Even as homelessness in New York City has doubled over the last decade— in 2022, more than 70,000 people were living in city-run shelters—we have struggled to deploy at scale one of the most effective solutions to the problem: permanent supportive housing.

The problem is not uncertainty about the effectiveness of supportive housing or a reluctance to build on the part of nonprofits. Supportive housing has a proven track record of helping people living with disabilities or who were formerly incarcerated avoid or exit the shelter system.

One significant obstacle to building more supportive housing is a shortage of creative funding that allows nonprofits to start large, complex capital projects. Unlike private developers, nonprofits usually do not have “walking around money” to pay for things like deposits to acquire a site or environmental reviews. Private developers can raise equity from investors, or get a bank loan, to pay for these costs. Nonprofits can’t do that, so cash for those costs often must come from the daily operating budget.

There are ways for philanthropists to fill the gap. The Fortune Society, a leading supportive housing provider, and FJC-A Foundation of Philanthropic Funds, recently launched a revolving loan fund that will provide desperately needed working capital to kickstart supportive housing projects.

The fund’s low-interest loans are capitalized by contributions from FJC’s donor-advised fund holders and matched by additional resources from the Fortune Society. The loans will allow the nonprofit Fortune to significantly expand its supportive housing portfolio over the next five years.

This model is different from most philanthropic grants. Instead of providing general operating support or an endowment to increase the organization’s balance sheet, the revolving loans will have a tangible community impact by accelerating specific capital projects. With low-interest-rate loans, donors are forgoing some potential growth in their fund accounts. However, at the end of the five-year term, the principal and modest interest gains can be redeployed as grants or toward another round of loans.

Combining creative philanthropy with the principles of impact investing in this way has applications beyond the supportive housing sector. Donors could use this approach to support any nonprofit that takes on similar entrepreneurial activity.

There is enormous untapped capacity within donor-advised funds, in which holdings increased by 23.6% between 2017 and 2021. Critics point out there are no minimum distribution requirements governing donor-advised funds. But that lack of strict requirements is precisely what allows for creative applications like The Fortune Society’s revolving loan fund.

Most donors are not thinking about using their philanthropic dollars this way. But imagine the possibilities if philanthropic leaders who think and act in business terms were to partner closely with nonprofits. They could help identify and fill common gaps that nonprofits face. Donors would see a bigger impact from their giving, and entrepreneurial nonprofits could take on more ambitious projects to solve our most challenging problems.

Sam Marks is chief executive of FJC-A Foundation of Philanthropic Funds.

JoAnne Page is president and CEO of the Fortune Society.