assistance to $250 million. The House approved the legislation in July, but the Senate failed to pass the bill before leaving for Thanksgiving recess.

"How can they go home, sit down for Thanksgiving dinner, knowing that we are turning people away?" Duggan wondered.

Without the promise of increased federal help, charitable groups are urging people to give as much as they can.

"We are hoping people will recognize now more than ever that we need their help," Nagle said.