Wow! Well I think it's very generous of you to have your niece back with you for the time being.
I would be amazed if your niece's therapist actually said that to her.
I don't know where you live but where I live no one would be turned away from a homeless shelter in weather like that, even if it's standing room only, so I would also question that story. It all sounds like a bunch of manipulative tactics.
But regardless, having him come and stay would be a recipe for disaster. First and foremost, you need to protect yourself.
However, if you are feeling at all guilty just remember, you also need to protect your house-guest. If it were anyone else in the world staying with you, your sibling, your Aunt your neighbour, would you have him come to stay?
There is a book called Co-dependant no more, by Melody Beattie, if you haven't read it already it is often recommended in the Friends and Family forum.