Paying for Success in Permanent Supportive Housing

Earlier this year, the County of Santa Clara announced an innovative approach to addressing the housing resource problem. In July, the County launched “Project Welcome Home,” a PSH program financed through a cross-sector Pay for Success (PFS) contract.

Homelessness affects thousands throughout the United States, particularly in California. A 2014 report from the US Department of Housing and Urban Development reported the state held over 110,000 homeless individuals, making up 20 percent of the nation’s homeless population.

Santa Clara County, the Bay Area county most known for Silicon Valley, is no stranger to this issue. More than 6,000 people within its jurisdiction were homeless in 2015, with most unable to secure shelter. Roughly a third of these individuals have experienced multiple episodes of homelessness, or have been homeless for a year or more. These “chronically homeless” individuals are particularly vulnerable, often suffering from substance use, mental illness and other destabilizing health conditions.

For local governments trying to serve this population, permanent supportive housing (PSH) is nothing new. Many cities, counties, and states across the U.S. currently operate the dual-service program, connecting high-need homeless populations with a combination of housing and supportive services. Several PSH programs have demonstrated improvements in the housing stability and overall wellbeing of homeless individuals, but this success can prove expensive. Governments facing a limited supply of housing resources, particularly those in expensive housing markets, find it difficult to assume the upfront costs of PSH. Too often these costs leave the chronically homeless underserved.

Earlier this year, the County of Santa Clara announced an innovative approach to addressing the housing resource problem. In July, the County launched “Project Welcome Home,” a PSH program financed through a cross-sector Pay for Success (PFS) contract.

In this contracting model, service providers receive upfront funding from private funders to cover the cost of service delivery. Governments, service providers and funders then agree to specific outcomes that will be used to measure program success. If those outcomes are achieved, the government will make “Success Payments” that can be used to repay the funders. If not, government does not pay, and funders assume the financial loss. This model allows governments to scale effective programs, and through rigorous evaluation, only make payments if measurable results are achieved. In Project Welcome Home, these results mean improved outcomes for those suffering from chronic homelessness. The County of Santa Clara has agreed to pay Abode Services, the project’s procured PSH provider, for each month of continuous stable tenancy achieved by chronically homeless participants.

Interest in the PFS model is growing. A total of $8.6 million of federal funding has recently been designated for PSH programs leveraging the PFS model.  For jurisdictions considering a bid for these funds, the project in Santa Clara County offers several insights on what PFS can bring to homelessness interventions:

1. Integration of Data for Effective Programming

In traditional government procurement, providers are contracted on the basis of outputs. Service providers addressing homelessness might receive funding to serve a specific number of individuals, or provide a certain number of housing units. In PFS contracts, service providers receive payments on the basis of outcomes. Governments only pay for services that achieve specific measurable results, such as housing retention or improved client wellness, as measured through rigorous evaluation. Determining which outcomes indicate a successful program is a key aspect of the contracting process, and their measurement requires accessible sources of data.

Prior to Project Welcome Home, this data was isolated in various systems. Despite uploading data to the Homelessness Management Information Systems (HMIS), housing providers often had no means to effectively utilize information in the database. Other government databases lacked integration across different agencies. The resulting data ‘silos’ between homeless shelters, criminal justice systems, mental health care providers, and emergency departments prevented a robust understanding of the behaviors and needs of the homeless population. Far from unique to Santa Clara, local governments and housing providers nationwide face these gaps between HMIS and government databases. PFS can provide the impetus to bridge them.

Recognizing the benefits of understanding and aggregating data from these systems, Santa Clara County leveraged an array of data sharing agreements and other strategies to pull this data together and commissioned a study detailing a more complete profile of its homeless population. The PFS contract put these findings into action by leveraging the data-integration efforts and creating the legal and operational mechanisms for providing data to the project’s evaluators. The improved data systems are being used to measure individuals’ use of County services, allowing Abode to adjust their service offerings accordingly to achieve better outcomes. With data collected, distributed, and monitored by the County, the evaluators, and Abode, the project can then prioritize limited resources towards the most vulnerable individuals.

2. Enhanced Public-Private Partnerships

PFS projects are constructed through a collaborative, multi-party, cross-sector process (see the link below for a full list of key participants in Project Welcome Home). Governments and service providers partner together to define a specific population to be served, and develop detailed operational plans for implementing services and evaluating results. The model is mutually beneficial: governments only pay for programs with impact, and community nonprofits are able to scale their programs with long-term, fully funded contracts.

Prior to Project Welcome Home, Abode Services was operating other high-performing programs in neighboring counties, but had limited operations within Santa Clara. Through a competitive RFP process, the County selected Abode as the project’s service provider, offering the nonprofit a chance to scale its programs in a new jurisdiction. PFS created an opportunity for the County to attract a proven service provider to enter a public-private partnership.

The County benefits from Project Welcome Home by enrolling some of its most vulnerable chronically homeless individuals who have not been able to stabilize through other services. Further, as the County only releases funds if the program is successful, the risk of financing services is shifted to private funders. In turn, Abode Services receives a six-year funding commitment from private funders. This funding commitment allows Abode to devote more resources towards the goal of reducing homelessness in Santa Clara, and less towards annual fundraising or grant compliance.

3. Introduction of Rigorous Evaluation

Since government payments are made for each outcome achieved, rigorous evaluation of program success is crucial to a PFS project. Most governments have limited means to evaluate the success of social programs, as independent evaluations are often too expensive for local governments to justify. Internal monitoring and evaluation efforts are often challenged by limited capacity and data sharing difficulties.

Project Welcome Home allowed the County to partner with researchers from the University of California, San Francisco to measure the program’s impact across several different County systems. In addition to housing stability metrics, the evaluators use information from the justice system, mental health facilities, and emergency departments to determine the impact of Abode’s program on participants’ jail time and emergency service use. The program’s evaluation not only provides the County and Abode with a more accurate assessment of the program’s effect, but also informs the broader homelessness field on the efficacy of PSH programs. The assessment can strengthen the policy community’s understanding of effective homelessness interventions, leading to improved social services beyond Santa Clara.

Federal Competition to Support Pay for Success for PSH

Though Santa Clara County is realizing the ongoing benefits of Pay for Success, it initially faced the common difficulty of innovation: the upfront time and cost. The multi-stakeholder negotiation of PFS projects requires significant staff time and technical assistance to prepare a project to launch. Project Welcome Home required more than a year of feasibility and project construction negotiations before any chronically homeless individuals could be served.

However, as PFS gains momentum across the country, practitioners are applying lessons learned from initial projects to reduce the implementation costs of performance-based contracting. The County of Santa Clara intentionally designed an extendable and replicable project that can reduce the upfront costs for similar projects in other jurisdictions. As more evidence becomes available from Project Welcome Home in the coming years, effective program design will become clearer, reducing the construction costs of similar PSH programs elsewhere.

Further, the federal government has pledged a total of $8.6 million dollars to catalyze the development of PFS projects. Recognizing the model’s potential, the U.S. Department of Justice and the Department of Housing and Urban Development announced a grant competition that will award up to six U.S. communities with access to funding for the assessment and construction of PFS projects addressing chronic homelessness. Communities are eligible to receive up to $1.3 million in federal funds that can be used for project development costs and/or success payments, allowing grantees to implement performance-based PSH projects like that of Project Welcome Home. Applications for these funds are due February 11, 2016.

Project Welcome Home is still new, and the overall success of the program won’t be determined until 2021. As early indicators and information are released from the project, other governments can learn how integrated data, cooperative public-private partnerships, and rigorous evaluation can improve the delivery of permanent supportive housing programs. These lessons will only become more important as more counties throughout the United States turn to Pay for Success to address homelessness in their communities.

For a list of Project Welcome Home funders, click here.

For further details on the DOJ/HUD funding availability, contact Michael Cwidak-Kusbach at [email protected].

(Photo credit: Abode Services – Estaban Allard-Valdivieso)

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