MASSACHUSETTS LAUNCHES PAY FOR SUCCESS INITIATIVE TO REDUCE
CHRONIC INDIVIDUAL HOMELESSNESS
Program will provide 500 units of stable supportive housing for
up to 800 chronically homeless individuals over 6 years
FRAMINGHAM – Monday, December 8,
2014 – Governor Deval Patrick today announced the launch of a
Massachusetts Pay for Success (PFS) initiative that will leverage philanthropic
and private capital investments to reduce chronic individual homelessness,
creating a new model of sustainable state support for chronically homeless
individuals. The initiative will provide 500 units of stable supportive housing
for up to 800 chronically homeless individuals over 6 years, improving the
well-being of individuals while saving taxpayer dollars by reducing the
utilization of costly emergency resources like shelter and Medicaid payments.
“Government’s role is to help people help
themselves. It is critical that we reduce the reliance on emergency services
and provide individuals safe and stable housing that will help strengthen our
communities and last for generations to come,” said Governor Patrick.
PFS contracts, also called Social Impact
Bonds, combine nonprofit expertise and private sector funding with rigorous
evaluation to transform the way government and society respond to chronic
social problems. In a PFS initiative, philanthropic and private investors
provide up-front funding for a project; the Commonwealth only repays investors
if a third party evaluator determines the initiative achieved specific,
predetermined outcomes that benefit society, including saving taxpayer dollars.
This project leverages $1 million in
philanthropic funding and $2.5 million in private capital investments from
Santander Bank N.A., the Corporation for Supportive Housing (CSH) and United
Way of Massachusetts Bay and Merrimack Valley. Through the PFS model, the
investors assume project risk by financing services up front with the promise
of Commonwealth repayment only in the event of success.
The Commonwealth’s PFS initiative is part of
an ongoing commitment by the Patrick Administration to reform the way
Government does business by identifying innovative programs that improve
outcomes and save money. If this program is successful, the Commonwealth will
make up to $6 million in success payments to repay investors and cover
evaluation and intermediary costs. Success will be based on the stable housing
for at least one year of chronically homeless individuals participating in the
initiative. The maximum possible return to investors is 5.33 percent.
“Pay for success contracts are a smart way for
government to raise resources to invest in innovative approaches to solving
chronic social problems. We only pay for programs that work, helping us improve
the well-being of those served while saving the Commonwealth money.” said
Secretary of Administration and Finance Glen Shor.
By repurposing existing state and provider
resources, this project will maintain a significant number of the 500 units of
supportive housing even after the six-year pay for success period concludes,
creating a new model of sustainable state support for chronically homeless
individuals. If successful, this initiative will greatly reduce the
Commonwealth’s population of chronically homeless individuals by serving up to
800 of the state’s approximately 1,500 chronically homeless individuals.
“Working together, with a shared vision for
our Commonwealth’s future, we can help build a bridge to stability for
vulnerable individuals who need assistance during difficult times,” said Health
and Human Services Secretary John Polanowicz. “Critical community-based support
such as care coordination and behavioral health services will help individuals
maintain housing, reduce their reliance on hospitalization and find personal
success.”
“This project will greatly expand permanent
housing options with ongoing support services for low income individuals.
DHCD is proud to participate in this new collaborative initiative that could
serve as a model for other state,” said Undersecretary for the Department of
Housing and Community Development Aaron Gornstein.”
In January 2012, Massachusetts announced a
first-in-the nation initiative to allow Massachusetts to enter into PFS
contracts designed to encourage innovative solutions to social problems,
improve the performance of government, and save taxpayer money. Through the
legislative authorization of the Social Innovation Financing Trust Fund, the
Secretary of Administration and Finance is able to enter into up to $50 million
in pay for success contracts, backed by the full faith and credit of the
Commonwealth.
“We are grateful to the Patrick Administration
for creating this exciting new supported housing initiative that will help the
Commonwealth move more quickly along the path to ending single adult
homelessness in Massachusetts. Also, we know from experience, that this
initiative will significantly reduce both the human and financial costs of
homelessness. We are delighted to be working in partnership with state
government and the Massachusetts Housing and Shelter Alliance and its proven
Housing First approach on this very promising program that will greatly
decrease reliance on emergency shelter by placing homeless individuals in
supported housing environments. In turn, safe and decent housing
will assist the residents to move forward in their goal of establishing
fruitful, successful and independent lives in their respective communities,”
Jim Cuddy, CEO, South Middlesex Opportunity Council.
“This Pay for Success Contract, focused on
permanent supportive housing for long-term and chronically homeless individuals,
represents a significant step forward in recognizing the critical relationship
between housing and health care. I am grateful for the providers, investors and
state officials who have made this initiative a reality,” said Joe Finn,
President & Executive Director of the Massachusetts Housing and Shelter
Alliance.
“Pay for Success has the potential to be a
game-changer for how human services are delivered in the Commonwealth,"
said Michael K. Durkin, President at United Way of Massachusetts Bay and Merrimack
Valley. "The agreement that government, and taxpayers, only pay when
the programs are proven to work and are accountable to outcomes as bold as
reducing the number of chronically homeless individuals in our state by
one-third, is a very innovative way to approach entrenched issues. For United
Way, the concept of investing and requiring specific measurable targets aligns
with how we already fund community based organizations with the dollars donors
entrusted to us. Going to scale with these strategies on a statewide basis, and
generating huge long-term savings to us all, is very exciting.”
“Groundbreaking investments such as this Pay
for Success Initiative are emphasizing accountability while providing the
resources to fund the housing and services we know end and prevent
homelessness,” said Deborah De Santis, President and CEO of CSH. “Beyond the
much-needed supportive housing it will create, Massachusetts will continue a
transformation in the way services are delivered, away from overreliance on
crisis health and shelters and toward more permanent solutions that provide the
stability people need to end their homelessness.”
“By investing in the Commonwealth’s Chronic
Individual Homelessness Pay for Success Initiative, we are investing in the
future of our most vulnerable neighbors,” said Gwen Robinson, Managing Director
of Community Development at Santander Bank. “Through this initiative,
chronically homeless individuals will get the housing, health care and job
training they need to become self-sufficient. We are always looking for ways to
give back to the community and are proud to play a small but meaningful role in
supporting this important initiative.”
In January 2014 the Commonwealth launched its
first PFS initiative, a $27 million Juvenile Justice PFS Initiative, the
largest financial investment in a PFS initiative in the country. The
Commonwealth, in partnership with Roca, a Chelsea-based service provider, and
Third Sector Capital Partners, a nonprofit fundraising and project management
intermediary, aim to reduce incarceration rates and improve employment outcomes
for young men. The Chronic Individual Homeless PFS initiative is the second
launched by the Patrick Administration.
Additionally, in August 2014, the Patrick
Administration announced the apparent successful bidders for the Adult Basic
Education Pay for Success Initiative. The Commonwealth’s partners in this
project are Jewish Vocational Services, one of the largest and most proven
providers of adult education and workforce development services in the Greater
Boston area, and Social Finance, a nonprofit fundraising and project management
intermediary. The Adult Basic Education Pay for Success Initiative will invest
approximately $15 million in state success payments to serve a portion of the
more than 16,000 adults on the waitlist for ABE and English for Speakers of
Other Languages (ESOL) programs. The PFS contract will be designed with the
goal of improving participants’ employment outcomes and increasing
postsecondary degree or certificate attainment over a six-year period.
Partners in the Chronic Homelessness
PFS Initiative:
Commonwealth of Massachusetts
o The Executive Office for Administration and
Finance (EOAF) is in charge of developing and implementing the state
budget. EOAF will make payments for success from the Social Innovation
Financing Trust Fund if the independent third-party evaluator determines that
the service providers have successfully housed each chronically homeless
individual for at least one year.
o The Department of Housing and Community
Development’s (DHCD) mission is to promote safe, decent affordable housing
opportunities in the Commonwealth. DHCD is investing shelter resources and
Massachusetts Rental Voucher Program (MRVP) housing vouchers in the Initiative
in order to maintain 500 units of supportive housing even after the Initiative
ends.
o The Executive Office of Health and Human
Services (EOHHS) administers MassHealth, the state’s Medicaid program.
MassHealth is helping managed care entities contract with service providers to
provide community support program services to PFS participants.
Massachusetts Housing and Shelter
Alliance (MHSA)
Massachusetts Housing and Shelter Alliance is
a member-based statewide advocacy and policy organization that works in
collaboration with its member agencies to develop innovative approaches to
ending homelessness and outcome-based housing programs for homeless
individuals. MHSA oversees more than 1,000 permanent, transitional and
emergency shelter beds and units with supportive services in approximately 30
cities and towns across Massachusetts, providing technical assistance, program monitoring,
data collection and reporting for all of these programs. MHSA will be the
lead partner who will coordinate providers of the Home & Healthy
for Good model for the Initiative and ensure that the programming is
being implemented correctly.
Corporation for Supportive Housing
(CSH)
CSH is the national leader of the supportive
housing movement, and has extensive experience in assembling and coordinating
local partners and teams of service providers to achieve successful
outcomes. As an investor in the Massachusetts Chronic Individual
Homelessness Pay for Success Initiative, CSH will be the first Community
Development Financial Institution (CDFI) to make a direct investment in this
Social Impact (Pay for Success) Financing. CSH will provide advice and technical
assistance for the initiative and is also an investor in the project.
United Way of Massachusetts Bay and
Merrimack Valley
United Way of Massachusetts Bay and Merrimack
Valley has a strong track record as a trusted leader and funder with the
experience to design and facilitate complex processes and partnerships
leveraging its established corporate, government and community-based partners
with the United Way network. Examples include its Housing First initiative,
Thrive in 5, Massachusetts Asset Building Coalition, Quality Rating Improvement
System, and its Investor Model of performance-based funding, its unique,
nationally-recognized method of addressing social issues. It was cited by
the Stanford Social Innovation Review as a nonprofit “achieving breakthrough
performance” and has been designated as a United Way Worldwide Center for
Excellence for its innovative impact approach and state and local
collaborations. In this partnership, United Way will serve as the
project’s fundraising intermediary, raising investor capital, acting itself as
an investor, and acting as the financial manager for the Initiative.
Santander
Santander
Bank, N.A. is one of the largest retail banks in the United States by
deposits. Its main corporate offices are in Boston and it operates
principally in Connecticut, Delaware, Maryland, Massachusetts, New Hampshire,
New Jersey, New York, Pennsylvania and Rhode Island. Santander’s 9,703
employees serve its 1.8 million customers through the Bank’s 703 branches,
2,092 ATMs, call centers, website and mobile app. Supervised by the Office of
the Comptroller of the Currency and a member of the Federal Deposit Insurance
Corporation, Santander in the United States is a wholly-owned, financially
autonomous subsidiary of Banco Santander (NYSE: SAN), a global commercial and
retail bank. For more information about Santander, visit www.santanderbank.com or call 877-768-2265.
Root Cause
Since 2003, Root Cause has improved the
performance of more than 200 organizations and funders in a wide range of
social service sectors. Root Cause’s Research and Assessments unit
focuses on addressing the “investment information gap” to help funders better
allocate limited resources to improve the lives of vulnerable
populations. Root Cause analysts conduct independent research
on social issues and evaluate program performance to provide leaders in the
nonprofit, foundation, government, and business sectors with actionable data to
invest in what works. Root Cause will act as the Independent Evaluator
for the Initiative, verifying the outcomes produced by the service providers.
Harvard Kennedy School Social Impact
Bond Technical Assistance Lab (HKS SIB Lab)
The HKS SIB Lab provides pro bono technical
assistance to state and local governments implementing PFS contracts using
Social Impact Bonds. The SIB Lab assisted Massachusetts in developing the
procurement and designing the data analysis strategy for this Initiative.
