Deborah Harmon, 43 and mentally ill, was released from jail for panhandling, and again faced living on the streets or in a shelter.

Runell McKnight, 25, had no place to go with her two young children after she broke up with the man she was living with.

Today, both women have apartments of their own, with each a beneficiary of programs that aggressively promote the notion that, above all, the homeless need homes.

That may seem obvious. But only recently has federal policy pushed this approach, prompting some cities to revamp how they deal with homelessness.

In Philadelphia, this new philosophy has challenged how things are done and created tension between social-service agencies as well as more intense competition for federal funding.

The city, which spends $98 million in federal, state and city funds on homelessness, works with more than two dozen social-service agencies that promote what was once the standard in care: Bring the homeless into shelters, treat them, train them, and eventually move them into a permanent and affordable home.

But five years ago, the U.S. Department of Housing and Urban Development began placing a premium on programs that offer housing to the most chronically homeless: those living on the streets or rotating in and out of shelters for years.

Those people represent from 10 percent to 20 percent of the nation's overall homeless population, but consume 50 percent of the spending on homelessness, said Philip Mangano, executive director of the Interagency Council on Homelessness, the agency established by Congress to oversee federal initiatives for ending homelessness.

"They're the most visible, most vulnerable, most disabled, most likely to die, and most expensive," Mangano said.

In 2006, Philadelphia lost 40 percent of its HUD funding for homeless programs because its bid - made collectively for all social-service agencies - sought too much for services and not enough for permanent housing for the chronically homeless.

In December 2007, the city regained its funding after every homeless agency cut its budget for services by 25 percent. Reflecting the new national focus, the project that got the most federal funding was a planned facility for permanently housing 79 homeless inebriates or addicts living on the streets of Center City.

This new approach, known as "Housing First," is designed to quickly get people into their own homes - not shelters - and then to connect them with services depending on their needs.

Harmon, for instance, was placed in her own apartment without any requirement that she first be clean and sober. Horizon House, a Quaker-affiliated nonprofit that works with the mentally ill, subsidizes her rent and provides her with mental health services, counseling, and a caseworker.

McKnight needed only a one-time housing grant to help keep her out of a shelter.

Phyllis Ryan, executive director of the Philadelphia Committee to End Homelessness, which runs the SafeHome program that assisted McKnight, said homeless people are languishing for too long in shelters.

"The current system treats everyone like they need to be fixed," Ryan said. "People are in a housing crisis. Instead of going into shelters, they need to go into their own place and then be offered - but not required to use - services to build stability."

But others see the cuts in services as giving short shrift to homeless families. These critics say the larger issue is the lack of affordable housing for quickly moving people from shelters to independent living.

"We're sending a message that poverty, serious trauma, domestic violence, childhood developmental delays, and addiction can all be fixed with an apartment," said Gloria Guard, president of the People's Emergency Center in West Philadelphia, which has an annual budget of $6 million.

Deborah Harmon's life unraveled in 1995, after she tried to burn down her home in Philadelphia and lost her job as an executive secretary.

In and out of shelters, she lived on the streets, sleeping on park benches and in subway stations, often drunk or high. She was hospitalized at least 10 times for depression and schizophrenia.

In 2006, after six months in jail for panhandling, Harmon was released to a shelter. That was when Horizon House offered her an apartment. Now, Harmon spends a third of her government disability check on rent and utilities. Federal funds to Horizon House cover the rest.

She also receives mental health counseling, as well as weekly visits from a case manager who keeps track of her and helps with any household needs.

In an interview in December, Harmon said her days of drinking and using drugs were over. But sobriety is not required by Horizon House.

That day, Harmon showed off her sunny, small apartment in Northeast Philadelphia. She had a few pieces of donated furniture and used an upside-down cardboard box as a coffee table. "My apartment is just so beautiful," Harmon said.

She spoke animatedly about cooking liver for dinner the night before and her new best friend downstairs - another formerly homeless woman, named Sharon, who has been on her own since March.

"I get to cook and clean and have company," Harmon said.

The transition from the streets to homes is sometimes difficult. Some Horizon House clients have trouble with neighbors or continue their street ways. Harmon said she still panhandles.

Two decades ago, Philadelphia pioneered ways to help move people off the streets and into longer-term housing, starting with a communal residence for mentally ill women who were living on sidewalks. The program that helped Harmon takes the concept one step further.

David Dunbeck, director of homeless services for Horizon House, said his agency has other programs for homeless individuals to "earn the right to housing" by remaining clean and sober. But this new one, started in 2003, makes no such demand.

"People can be using," Dunbeck said. "But our goal is always to move them to sobriety."

Like Harmon, most of the people in the program are struggling with mental illness and addiction. They can live in their apartments permanently and have continuous access to treatment.

Since 2003, Horizon House has placed 159 people who were chronically homeless in apartments scattered throughout the city. Dunbeck said about 70 percent are still in their apartments, some now for several years.

Of those who drop out, some cannot escape their addictions and fall back to living on the streets. Some are incarcerated, some hospitalized. Others die of unmet medical needs from years of homelessness.

Still others cannot cope with living on their own, Dunbeck said. Clients can leave and return to the program, but only three times.

Dunbeck said results of the last five years have not affected who gets selected - it will always be the hardest-to-reach homeless - but they have influenced how the agency deals with clients moving forward.

Horizon House has clustered clients who might have a harder time living alone at one apartment house with on-site support staff.

"We're still learning and making adjustments," Dunbeck said. "But it's been really successful for a lot of individuals who have never, ever had success in our other programs."

Dunbeck said the $2 million program spends about $20,000 per person a year - $8,400 for rent, with the rest going for mental health treatment, transportation, case managers, and other services.

That cost must be weighed against what the city spends on public services - medical care, jails, shelters - for people stuck on the streets or shelters.

Philadelphia has about 1,200 people who are long-term shelter residents or street dwellers, according to Dennis Culhane, an expert on homelessness at the University of Pennsylvania, who has influenced the shift in public policy in Washington toward a Housing First approach.

Of those, 500 use public services at a rate of $20,000 each a year, Culhane estimated.

"You can spend $20,000 and have someone still on the streets - or have them in a house," Culhane said.

The first thing that hit Runell McKnight when she entered the city-funded Eliza Shirley House for homeless families on Arch Street was the smell.

"Hot pee," McKnight said.

McKnight had a 1-year-old son and a newborn daughter who had a digestive problem that required her to have a colostomy bag.

"We were in a cubicle with no door, no privacy," with a mentally ill woman, McKnight said. "I slept with both eyes open."

McKnight ended up in the shelter in 2006 after splitting up with the man she was living with. For a week, she moved from one city shelter to another. Unable to tolerate such a life, she moved in with a distant relative, then another. Neither situation was a long-term solution.

Although she was working as a nurse's aide, she was hard-pressed to come up with the $1,500 that she needed to cover rent and a two-month security deposit. She also lacked a solid credit record.

McKnight heard about SafeHome Philadelphia from a caseworker at the city's Department of Human Services. That Housing First program helps families to find and fund new apartments.

A SafeHome counselor, Ruth Holland, spent two weeks looking for an apartment that McKnight could afford.

She found three apartments for her to chose from, each with a monthly rent of about $500. Holland helped persuade a landlord to take a chance on McKnight despite her sketchy credit history.

McKnight had to cover the first month's rent, with SafeHome paying the two-month security deposit. SafeHome budgets about $4,000 per client to cover a grant and follow-up with a caseworker for up to a year.

Holland also steered McKnight to a credit-counseling agency, helped her apply for state aid to cover her heating bill, and checked on her every week for seven months, which was all she needed.

McKnight moved her family into the West Philadelphia apartment in December 2006. Still a nurse's aide, she puts in 48 hours a week, with overtime, on the overnight shift at a nursing home. Her mother cares for her children while she works.

On a recent morning, McKnight was just home from work and trying to stay awake. Her son was visiting his father; her now-2-year-old daughter was chattering nonstop and anxious to play.

"There are moments when I feel like I'm going to break," she said.

But this is what it takes, she explained, to keep her family out of shelters.

"I wasn't going to take my kids through that again," McKnight said.

Since 2005, SafeHome has placed 61 families like hers into housing; 50 are still in their homes. Some clients left the city, some lost their jobs and moved in with relatives. One woman, a crack addict, was evicted.

"We have no way of knowing beforehand who will succeed and who will fail," said Kathleen Lewis, communications director for SafeHome. She added that the only criterion for helping families is whether they have an ability to pay rent either from jobs or government support.

The SafeHome project is one of only three Housing First programs for families. The others - one run by Episcopal Community Services, another just launched by the city - are also small-scale projects, aimed at rapidly placing families who arrive at shelters into new housing.

Compared with some cities, Philadelphia has been slow to adopt a Housing First approach for keeping families out of shelters. Chicago, for instance, revamped its homeless system in 2003 and has seen shelter capacity drop to 84 percent.

With substantial state help, Chicago will spend $10 million a year to underwrite rents for homeless families and make one-time emergency housing grants. It also will add more than 2,000 units of housing for homeless families.

Philadelphia gets no such support from state government.

The city's program, started last fall, is a $1.6 million pilot to divert families into housing within 48 hours of their showing up at the city's main intake center for homeless families.

The program will find housing for 75 families this year, offering them one-year subsidies of as much as $800 a month. Caseworkers, too, will help with things such as improving credit histories, career counseling, and job placement.

Penn's Culhane, who will evaluate the progress of families and reasons for their success or failure, said Philadelphia now spends about $2,500 a month to shelter a family - money that could go toward grants, relocation funds, or small housing subsidies to get people through housing emergencies.

"Putting people in housing," said Phil Lord, who is running the city's pilot program, "is cheaper than putting them in shelters."

Dainette Mintz, the city's director of homeless services, said Housing First can work for families whose foremost problems are financial. But, she added, those people are not the majority.

Too often, she said, a family is dealing with myriad issues - domestic abuse, addiction, mental illness.

"That is not a family who ideally would be placed in independent housing, where we just start paying their rent and say bye-bye," Mintz said.

Mintz said Housing First was worth developing further, but she is not about to stop funding shelters.

"I cannot flip a switch and move everyone from shelter into housing overnight," Mintz said. "We're going to still have to be funding two systems simultaneously."

Tomorrow: New York City's approach

Contact staff writer Jennifer Lin at 215-854-5659 or jlin@phillynews.com

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