July 16, 2019
Pay for Success Project Beats Interim Goal to Trim Homeless

February 13, 2018 — The first-in-the-nation pay for success initiative to reduce chronic individual homelessness has significantly exceeded interim targets, the United Way of Massachusetts Bay and Merrimack Valley announced today.

The pay for success (PFS) initiative, launched three years ago, "has significantly exceeded targets and successfully placed over 656 high-need individuals into stable, supportive housing," according to the United Way of Massachusetts Bay and Merrimack Valley.

The PFS initiative, a partnership of the Commonwealth of Massachusetts, the Massachusetts Housing & Shelter Alliance (MHSA), a Boston-based organization with nearly 100 community-based agencies from across Massachusetts, Corporation for Supportive Housing (CSH), Santander Bank, N.A., and the United Way, aimed to provide permanent supportive housing for up to 500 individuals in the first two years of the project, and 800 people by 2019.

In addition, by last June 30, the end of the second year, 93% of those housed via the initiative remained housed after one year. The target to trigger dividend payments to the investors was an 85% retention rate.

To date, the homelessness initiative has saved Massachusetts an estimated $2.2 million in shelter, emergency room, and in-patient hospitalization care costs, the United Way said.

In a PFS venture, investors assume project risk by financing services up front with the promise of repayment from the state if a third party evaluator determines the initiative achieved specific, predetermined outcomes that benefit society, including saving taxpayer dollars. The aim is to shift the focus from outputs to outcomes, directing taxpayer dollars to programs that work. If goals are not met, the government is not obligated to repay investors.

Root Cause, a Boston nonprofit that supports social innovators and educates social impact investors, provided an independent evaluation of whether the initiative achieved its goals.

Duke Dayal, president and CEO of Santander Bank today announced that his bank will be donating funds equivalent to its $102,200 dividend to MHSA. United Way said it will reinvest its $102,200 dividend to support its work to end homelessness, and CSH will reinvest its $51,100 dividend to advance PFS as a finance model to create supportive housing.

"The pay for success initiative has successfully met its targets for housing retention, demonstrated a reduction in utilization of medical services by clients, and demonstrated a cost-benefit,” said Joe Finn, MHSA president and executive director.

He added, “By focusing on housing chronically homeless individuals and long-term homeless individuals who are high utilizers of emergency care, the pay for success initiative is having a significant impact on the utilization of emergency resources. It has also brought much needed services to clients who could not otherwise have accessed services.”

“While we are proud to return dividends to the investors, the real dividends here are the dignity and supportive services we are providing to some of the Commonwealth’s most vulnerable individuals,” said Michael K. Durkin, president of the United Way of Massachusetts Bay and Merrimack Valley. "It is very exciting to be able to scale programs that work, significantly reducing our state's chronically homeless individual population, and creating potential savings in other costs like incarceration, shelter, and emergency care."

Individuals in the homelessness PFS initiative are high utilizers of emergency room services, health services, and shelters, and many have lived on the streets for years. To break this cycle of high utilization, the model focuses on providing permanent, low-threshold supportive housing, through a network of 18 homeless service providers, to those who would otherwise rely on costly emergency resources. The stability of supportive housing allows participants to address their often complex health issues more effectively than they would on the streets or in shelters, the United Way said.

CSH invested $500,000 in the initiative, while Santander Bank and the United Way of Massachusetts Bay and Merrimack Valley each invested $1 million.

Over the last six years, several pay for success projects have been launched in Massachusetts, including:
  • A partnership involving Roca, a Chelsea-based service provider, and Third Sector Capital Partners, a nonprofit fundraising and project management intermediary based in Boston, that seeks to reduce incarceration rates and improve employment outcomes for young men.

  • The Adult Basic Education Pay for Success Initiative that pairs Jewish Vocational Services, one of the largest providers of adult education and workforce development services in the Greater Boston area, and Social Finance, Inc., a Boston-based fundraising and project management intermediary that mobilizes capital to drive social progress,.

  • A K-12 education project, sponsored by Social Finance and Jobs for the Future (JFF), a national nonprofit that builds educational and economic opportunity for underserved populations, in which organizations were asked to compete to explore how pay for success would allow them to implement or expand a career and technical education program.

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