Funding, Facilities, and the Face of Homelessness: Heterogeneous Impacts of Federal Grants on Sheltered and Unsheltered Counts

ABSTRACT This paper examines the causal impact of federal homeless‐assistance grants on reported homelessness and shelter capacity across 370 Continuums of Care in 2019. We exploit cross‐sectional variation in pre‐1940 housing shares, used in Community Development Block Grant formula allocations, as an instrument for combined CoC and Emergency Solutions Grant funding in a two‐stage least‐squares design. We find that federal funding produces significant increases in sheltered homelessness—driven primarily by emergency and transitional bed expansions—while having no detectable effect on unsheltered counts. Heterogeneous effects reveal that working‐age adults, men, and Black individuals account for most of the shelter response. Notably, racial disparities emerge in unsheltered outcomes: white individuals experience decreases while Black individuals experience increases in unsheltered homelessness when funding rises. These findings suggest federal grants primarily attract certain groups into formal shelters without directly reducing street homelessness in larger metro areas. The results highlight the need for targeted interventions addressing barriers to shelter access and the persistent challenge of unsheltered homelessness, with policy implications for balancing immediate shelter capacity expansion with long‐term permanent supportive housing investments.