Center for American Progress

Nonprofit Hospitals Can Improve Community Health Through Housing Investments

Nonprofit Hospitals Can Improve Community Health Through Housing Investments

Nonprofit hospitals have an obligation to provide community benefit; as part of this, they should do more to support the housing needs of the communities they serve.

In this article
Exterior of IRS building
The IRS building is seen in Washington, January 24, 2023. (Getty/Stefani Reynolds/AFP)
Key takeaways
  • Growing gaps in affordable, quality housing options can have harmful health consequences and deepen health disparities. Given housing’s integral role as a social determinant of health and nonprofit hospitals’ obligation to provide community benefit in exchange for significant tax exemptions, hospitals should address housing needs within their communities.

  • Nonprofit hospitals can consider different strategies for investing in housing, including: screening for housing insecurity and referring patients to resources; improving the quality of existing housing stock; building up the supply of quality, affordable housing; offering rental assistance and supportive services; and advocating for federal and state policies that strengthen and stabilize housing. When pursuing these strategies, hospitals should partner with communities in developing and implementing efforts and take steps to avoid unintended results such as accelerated displacement of vulnerable communities.

  • State and federal policymakers must monitor and revise the community benefit standard that governs hospitals’ nonprofit designation. Policy changes to clarify the standard, promote high-impact community benefit provisions within it, and increase accountability and oversight would encourage more hospital investment in social determinants of health, notably housing.

Introduction and summary

Nonprofit hospitals are tax-exempt entities required by law to improve and uplift the communities they serve. Because nonprofit hospitals make up nearly 60 percent of all U.S. hospitals and hold substantial financial resources—7 of the top 10 most profitable hospitals are nonprofit—they have the opportunity to meaningfully address the social needs of their communities, which are the main drivers of health.1 Despite receiving substantial tax breaks, many nonprofit hospitals provide no more for their communities than for-profit hospitals.2 Given the current housing crisis in cities across the country, housing can be one of the most profound ways through which hospitals invest in and fulfill the community benefit activities required for nonprofit status and exemption from federal, state, and local taxes.

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Access to safe, quality housing is widely considered a fundamental social determinant of good health and healthy child development.3 The link between health and housing is well-documented, with the lack of adequate and affordable housing significantly contributing to health inequities. Hospitals can take action to alleviate housing instability and improve housing quality in a variety of ways, including the following:

  • Screening patients for housing insecurity and connecting them to community organizations that can help
  • Improving the quality of existing housing stock, particularly for low-income households
  • Building up the supply of quality housing, whether temporary or permanent, that meets the needs of underserved community members
  • Supporting patients by offering rental assistance and supportive services
  • Investing in efforts to advocate for policies that strengthen and stabilize housing

Policymakers, for their part, can encourage nonprofit hospitals to invest in expanding access to quality, affordable housing by making long-overdue changes to the community benefit requirement. States can set standards for nonprofit-hospital community benefit spending and community engagement and improve accountability for meeting community benefit obligations. The federal government can take steps to clarify ambiguous community benefit standards in the U.S. tax code to promote investments in social determinants of health and to strengthen tools to monitor and enforce community benefit compliance.

Housing is a precursor to achieving optimal health

Access to safe, quality housing is a fundamental social determinant of good health and healthy child development.4 It is a crucial building block for every aspect of well-being across the lifespan, including economic and education opportunities, food and health care access, and safety. Housing instability and poor-quality housing often threaten children’s health by increasing their risk for respiratory illnesses such as asthma, low birthweight, preterm birth, and developmental disorders.5 Poor-quality housing and housing instability also have a documented effect on educational performance, reducing assessments of school readiness and contributing to increases in missed school days.6 Research shows that these effects can last even after housing instability ends.7 Moreover, where one lives is the most potent predictor of health, with life expectancy differing by up to 20 years across ZIP codes within the same city.8 These disparities are shaped by a number of factors, including historical segregation compounded by redlining and continued systemic disinvestment in communities of color.9

Figure 1

The COVID-19 pandemic illuminated the fundamental relationship between housing and health. People struggling with homelessness or living in congregate settings or overcrowded housing were at higher risk of exposure to COVID-19, given their inability to socially distance.10

A 2018 Health Affairs article outlined four primary ways in which housing affects health: stability, safety and quality, affordability, and neighborhood conditions.11 People struggling with chronic homelessness often experience all four elements and tend to have higher mortality rates and worse physical and mental health outcomes. Obtaining housing can ease some of these effects: A 2016 study of a supportive housing facility in Oregon found that one year after moving into stable housing, Medicaid expenditures for those dealing with chronic homelessness decreased by 45 percent, emergency department expenditures declined by 60 percent, and 76 percent fewer residents reported being “not too happy in life.”12

Yet poor housing infrastructure and climate vulnerabilities threaten health and well-being even among those with access to housing. For example, harmful environmental conditions such as exposure to lead, poor ventilation, and pest infestation are associated with poor health outcomes, including irreversible neurological damage and infectious and chronic diseases.13 Another dimension of housing quality and safety is climate resiliency. Most existing occupied housing infrastructure is vulnerable to the increased risk of extreme weather events and disasters worsened by climate change.14

Furthermore, neighborhood infrastructure and safety bear materially on health. Access to reliable public transit can help facilitate access to economic opportunities. In addition, families need sufficient and convenient grocery store access to make healthy food choices. Safe sidewalks and outdoor green spaces allow residents to walk and exercise freely. Neighborhood safety is also critical: Crime and violence can contribute to toxic stress, with potential physical manifestations.15 Importantly, interventions beyond expanding access to housing are needed to remediate these neighborhood conditions. Just as critical is addressing unmet basic needs; limited economic opportunities, especially among communities of color; police violence and criminal justice system concerns; education quality; and other social determinants of health.

The lack of affordable housing also has negative consequences for other determinants of well-being. For example, as households become increasingly more cost burdened and fall behind on housing payments, their money for medication, health care services, and food becomes more limited.16 Additionally, the psychological stress that financial hardship raises can lead to depression and other mental health conditions, an increased likelihood of engaging in risky health behaviors, and physical health problems such as hypertension, heart attack, and stroke.17

Given the inextricable ties between housing and health, entities and organizations concerned about community health should consider investing in programs that support affordable, quality housing. Nonprofit hospitals, as tax-exempt entities required to invest in their communities, can and should be critical actors in improving housing quality and affordability and, in turn, community health.

Housing in the United States is increasingly unaffordable and inaccessible

The nation’s shortage of affordable housing is the result of long-standing, multifaceted issues exacerbated by economic challenges during the COVID-19 pandemic. Stagnant wages strained by student loan debt, discriminatory housing policy, and increasing housing prices influenced in part by investor purchasing all affect the accessibility and availability of affordable housing.18 According to an August 2021 U.S. Census Bureau survey, nearly 8 million people were behind on rental payments and nearly 4 million were likely to be evicted within the next two months.19 Several trends point to a further worsening of America’s housing problem, including:

  • Rising homelessness
  • Increasing cost burden on renters
  • Poor quality housing stock
  • Overcrowded or doubled-up housing20

There is limited supply of housing stock in relation to demand—especially affordable quality options.21 Individuals and families across the country are increasingly unable to find affordable housing,22 a problem that disproportionately affects low-income people and Black and Hispanic households.23 In fact, as of 2021, 49 percent of Americans believed that the availability of affordable housing was a “major problem” in their community, rising 10 percentage points from 2018.24 According to the National Low Income Housing Coalition, no state has sufficient housing supply for low-income renters: There is an estimated shortage of 7 million available affordable rental homes nationwide.25 Moreover, supportive housing—affordable housing that is paired with needed wraparound services for those who are disabled or aging, have mental health or substance use issues, are transitioning from institutions, or are struggling with chronic homelessness—likewise is limited; at least 1.2 million more of these units are needed.26

The rising cost of buying a home has also made ownership more elusive, particularly among younger generations.27 Seventy percent of adults believe buying a home is more difficult for them than it was for their parents’ generation.28 The pandemic—and the increasing need for homes to serve multiple functions—created a surge in demand for a housing stock that was already in low supply.29 Subsequently, a tightened and highly competitive housing market has left many potential buyers without options as home prices soar in response.30 From 2020 to 2021, home prices increased by 19 percent, compared with a 10 percent increase from 2019 to 2020, and home values have risen by $75,000 since summer 2020.31 Those able to successfully compete in the homebuying market are typically higher earners, which leaves middle- and low-income earners competing for limited rental units.

Protections that kept people housed over the past two years, such as moratoriums on rent increases and evictions, have expired, fueling the housing affordability crisis as families work to recover from the pandemic.32 Rental assistance has struggled to keep pace with rising housing costs and is far from sufficiently funded to help all in need.33 The Biden administration’s “Housing Supply Action Plan” aims to alleviate this through investments that lower costs and expand supply by incentivizing local jurisdictions to reform zoning and land-use policies, expand current and create new financing mechanisms for the development and preservation of affordable units, and better target government-owned housing stock to families in need.34 The administration has also developed a plan to reduce homelessness by 25 percent within the next three years by increasing the supply of housing with supportive services and guiding states and localities on effective strategies to combat homelessness, including using recovery funds.35 In its “Blueprint for a Renters Bill of Rights,” the Biden administration has committed to actions that strengthen renter protections and preserve rental affordability, including maximizing the Federal Trade Commission’s ability to identify and regulate unfair housing practices, improving enforcement of accurate credit reporting, and undergoing rulemaking to require 30-day advanced notice of lease termination for nonpayment in public housing.36

Although these efforts are a step in the right direction, actors in various sectors—including nonprofit hospitals—need to commit to comprehensive, community-based initiatives that can address an urgent basic need and significantly improve community health.

Nonprofit hospitals can be valuable partners in improving housing and community health

Nonprofit hospitals—which make up nearly 3 in 5 community hospitals in the United States—play a unique role, as they straddle both care delivery and community support.37 In order to receive tax-exempt 501(c)(3) status from the IRS, nonprofit hospitals must meet the following four primary requirements.

1. Conduct a community health needs assessment (CHNA) and submit an implementation strategy to address health needs every three years

The IRS says that to conduct its CHNA, a nonprofit hospital must:38

  1. Define the community it serves.
  2. Assess the health needs of that community.
  3. In assessing the community’s health needs, solicit and take into account input received from persons who represent the broad interests of that community, including those with special knowledge of or expertise in public health.
  4. Document the CHNA in a written report … that is adopted for the hospital facility by an authorized body of the hospital facility.
  5. Make the CHNA report widely available to the public.

In defining the community served, the nonprofit hospital may consider its geography, target populations, and principal functions but cannot exclude “medically underserved, low-income, or minority populations.”39

2. Provide a “community benefit”

Per the IRS, there are six factors that demonstrate community benefit:40

  • Operating an emergency room open to all, regardless of ability to pay
  • Maintaining a board of directors drawn from the community
  • Maintaining an open medical staff policy
  • Providing hospital care for all patients able to pay, including those who pay their bills through public programs such as Medicaid and Medicare
  • Using surplus funds to improve facilities, equipment, and patient care; and
  • Using surplus funds to advance medical training, education, and research.

Nonprofit hospitals can also engage in “community health improvement” activities as community benefit, described as “activities or programs, subsidized by the health care organization, carried out or supported for the express purpose of improving community health.”41

3. Have a publicly available financial assistance policy

A nonprofit hospital must publicize its financial assistance policy, which includes eligibility criteria, methodology for calculating charges to patients, and consequences of nonpayment.42 They must also provide a concise, clear, and understandable plain-language summary of their financial assistance policy.43

4. Limit charges and extraordinary debt collection practices

Nonprofit hospitals must limit the amounts charged for emergency and medically necessary care for a patient eligible for a financial assistance policy to no more than the amount generally billed to an insured patient receiving the same care.44 In addition, these charges must be “less than the gross charges” for the care provided.45

Moreover, nonprofit hospitals are prohibited from engaging in extraordinary collection practices for services covered by the hospital’s financial assistance policy if the patient is eligible for financial assistance.46

Yet limited oversight and lack of enforcement of many of these requirements mean that too many nonprofit hospitals do not fulfill their obligation to promote community health.47 Furthermore, nonprofit status does not preclude hospitals from being highly profitable: In 2013, 7 of the top 10 most profitable U.S. hospitals, as measured by net income, were nonprofit.48 Moreover, nonprofit hospitals are some of the worst offenders when it comes to predatory billing practices; in some cases, nonprofit hospitals have marked up patient medical bills as high as 1,200 percent and were among hospitals with the lowest charity care spending as a share of total investments in recent years.49

Nonprofit hospitals’ community benefit obligation leaves much to their discretion. The community benefit standard requires a hospital to “[d]emonstrate that it provides benefits to a class of persons that is broad enough to benefit the community, and [o]perate to serve a public rather than a private interest.”50 Furthermore, the IRS makes a distinction between “community health improvement” activities that count as community benefit and “community building” activities, which address a broad range of social determinants, including “physical improvements and housing.”51 However, a hospital may report community building activities as community benefit if it provides additional documentation of “how its community building activities promote the health of the communities it serves.”52 Given the overlap between the two categories and an unclear distinction when applied to specific initiatives, this report considers housing initiatives with explicit links to health as falling under the “community benefit” umbrella term.

Also read

Nonprofit hospitals should do more to address social determinants of health

In 2011, nonprofit hospitals saved an average of $11.3 million per hospital per year in direct and indirect benefits through tax exemption, totaling $24.6 billion nationwide.53 Yet some nonprofit hospitals do not provide meaningful community benefit, calling their tax-exempt status into question and keeping critical funding out of the pool of taxpayer funds available to provide social and economic support to the community.

For example, an analysis of 2009 IRS data found that 25 percent of community benefit spending was on charity care, 45 percent was on unreimbursed costs for means-tested programs, and only 5 percent was on direct community health improvements.54 In addition, hospitals vary extensively on their amounts of community benefit spending, with some spending as little as 1 percent of operating expenses on community benefit and others spending as much as 20 percent. Notably, this variation was not associated with community need.55

Because for-profit hospitals typically also provide charity care and accept patients covered by means-tested programs, measuring incremental community benefit provision, or the community benefit a nonprofit hospital provides above that which a for-profit hospital offers, can be a useful tool. In 2022, 39 percent of nonprofit hospitals did not spend more on incremental community benefit than what they saved on tax exemption, and 80 percent did not provide enough incremental charity care to warrant their tax exemption.56 In other words, the amount these nonprofit hospitals spent on community benefit and charity care above what for-profit hospitals without a community benefit obligation spent was less than the value of the tax breaks they received.

While nonprofit hospitals are obligated to accept Medicaid patients, provide charity care, and operate an emergency department open to all, these are standard practices at both for-profit and nonprofit hospitals. In fact, a Health Affairs study using 2018 data found that in aggregate, nonprofit hospitals spent just 60 percent of what for-profit hospitals spent on charity care as a proportion of total expenses incurred.57 Additionally, in 23 of 45 states analyzed in a recent Journal of the American Medical Association study, “for-profit hospitals had higher unreimbursed Medicaid cost to expense ratios than nonprofit hospitals.”58

Nonprofit hospitals have a unique opportunity to use their obligation to effect meaningful change in their communities. As anchor institutions, or “large, place-based establishments” linked to the community, nonprofit hospitals should “commit major financial, human, and intellectual resources to address social challenges,” according to an American Journal of Public Health article led by Howard K. Koh, former assistant secretary for health in the U.S. Department of Health and Human Services.59 As public health and health care experts increasingly acknowledge that medical care is insufficient to achieve whole-person health and subscribe to a social-determinant-of-health model, nonprofit hospitals that take their community benefit obligation seriously must follow suit.60

Investing in social determinants of health is not only in the spirit of nonprofit status and the community benefit standard but also crucial to improving health outcomes and reducing health disparities.61 According to one study, clinical care only accounted for 16 percent of the variation in county-level health outcomes. In contrast, socioeconomic factors, health behaviors, and the physical environment accounted for 47 percent, 34 percent, and 3 percent, respectively.62 Given the strong associations between housing and health, the vast savings of tax exemption, and an obligation to serve the community, nonprofit hospitals are uniquely positioned to support housing in their communities.

Nonprofit hospitals can invest in housing using a variety of strategies

Nonprofit hospitals considering using their community benefit funds to have a more significant impact on improving health and reducing disparities through housing investment should consider applying the strategies discussed in this section.

Screen patients for housing insecurity and connect them to community organizations that can help

To respond to the housing needs of their patient populations, hospitals and their employees must first be able to identify and quantify them during clinical encounters. Although studies vary on the number of hospitals participating in social needs screening, providers increasingly recognize its importance.63 The Centers for Medicare and Medicaid Services originally developed a Health-Related Social Needs Screening Tool to help providers enrolled in its Accountable Health Communities (AHC) Model assess their patients’ social needs, but it is now available for public use.64 Beyond screening, referrals to community housing partners are vital to ensuring that patients who face housing insecurity receive support, yet some hospitals struggle to develop the community partnerships needed to serve the issues identified in screenings. Evaluation of the AHC Model shows that systematic screening for social needs can help expand referral infrastructure and community partnerships.65 Partnerships could also include co-locating social and medical services to facilitate access to community resources. One example of strategic collaboration is medical-legal partnerships to help patients navigate their housing rights and protections while improving health outcomes.66

Yet many of these efforts are only the beginning of how hospitals can use their funds to address housing issues among their patient populations. These efforts do not meaningfully address the structural issues of housing quality, supply, or affordability across broader local communities. Community partners who receive hospital screening referrals largely rely on inadequate government funding, limiting their capacity to address housing needs.67 Hospitals should screen for housing instability alongside more robust initiatives that help fill gaps left by nonhospital resources—by, for example, using screening protocols to identify patients eligible for a hospital’s rental assistance program.

Improve the quality of existing housing stock, particularly for low-income households

Low-income households and families of color are at the highest risk of being exposed to harmful in-home conditions or living in climate-vulnerable housing and communities.68 Toxicants such as lead, mold, and dangerous chemicals jeopardize the health of these families and increase their reliance on the health care system. Hospitals can help ensure their community’s housing stock is healthy and safe by investing in initiatives that make homes climate resilient, including floodproofing or sealing a building’s infrastructure from air leaks, or removing toxins from homes. For example, Penn Medicine Lancaster General Health’s Lead-Free Families initiative is investing $50 million over 10 years for lead remediation in Lancaster County, Pennsylvania. Lancaster, a county in which half the homes were built before lead paint was outlawed in 1978, has one of the state’s highest rates of childhood lead poisoning at 13.4 percent.69 Launched in August 2021, the Lead-Free Families initiative has a 10-year goal of eliminating lead from 2,800 homes in the county. Importantly, the program serves families living below 400 percent of the federal poverty line, as well as rental owners, for free or significantly reduced remediation costs.70

Build up the supply of quality housing, whether temporary or permanent, that meets the needs of underserved community members

Hospitals can increase the housing supply in their communities by thoughtfully financing housing development projects, offering hospital-owned housing units, or developing new affordable housing units. For example, Nationwide Children’s, based in Ohio, built and manages 58 low-income housing units with on-site career development training.71 In addition, Denver Health repurposed its old administrative office building, in partnership with the Denver Housing Authority (DHA), to create 110 housing units for low-income older adults, individuals with disabilities, and discharged patients experiencing homelessness who need transitional housing.72 The DHA will retain ownership and coordinate management of the newly designed apartment building. Hospitals that invest in housing development projects or manage rental properties should ensure their investments increase affordable housing stock accessible to community members in need rather than prioritizing profits.

Other hospitals invest in community projects that advance affordable housing. For example, Boston Medical Center invested $6.5 million in affordable housing initiatives, including a $1 million no-interest loan to fund a mixed-use development in an underresourced area of Boston.73 Rush University Medical Center provided a loan of roughly $1 million to a regional community development financial institution, the Chicago Community Loan Fund, to facilitate the rehabilitation of 50 vacant buildings across Chicago into affordable homes.74

Since 2016, Bon Secours Hospital in Richmond, Virginia, has invested in the Maggie Walker Community Land Trust.75 The trust purchases and owns the land; allows residents making 80 percent of the median income in the area to buy just a home on the land, significantly reducing the cost of homebuying—by 54 percent, on average.76 The trust has created more than 50 permanently affordable and owner-occupied homes across Richmond, with more in development.77 Although community land trusts are important tools for building wealth, particularly for communities of color, they are often small and have limited capacity—making hospital investment to expand these resources incredibly impactful.78

In addition, hospitals looking to address community needs have partnered with other local hospitals to maximize the impact of their investments. Hospital systems can combine their investment capital, as happened in Portland, Oregon, with Kaiser Permanente, Adventist Health, Legacy Health, Providence Health & Services, and Oregon Health & Science University, along with managed care health insurance company CareOregon. Combined, the organizations contributed $21.5 million to a $69 million development project led by Central City Concern, a local nonprofit housing provider, to create 382 housing units for low-income and homeless residents.79

Support vulnerable patients by offering rental assistance and supportive services

Rental assistance remains crucial in keeping low-income families housed. The majority of available rental assistance flows from federal funds, though there is a limited patchwork of state and local programs.80 Yet federal rental assistance programs are vastly underfunded and serve only a fraction—roughly 1 in 4—of people in need, and many families wait years to receive assistance.81 Hospitals can help fill the gaps in funding by offering rental assistance to patients in need.

An example of a hospital rental assistance program is the California-based Dignity Health’s “Housing with Dignity” partnership, done in compliance with a merger condition from the California Department of Justice.82 The program, started in 2014, has a budget of about $350,000, comprising both community benefit funds and Medi-Cal funds, and provides temporary housing for up to 12 chronically homeless individuals at a time, typically patients who frequently utilize hospital services or struggle with chronic conditions.83 Dignity Health provides financial assistance for the apartment costs, while its partner, Lutheran Social Services of Northern California, provides supportive services and life-skills training to help transition participants into permanent housing.84 Hospital efforts to alleviate an individual patient’s housing cost burden could be coupled with initiatives that encourage decision-makers to change policy and coordinate housing investments for broader impact.

Invest in efforts to advocate for policies that strengthen and stabilize housing

As anchor institutions, hospitals hold significant political and economic capital that they can mobilize for policy change.85 Hospitals can utilize that capital to support advocacy efforts led by community organizations and coalitions to advance housing policy that addresses supply, affordability, and quality. In their advocacy priorities, hospitals have traditionally focused on issues that affect medical care provision such as reimbursement and regulatory standards.86 Expanding their advocacy portfolios to include sustained and robust resources for social supports, including housing, would acknowledge that their work can only go so far in keeping patients healthy and that policies targeting social determinants are a priority.

The Kaiser Permanente Thriving Communities Fund is a $400 million investment that aims to create and preserve 30,000 affordable and supportive housing units across its service area markets by 2030.87 This investment is part of Kaiser Permanente’s larger housing efforts, including its strategic partnerships with local leaders through the Mayors and CEOs for U.S. Housing Investment coalition; other health systems through its Healthcare Anchor Network; and charitable foundations, such as the de Beaumont Foundation, through the CityHealth initiative.88 Both individually and through these partnerships, Kaiser Permanente advocates federally for low-income housing tax credits and state and locally for housing bonds and inclusionary zoning policies that support housing supply and development.89 In California, this advocacy helped secure voter approval for a $4 billion housing bond to create affordable housing and low-interest loans for veterans.90

Considerations for hospital housing investments

Society bears the cost of nonprofit hospital status in the form of forgone local, state, and federal tax revenue.91 This lost revenue reduces the government’s ability to sufficiently fund education, physical infrastructure improvements, public health services, transportation, emergency services, food and child care assistance, housing supports, and other public services.92 When hospitals and health systems do not return the value of their exemption to the community, which less than half have been found to do,93community members, leaders, and policymakers should question their nonprofit designation.94 Payments in lieu of taxes (PILOT) is a mechanism that localities such as Boston and Pittsburgh are increasingly using to encourage greater hospital contribution and offset lost revenue.95 Nonprofit hospitals must invest in their communities in a way that adequately reflects the value of the tax savings received. Those investments should target the social determinants of health typically supported by public funds.

When hospitals and health systems do not return the value of their exemption to the community, which less than half have been found to do, community members, leaders, and policymakers should question their nonprofit designation.

Hospitals should be thoughtful as they pursue strategies to support housing in their service areas. Investing in neighborhood revitalization efforts or housing development projects or building and/or managing housing units may lead to unintended consequences such as accelerated displacement of communities already vulnerable to housing loss, particularly among people of color.96 When hospitals take on construction projects, such as building new or expanding existing medical facilities, their actions also risk furthering displacement in affected neighborhoods—making housing less affordable.97 Health care sector spending on facility construction projects rose to an all-time high of more than $50 billion in 2022, some of which could count toward community benefit under the current standard.98 As hospitals purchase real estate for construction and expansion projects, they should be mindful not to purchase and demolish existing affordable housing stock. Though hospitals are often shielded from this requirement, they could consider entering into community benefits agreements with coalitions or community-based groups to help prevent harm and ensure equity during construction efforts.99

The design of these types of hospital investments must be intentional—co-created with existing residents to center community needs and preserve the community’s existing social fabric. This co-creation requires hospitals to embed themselves in the community by understanding its history and culture and collaborating with community members to develop shared leadership, goals, and investment strategies. Although admittedly challenging for many hospitals, collecting outcomes data from their housing investments can not only quantify the impacts on health but also potentially help identify early on when investments yield unintended results.100

The design of these types of hospital investments must be intentional—co-created with existing residents to center community needs and preserve the community’s existing social fabric.

Hospitals can use various methods to minimize displacement, such as ensuring that the majority, if not all, of the units in their investment properties are affordably priced for existing community members and targeted to those unable to afford the market rate. Hospitals can also consider implementing renter protections within their investment properties, including caps on yearly rent increases. In particular, community land trusts include built-in protections that retain long-term affordability, including restrictions on resale price and providing a right of first refusal to renters—both also important mechanisms in curbing displacement.101 In addition, community land trusts help stabilize neighborhoods by contributing to “fewer foreclosures, better upkeep, and stable occupancy.”102 Hospitals can also advocate for state and local anti-displacement policies such as upzoning in wealthy areas, which helps increase housing supply overall and limits the gentrification of lower-income neighborhoods.103

Also read

Some housing investments, by nature, may end up generating financial returns for hospitals,104 though potentially a small part of hospitals’ overall investment income.105 Hospitals should be careful to avoid violating the spirit of community benefit by using these investments to gain profits and minimize the cost of maintaining nonprofit status. Ensuring that housing investment returns are part of a revolving set of funds that are ultimately reinvested back into the community, as Boston Medical Center has committed to doing,106 can help honor the community benefit requirement and maximize impact on community health.107 Because hospitals are often considered trusted institutions in the communities in which they operate, they must maintain this trust as they pursue investment strategies.

Policy recommendations

State and federal policymakers should monitor community benefit standards more closely and consider implementing policies to promote high-impact community benefit provision, accountability, and oversight. Policymakers should also consider how linking community benefit more explicitly to health equity and social determinants of health would more comprehensively improve community health. 

State policy recommendations

Consider state community benefit spending standards

While the IRS does not specify how much nonprofit hospitals must spend on community benefit to qualify for nonprofit status, to make meaningful improvements to housing quality and affordability, nonprofit hospitals must make substantial community benefit investments. Researchers have found a vast range of community benefit spending: For example, in 2018, the nonprofit hospitals in the top 25 percent of charity care to expense ratios spent $3.22 of every $100 in expenses incurred on charity care, while the lowest 25 percent spent just 21 percent.108

Given such variation, some states have set minimum spend standards for community benefit among their nonprofit hospitals. Illinois and Utah require nonprofit hospitals to match or exceed, respectively, their property tax liability in community benefit spending.109 Some research suggests that any state community benefit policy is associated with increased community benefit spending, with multiple policies having a greater impact, although there are some mixed findings.110 However, while minimum spending policies can prevent nonprofit hospitals from spending inadequate amounts on community benefit, some experts have raised concerns that setting a spending floor could lead nonprofit hospitals already providing substantial community benefit to decrease their spending.111

In 2019, Oregon took an alternative approach to setting spending thresholds.112 H.B. 3076 authorized the Oregon Health Authority (OHA) to establish a methodology for setting spending floors for nonprofit-hospital community benefit provision every two years.113 For fiscal years 2022 and 2023, the OHA calculated each hospital’s spending floor using the three-year average of unreimbursed care spending, the direct-spending net-patient revenue percentage, and an operating margin multiplier.114 While not a foolproof solution to achieving adequate community benefit spending without discouraging spending above the threshold, the Oregon program may be more effective because it calculates a floor for each hospital and allows flexibility to adjust the methodology every two years.

In addition to promoting higher spending standards, some states have filled the IRS’ gap in clarity about what community benefit entails by codifying more explicit expectations. For example, a Pennsylvania law specified six community benefit standards for tax exemption,115 while a Massachusetts hospital licensing program more specifically ties hospital spending to social determinants of health.116 Furthermore, states can require nonprofit hospitals to address equity goals to qualify for state tax exemption: In Maryland, nonprofit hospitals must report their efforts to track and address disparities. Similarly, nonprofit hospitals in New York must tie their spending and plans to statewide health equity goals.117 By highlighting social determinants of health initiatives as contributing to community benefit that can address assessed community needs, states could incentivize nonprofit hospitals to develop comprehensive initiatives to address social and economic needs, including housing.

Require greater accountability and transparency of community benefit provision

Given the IRS’ limited capacity to monitor, regulate, and enforce community benefit standards, states can conduct audits of community benefit provision. In addition, states may take a legislative route, as “a legislative audit allows for a nonpartisan, evidence-based evaluation and recommendations for legislators to consider,” according to the National Academy for State Health Policy.118 For example, in September 2020, the Montana Legislative Audit Division published the values of hospitals’ tax exemptions and community benefits, analyzed the top community-reported health needs, and examined the relationship between community benefit spending and community health.119

Set community engagement standards

While hospitals may recognize the value of investing in social determinants of health, they must design community benefit programs that not only respond to community needs but also address these needs in ways the community thinks are best. In addition, to make community benefit spending more ethical, meaningful, and effective, it is essential that community members and leaders have seats at the table that allow for collaboration, co-creation, and shared decision-making.120

Nonprofit hospitals are federally required to “solicit and take into account input” from community representatives when conducting community health needs assessments.121 However, the federal obligation to involve the community in community benefit ends there. Some states, such as Rhode Island, have extended this requirement to explicitly require the representation of certain groups of stakeholders in the needs assessment and implementation processes.122 For example, requiring community collaboration for housing initiatives would aid nonprofit hospitals in addressing housing needs in ways that best serve their communities.

Also read

Federal policy recommendations

Clarify community benefit standards

Because the IRS does not explicitly define what constitutes community benefit and instead lists examples of possible community benefit avenues, it may need to clarify for hospital administrators and decision-makers whether programming meets tax exemption requirements.123 Although the IRS has made remarks affirming that housing and other social determinants of health may meet the community benefit standard, the Schedule H instructions should be more explicit about this.124 Furthermore, the IRS should clarify or remove the distinction between community benefit and community building activities to allow evidence-based community building activities to count toward tax exemption and incentivize these investments.125

Additionally, regulators should ensure that nonprofit hospitals with community benefit activities that may be profitable, such as housing development, truly meet standards for tax exemption. For example, in the instructions for the Schedule H (Form 990) tax form in which nonprofit hospitals report community benefit, the IRS states that “activities or programs cannot be reported if they are provided primarily for marketing purposes or if they are more beneficial to the organization than to the community.”126 The IRS should consider providing more specific guidance about the threshold for community benefit, and both federal and state regulators should monitor this reporting closely.

Set protocols to monitor community benefit spending

Tax reporting requirements make monitoring, regulating, and tracking community benefit compliance difficult. According to the Government Accountability Office (GAO), it is difficult for the IRS “to verify community benefits because the law isn’t specific about which services qualify,” and it is also difficult for it to demonstrate consistent review of hospitals’ community benefit.127 Furthermore, the IRS requests community benefit spending information in an open-ended narrative section inaccessible to the public, limiting consistency and making compliance review and accountability less straightforward.

From 2015 to 2019, the IRS referred nearly 1,000 hospitals for audit due to potential noncompliance with nonprofit hospital standards. Still, the IRS could not verify whether any referrals were related to community benefit.128 Yet some evidence suggests potential community benefit violations: GAO analysis of IRS data estimated that 30 hospitals had no community benefit spending in 2016.129

As the GAO suggested in its review of nonprofit hospital oversight, the IRS should consider adding codes to track community benefit reporting and making this information publicly available. Doing so may encourage nonprofit hospitals to spend adequately on community benefit and invest in high-impact community health approaches such as housing.

Strengthen enforcement tools to penalize noncompliant nonprofit hospitals

While the IRS has the authority to revoke hospitals’ nonprofit status for noncompliance with tax exemption requirements, it needs more tools at its disposal to take intermediate steps toward community benefit compliance. For example, in one instance in 2017, the IRS revoked a hospital’s nonprofit status for failing to comply with its community health needs assessment and implementation plan requirements.130 While noncompliance with CHNAs and implementation plans has a more precise protocol, including a $50,000 excise tax, the IRS has little capacity or authority to enforce the community benefit standard beyond extreme measures such as revoking nonprofit status.131

If the IRS were able to fine or penalize noncompliant hospitals, it could encourage nonprofit hospitals to improve their community benefit efforts and make meaningful investments in community health through initiatives such as housing programs. In the absence of IRS enforcement tools, Congress should extend the Federal Trade Commission’s authority to regulate nonprofit hospital conduct.132


There is significant opportunity for nonprofit hospitals to take their role as community-based charitable organizations seriously and address housing as one of the most pressing social determinants of health. Given their vast financial resources bolstered by significant tax savings, nonprofit hospitals can meaningfully fulfill their community benefit obligations and return value to communities by filling critical housing gaps. These hospitals should focus their efforts on addressing community needs in partnership with community members and demonstrate that their commitment to improving community health offsets their tax exemption.


The authors would like to thank Jill Rosenthal, Emily Gee, Amy Clary, Arohi Pathak, Edwith Theogene, Justin Dorazio, Michela Zonta, and Hailey Gibbs for their insights and thoughtful review of this report.


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  129. Ibid.
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  131. IRS, “Consequence of Non-compliance with Section 501(r),” available at (last accessed November 2022); Emily Gee and Thomas Waldrop, “Policies To Hold Nonprofit Hospitals Accountable” (Washington: Center for American Progress, 2022), available at
  132. Gee and Waldrop, “Policies To Hold Nonprofit Hospitals Accountable.”

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Policy Analyst, Health


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