In home­less­ness fi­fi­fi­fight, non­profi­fi­fi­fi­fi­fit turns to in­vestors

Austin’s ECHO starts project with in­no­va­tive fund­ing model.

Austin American-Statesman - - FRONT PAGE - By Tay­lor Gold­en­stein tgold­en­stein@states­man.com

An ini­tia­tive to house and pro­vide ser­vices to up to 250 home­less peo­ple in Travis County is set to be among the fi­first in Texas to use an in­no­va­tive fund­ing model in which in­vestors pay up­front costs and are re­im­bursed by lo­cal gov­ern­ments only if goals are met.

The fund­ing model, known as “Pay for Suc­cess,” has gained pop­u­lar­ity through­out the coun­try and world since the fi­first project launched in the United King­dom in 2010.

The premise is that in­vestors front the cost of a project that ad­dresses a so­cial prob­lem, and only if it is suc­cess­ful, ac­cord­ing to met­rics agreed upon ahead of time and ver­i­fi­fied by a third­party eval­u­a­tor, will gov­ern­ments re­pay the in­vestors. They usu­ally re­ceive a mod­est re­turn on in­vest­ment as well.

In Travis County, the plan is to pro­vide up to 250 home­less peo-

ple with sub­si­dized rental hous­ing, likely through voucher pro­grams, paired with case man­age­ment and other so­cial ser­vices. It will tar­get those who are fre­quent users of health care, shel­ter and emer­gency med­i­cal re­sources or have fre­quent ar­rests.

The project is be­ing spear­headed by the non­profit End­ing Com­mu­nity Home­less­ness Coali­tion, com­monly known as ECHO.

The pro­gram is ex­pected to cost about $15 mil­lion, but ECHO will need to se­cure about $17 mil­lion in gov­ern­ment pledges to cover po­ten­tial re­turns for in­vestors. That would mean a max­i­mum an­nual re­turn on in­vest­ment of about 2.5 per­cent.

Since the project was pro­posed about two years ago, the non­profit has re­ceived $1.3 mil­lion in grants to set it up. It has also re­ceived as­sur­ances from three lo­cal gov­ern­ment en­ti­ties that they will pro­vide the bulk of the re­im­burse­ment fund­ing.

The project first grew wings when a fea­si­bil­ity re­port pub­lished by the non­profit Cor­po­ra­tion for Sup­port­ive Hous­ing in 2016 con­cluded that ECHO was well-po­si­tioned to move for­ward with a Pay for Suc­cess project.

The re­port found that the 250 most ex­pen­sive home­less in­di­vid­u­als in Austin and Travis County, based on emer­gency ser­vices and jail book­ings, cost tax­pay­ers on av­er­age about $222,000 per per­son a year.

Ann Howard, ex­ec­u­tive di­rec­tor of ECHO, said the goal of the model is to use gov­ern­ment funds in a smarter way.

“Tax­pay­ers are pay­ing for this in­ef­fi­cient sys­tem,” Howard said. “If we can take this home­less pop­u­la­tion that’s been cy­cling in and out of the jail and hos­pi­tal and get them sta­bly housed ... all the data shows they’re go­ing to change some of their be­hav­ior ... and as a com­mu­nity, we’re go­ing to avoid a bunch of costs.”

The suc­cess met­rics for the project would likely cen­ter on how many peo­ple re­main housed for a set pe­riod, how many fewer peo­ple are in­car­cer­ated and how many peo­ple avoid emer­gency depart­ments and hos­pi­tal­iza­tions.

Spe­cific bench­marks will be de­ter­mined i n a fi­nal agree­ment with the l ocal gov­ern­ments, Howard said.

Per­ma­nent sup­port­ive hous­ing has been one of the city of Austin’s main tools in its fight against home­less­ness. Stud­ies show that it can in­crease hous­ing sta­bil­ity, re­duce hos­pi­tal­iza­tion and crim­i­nal jus­tice en­coun­ters and im­prove res­i­dents’ health.

So far, the city of Austin, Travis County and Cen­tral Health, Travis County’s health care district, col­lec­tively have given ten­ta­tive ap­proval to cover $11 mil­lion over five years. ECHO still needs to find pledges for the re­main­ing $6 mil­lion over five years.

Once the $17 mil­lion is com­mit­ted, Howard said, the next steps will be to write up a con­tract and bring the project pro­posal to in­vestors.

The re­port es­ti­mates that over five years the sav­ings to lo­cal gov­ern­ments could be about $43 mil­lion af­ter in­vestors are paid.

‘In­no­va­tive con­cept’

Pay for Suc­cess pro­grams cover a spec­trum of so­cial is­sues. As of 2018, there are 20 launched projects in the United States and 108 in 24 other coun­tries, ac­cord­ing to So­cial Fi­nance, a non­profit Pay for Suc­cess in­ter­me­di­ary, which will de­sign the struc­ture of ECHO’s project.

Of 27 projects that had wrapped up, 10 de­liv­ered on tar­gets and gov­ern­ments re­paid in­vestors, 16 had not re­ported re­sults, and one failed and left in­vestors un­paid, ac­cord­ing to So­cial Fi­nance data as of Jan­uary.

Crit­ics of the model have raised con­cerns about the length of time they take to com­plete and their po­ten­tial to con­cen­trate phil­an­thropic funds only on so­cial is­sues with quan­tifi­able so­lu­tions.

The city of Austin agreed last fall to set aside from re­serve funds the first of what would be an­nual $1.2 mil­lion pay­ments to the project over five years in its fis­cal 2018 bud­get. Travis County com­mis­sion­ers voted unan­i­mously March 6 to com­mit $600,000 in a re­serve ac­count, also the first of five an­nual pay­ments.

Mayor Steve Adler said the project falls in line with the coun­cil’s goal of ad­dress­ing home­less­ness. While de­tails still need to be worked out be­fore of­fi­cials sign a con­tract, he said the fund­ing model is in­trigu­ing.

“Be­ing able to use pri­vate money to prove out the ef­fi­cacy of so­cial pro­grams is kind of a new and novel and in­no­va­tive con­cept,” Adler said, “and I think that Austin, as an in­no­va­tive and cre­ative city, needs to be one of the play­ers at the ta­ble.”

Travis County Com­mis­sioner Ger­ald Daugh­erty said he saw the ef­fort as a tan­gi­ble way for the county to step up and ad­dress a prob­lem that of­fi­cials con­stantly talk about solv­ing.

“I am in­ter­ested in tak­ing 250 peo­ple that we know are the peo­ple that are cost­ing us the most money to do some­thing with them,” Daugh­erty said. “And I think that we owe it to our­selves as a Com­mis­sion­ers Court, and we owe it to this com­mu­nity to par­tic­i­pate.”

Cen­tral Health com­mits

At the end of last month, ECHO re­ceived its lat­est fi­nan­cial com­mit­ment from Cen­tral Health. ECHO had re­quested $1.2 mil­lion a year, but Cen­tral Health’s staff in­stead rec­om­mended $400,000 a year.

Cen­tral Health Pres­i­dent and CEO Mike Geeslin said he felt more com­fort­able with the lower amount be­cause it left room for spend­ing on other projects.

“If we can ad­dress their lack of hous­ing, we be­lieve we can sta­bi­lize their life, driv­ing down their med­i­cal costs while im­prov­ing their qual­ity of life,” Geeslin said. “This is good for our en­tire com­mu­nity.”

Cen­tral Health’s board of man­agers ap­proved the com­mit­ment on a 6-2 vote March 28 with man­agers Maram Mu­seitif and Cyn­thia Valadez against and Julie Oliver ab­sent.

Valadez said she would pre­fer to see the money go di­rectly to­ward med­i­cal care, and Mu­seitif said she first wanted to see Cen­tral Health and its part­ners write a strat­egy for ad­dress­ing so­cial de­ter­mi­nants of health on a larger scale.

“Yes, it’s a no-brainer to sup­port home­less­ness ini­tia­tives,” Mu­seitif said at the March meet­ing. “But given the cur­rent cir­cum­stances, the fi­nan­cial strains and obli­ga­tions, I can­not sup­port any so­cial ser­vice fund­ing with­out hav­ing a col­lab­o­ra­tive strat­egy.”

Geeslin said the agency might be able to help make up the gap with funds from its part­ners, such as the Com­mu­nity Care Col­lab­o­ra­tive, a Seton Health­care Fam­ily-Cen­tral Health non­profit that pro­vides health care.

Howard said she’s hope­ful ECHO can raise the rest of the money from the or­ga­ni­za­tion and other health-ori­ented non­prof­its.

“A project like this is al­low­ing us to all work more closely to­gether and fig­ure out the i nter­ven­tions we need to end home­less­ness,” she said.

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