Will housing bust trickle down to poor, hungry?

updated 8:24 p.m. ET Nov. 19, 2007

WASHINGTON - 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.

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