When the Mayor declared Seattle’s homelessness epidemic a state of emergency one year ago, he reported that more money should be spent on “housing-focused” solutions.^[1] Providing immediate access to permanent supportive housing has been proven effective in ending chronic homelessness.^[2]

Last September, the city issued a “Pathways Home” plan for tackling the homelessness emergency. Marking a shift in policy, it demands a “relentless focus on permanent housing.”^[3] The plan also acknowledges that the current investment process is outdated and uncompetitive. Going forward, it prioritizes “performance based contracting” with a focus “on obtaining specific, measurable performance outcomes.”

This data-driven approach is commendable, but doesn’t go far enough. What if the measurements reveal housing goals still aren’t being met? The proposal weakly threatens, “funded agencies will be expected to implement improvement strategies and quickly demonstrate improvement if performance is below expectations.”

Make payment contingent on whether those measured outcomes are actually achieved.

Local organizations, such as Plymouth Housing and the Downtown Emergency Services Center, have a track record of building and operating permanent supportive housing.^{[4] [5]} But Seattle’s soaring real estate market is making development of these projects harder to finance. Additionally, half of all funding for homelessness programs in King County comes from the federal government, now controlled by Republicans who appear intent on cutting spending on social programs.^[6]

Private investors could fill this funding gap and earn a small return in the process. Foundations, nonprofits, companies, and individuals could loan money to local nonprofits to begin building housing units.

The city would guarantee that if specific measurable impacts are achieved, it will repay the investors, plus pay a modest return linked to the scale of the outcomes. An independent evaluator would be assigned to measure whether each project’s impacts met preset criteria.

In addition to the number of people housed, it is logical to target those impacts that would save the city the most money, such as reduced shelter stays, jail visits, or treatments by paramedics. (If the project were unsuccessful in meeting these goals the investors would be repaid less.)

The “pay-for-success” financing mechanism I’ve just described—also called a “social impact bond”—is already being used by other US governments to tackle their own homelessness crises.

In 2014 Massachusetts launched a pioneering initiative to provide 500 units for chronically homeless individuals.^[7] In two years, $3.5 million in philanthropic and private capital investments have saved the commonwealth 33,151 nights in shelters, 2,286 days in hospital, and 737 emergency room visits.

Denver plans to house 250 chronically homeless people using Social Impact Bonds.^[8] The initial development will house 25 individuals, thanks to $8.7 million from a syndicate of eight impact investors, leveraged with an additional $15 million in federal money. It aims to reduce the target population’s jail stays by at least 35% while increasing their housing stability by 83%. Investors will be paid $9.5 million if these impacts are achieved. Salt Lake City and Santa Clara County have launched similar schemes.^{[9] [10]}

Pay-for-success shifts risk to the private sector, which appeals to fiscal conservatives, while expanding funding to social welfare services. The rates of return to the investors would be modest, but unlike purely philanthropic giving, the money is returned and can be redeployed again and again.

The Mayor’s 2015 Housing Affordability and Livability Agenda (HALA) Committee urged the city to explore Social Impact Bonds as one type of “local opportunities for Social Investments in housing.”^[11] But there hasn’t been serious discussion of this emerging pay-for-success model since.

Seattle could begin harnessing additional outside investment dollars, while committing to only pay for those outcomes that are achieved. By matching capital to impacts, the city could measurably improve more lives than if it relies on public funding alone to solve our homelessness emergency.

Alastair Townsend is an architect, who is completing a master’s degree at the University of Washington’s Runstad Center for Real Estate Studies. 

^[1] Murray, E. B., & Lester, C. (2016). Homeless State of Emergency Implementation Plan (p. 5) (City of Seattle, Human Services Department). Retrieved 13 February 2017, from http://www.seattle.gov/Documents/Departments/pathwayshome/SOEImplementationPlan.pdf

^[2] Housing First Checklist: Assessing Projects and Systems for a Housing First Orientation. (2017). Usich.gov. Retrieved 13 February 2017, from https://www.usich.gov/tools-for-action/housing-first-checklist

^[3] (2016). Pathways Home, Seattle’s Person-Centered Plan to Support People Experiencing Homelessness (P. 33) (City of Seattle). Retrieved 13 February 2017, from http://www.seattle.gov/Documents/Departments/pathwayshome/ActionPlan.pdf

^[4] Our Properties | Plymouth Housing Group. (2017). Plymouth Housing Group. Retrieved 13 February 2017, from https://www.plymouthhousing.org/what-we-do/our-properties/

^[5] DESC (2017). Supportive Housing. Desc.org. Retrieved 13 February 2017, from http://www.desc.org/housing.html

^[6] All Home. (2015). All Home Strategic Plan 2015-2019. (P. 13). (All Home) Retrieved 13 February 2017, from http://allhomekc.org/wp-content/uploads/2015/09/All-Home-Strategic-Plan.pdf

^[2] MHSA Launches Pay for Success Program to Combat Chronic Homelessness | Massachusetts Housing & Shelter Alliance. (2017). Mhsa.net. Retrieved 13 February 2017, from http://www.mhsa.net/news/mhsa-launches-pay-success-program-combat-chronic-homelessness

^[3] Denver homeless initiative would be latest to tap social impact bonds – The Denver Post. (2017). Denverpost.com. Retrieved 13 February 2017, from http://www.denverpost.com/2015/01/24/denver-homeless-initiative-would-be-latest-to-tap-social-impact-bonds/

^[4] Harris, J. (2017). Pay for Success aims to helps homeless. KUTV. Retrieved 13 February 2017, from http://kutv.com/news/local/pay-for-success-aims-to-helps-homeless

^[5] Third Sector Capital Partners. (2013). From Idea to Action: Pay for Success In Santa Clara County. (Third Sector Capital Partners.) Retrieved 13 February 2017, from http://www.thirdsectorcap.org/wp-content/uploads/2015/02/131118_Third-Sector-Capital-Partners_Santa-Clara-Case-Study.pdf

 

^[1] HALA Steering Committee. (2015). Seattle Housing Affordability and Livability Agenda, Final Advisory Committee Recommendations To Mayor Edward B. Murray and the Seattle City Council

(p. 18). Retrieved 13 February 2017, from http://murray.seattle.gov/wp-content/uploads/2015/07/HALA_Report_2015.pdf