Investors help fund housing goal
Foundations and a bank among those kicking in $8.6M for homeless program.
Several philanthropic foundations and a national bank are among eight investors that will kick in $8.6 million to start and run a Denver program aimed at housing up to 250 of the city’s most chronically homeless people.
The identities of the investors were among new details, along with some slight financial revisions, when the city released the contract last week for its unusual “social impact bond”-funded program. The city says it’s only the ninth such arrangement in the nation using that private funding model.
The program faces crucial City Council votes Monday night.
The new supportive housing program would draw money from the upfront investors and other sources, including rental vouchers and the state’s Medicaid program. The city then would repay the funders in part after documenting savings in criminal justice and other costs that participants now rack up an estimated $7 million or more a year in city-paid costs as they cycle through jails, detox and the city-run emergency room.
Repayment would be based on the extent of the gains and savings, with higher performance enabling them to earn back up to $11.4 million — or as low as $2.6 million, if the program falls far short of its goals.
Northern Trust Co., a Chicagobased bank with a local office, would provide $3 million over the program’s five years. Another $1.7 million would come from the Houston-based Laura and John Arnold Foundation.
Northern Trust is one of three investors that would be repaid
based on program participants’ success remaining in one-bedroom apartments provided by the city’s partners, the Mental Health Center of Denver and the Colorado Coalition for the Homeless. The others are the Denver Foundation and The Piton Foundation, both locally based and set to provide $500,000 each.
The Arnold Foundation is among five investors that would be repaid based on the reduction in expected days spent in jail by participants.
Other investors in that group are the Colorado Health Foundation (providing $1 million); the Ben and Lucy Ana Walton Fund at the Walton Family Foundation ($1 million); the New York-based Nonprofit Finance Fund ($434,695); and the Living Cities Blended Catalyst Fund ($500,000), part of an organization established by large foundations and banks to invest in urban programs.
Several council members said they like the setup, which transfers much of the funding risk to the investors, as one of several potential upcoming city efforts on homelessness.
“I think it’s an absolutely worthwhile endeavor, and I would certainly like to see this move forward,” council president Chris Herndon said Friday about the program.
But Kevin Flynn, whose southwest Denver district is set to receive one of the large new developments housing participants, is among a few members who have asked repeated questions about how it would work, the financing structure, impact on neighborhoods and logistics. The latter includes whether too many of the substance abuse and mental health services provided for residents would be off-site.
“I can’t vote yes right now,” Flynn said, with lingering concerns and some questions not answered to his satisfaction.
Based on previous studies of supportive housing, the city has set a goal of 83 percent of participants staying in the provided apartments at least a year and spending 40 percent fewer days in jail.
That would qualify the funders for a total $9.6 million in repayment, or an 11 percent overall return. But they could earn more — as much as a 32 percent return on the total invested — if the program is more successful.
The contract is with the Corporation for Supportive Housing and Enterprise Community Partners, both nonprofits that will coordinate the program. The council also will vote Monday on a $937,500, six-year evaluation contract with the Urban Institute and local research partners to track outcomes and savings.
The program, under discussion for more than a year, has taken on recent urgency as city officials have pushed the council to vote after a short review period for the contracts.
Outgoing Deputy Mayor Cary Kennedy, also the city’s chief financial officer, says coordinators want to launch the program and recruit the first participants soon to take advantage of about 20 units in a newly built Coalition housing project. The bulk of the units would be completed in 2017.
Councilman Wayne New, who also has probed the deal in recent weeks, said he likely would vote yes.
Eager supporters include Albus Brooks, who represents most of downtown. He says he supports “private-public partnerships like these that have such a positive impact on our most vulnerable citizens.”
Another is at-large member Robin Kniech, who is looking forward to intensive program evaluation.
The program is “only one step among many that we need to take” on homelessness, she said. “But it’s a very important first step.”