2017 Symposium Industry Report: Pay for Success

Pay For Success & Affordable Housing


Acknowledgments  Executive Summary 

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The NHP Foundation—What We Do and Why 

How NHPF Finances Housing 

Private-Public Partnerships Rental Assistance Demonstration (RAD) Looking Ahead



Our Neighborhood, Our Community

What is Affordable Housing? 


How to Define “Affordable” Percent of Income

Housing and Transportation Costs Shelter Poverty/Residual Income Further Criticisms of Economic Definitions of Housing Insecurity

Understanding the Numbers New Standards of Affordability

The Importance of Housing 


Affordable Housing and Homelessness Who Are the Homeless? HUD Programs for the Homeless Case Study: Homeless in Charlottesville Housing First Affordable Housing and Health

How Neighborhoods and Housing Affect Health The Effects of Affordable Housing on Health Nutrition Physical Health Access to Healthcare Mental Health Affordable Housing and Education Affordable Housing and Economic Opportunity Fighting Discrimination in Affordable Housing

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Millennials and the Housing Market The Elderly and the Housing Market Costs and Benefits of Affordable Housing

Affordable Housing Policy 


Understanding Affordable Housing Public Housing in the United States The Low-Income Housing Tax Credit The Future of Housing Policy Using Pay for Success to Finance Affordable Housing 


What is Pay for Success (PFS)?

Why PFS? 


The Problem The Solution The “Value-Added” Model of Social Service Financing Challenges Ahead

Cost Savings vs. Cost Avoidance Current PFS Housing Contracts Case Study: Denver, CO Supportive Housing Project Beyond Supportive Housing: Pay for Success and Housing Construction PFS and Pre-Acquisition Financing Pay for Success and Property Acquisition/Rehabilitation-Preservation

Case Study: Mark Twain Residences Pay for Success and Resident Services Case Study: Cleme Manor Implementing a Pay for Success Program 


Preconditions Feasibility Study—The Urban Institute Quick Assessment Tool A Pay for Success Action Plan for America Appendix A: Pay for Success Background  Pay for Success 101 Benefits of Pay for Success Challenges of Pay for Success Stakeholders Involved Stakeholder Motivations Project Development Process Pay for Success Project Development Appendix B: The PFS Process—Brief Step by Step  Appendix C: PFS Rapid Feasibility Quick Assessment Tool 


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Endnotes and Works Cited 

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The author, Stefano Rumi, would like to thank, in alphabetical order, the follow- ing individuals for their invaluable assistance and insight for this research: Mecky Adnani Senior Vice President Acquisitions, The NHP Foundation Patrick Fry Senior Vice President Acquisitions and Development, The NHP Foundation Marijane Funess Marketing & Public Relations, The NHP Foundation Stephen Green Chief Operating Officer/Chief Investment Officer, The NHP Foundation Josh Ogburn Director, University of Virginia PFS Lab Thomas Vaccaro Senior Vice President, The NHP Foundation Kenneth White Vice President Resident Services,The NHP Foundatio n Erin Briggs Yates Executive Director, Thomas Jefferson Area Coalition for the Homeless

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Executive Summary

Millions of Americans today face a crisis of affordable housing as costs soar while wages stagnate. Across the nation, thousands of neighborhoods and communi- ties are rallying together to guarantee all of its members access to housing that is safe and affordable, full of opportunities, and a central part of a healthy and positive lifestyle. The purpose of this report, released by the University of Virginia’s Pay for Success Lab at the Frank Batten School of Leadership and Public Policy, in col- laboration with The NHP Foundation (NHPF), is to explore the background of affordable housing in the United States, and the future of the affordable housing industry. In addition, this report aims to make the case for affordable housing as a fundamental right and pressing social issue by outlining its impact on health, education, and opportunity, among other aspects of every individual’s daily life. Finally, this report proposes Pay for Success (PFS) financing as a potential tool to capitalize on affordable housing preservation, rehabilitation, and support services. PFS contracts are a new form of private-public partnerships aimed at promoting innovative and preventive social services while simultaneously mit- igating financial risks for governments and allowing philanthropic donors and impact investors to contribute to efficient projects. By using private funding upfront to capitalize social service providers, PFS contracts help not-for-profit and for-profit organizations get off the ground and begin implementing social service interventions immediately. In addition, because the government does not reimburse service providers until successful completion of the contract, taxpay- ers are insulated from inefficient spending and governments are able to balance the budget. Because successful projects are reimbursed, philanthropies and mis- sion-based organizations can re-invest their initial contribution into more PFS projects, catalyzing more innovation. This report is intended to be a resource for local and national policy- makers, financial and philanthropic institutions, and advocates for affordable housing who are interested in new funding mechanisms. By incorporating case studies of real housing deals the NHPF has financed and a helpful PFS worksheet to determine the feasibility of a PFS project, it aims to serve as a model for future affordable housing financing across the nation. Five PFS contracts are currently used to provide Permanent Supportive Housing (PSH), a HUD program providing permanent housing and support- ive services to individuals and families experiencing homelessness to ensure

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housing stabilization. In addition to providing a breakdown of existing PFS and PSH projects, this report recommends further areas of affordable housing financ- ing that might be capitalized through PFS contracts. Stakeholders should use this report as a resource to pursue independent studies to explore novel implementation of PFS contracts in their communities. As one of the academic leaders in the PFS field, the University of Virginia Pay for Success Lab is prepared to provide communities, philanthropic institutions, and service providers comprehensive assistance throughout the Pay for Success process.

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The NHP Foundation—What We Do and Why

The increasing scarcity of safe and affordable housing is a growing threat to our nation. Unfortunately, this threat is often invisible to all but the low and moder- ate income families and seniors who are quietly denied adequate shelter. As reported by Harvard University’s Joint Center for Housing Studies in The State of the Nation’s Housing 2017 , the number of renter households has been steadily rising. Sadly, more than a quarter of that growth represents house- holds subsisting on less than $15,000 in annual income. An additional 30% of that increase is attributed to households surviving on only $15,000–$29,999 in income during the course of a year. These are clearly Americans for whom the operating margins to keep a roof over their heads are unspeakably tight. Because the vast majority of renters are forced to spend a high per- centage of their income to secure affordable housing, they are left with insuffi- cient resources for proper nutrition, healthcare, and other basic necessities. For a young working family with small children or a senior on a fixed income, as well as recent high school and college graduates now entering the labor force and housing market, the lack of safe and affordable housing sets up a harmful pattern with little opportunity to escape. As quality housing conditions become unaffordable to more and more Americans, this crisis threatens to escalate into a fundamental human rights issue. Headquartered in New York City with offices in Washington, D.C., and Chicago, IL, The NHP Foundation (NHPF) was launched on January 30, 1989, as a publicly supported 501(c)(3) mission based not-for-profit real estate corpora- tion. With a portfolio that spans 15 states and the District of Columbia, NHPF is dedicated to preserving and creating sustainable, service-enriched multifamily housing that is both affordable to low and moderate income families and seniors, and beneficial to their communities. NHPF’s diverse properties are service-enriched by Operation Pathways, an affiliate program of NHPF. Our experience demonstrates that a robust ser- vice program catering to the needs of residents is directly correlated to higher standards of living, higher reported satisfaction with living conditions, and safer communities with lower costs and burden to local law enforcement agencies. By partnering with local not-for-profit service providers familiar with the neighbor- hood, Operation Pathways enriches the lives of residents with afterschool pro- gramming, summer education, and wellness and savings programs, all geared to helping lower income Americans and their children succeed.

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How NHPF Finances Housing

Private-Public Partnerships Contrary to what some might say, we as Americans can overcome our housing challenges. A good place to start is by building strong private-public partnerships. NHPF attributes many of its successful projects to the involvement of one or more partners from the private and public sectors. Working together with other ded- icated and socially responsible organizations, NHPF has been able to use com- mercial bank financing, permanent tax-exempt bonds and Low-Income Housing Tax Credits (LIHTC) to preserve existing buildings as affordable housing. Since 1986, the use of LIHTC nationwide has led to the creation of nearly 2.8 million affordable housing units, guaranteed the need for 96,000 jobs year in and year out, and boosted local economies with approximately $3.5 billion in taxes and other revenues annually. Rental Assistance Demonstration (RAD) An example of this type of partnership can be found through NHPF’s involve- ment in HUD’s Rental Assistance Demonstration (RAD) program. This program allows public housing agencies (PHAs) and owners of other HUD-assisted proper- ties to convert units from their original sources of HUDfinancing to project-based Section 8 contracts. RAD is an effective tool in providing needed funding to repair and refurbish public housing and in some cases, to build new affordable housing. By participating in RAD, The NHP Foundation is providing evidence that the public and private sectors can work together in affordable housing, and that they can also do so incredibly effectively. Looking Ahead Moving forward, private-public partnerships will be essential to providing high-quality affordable housing for low and moderate income individuals, fam- ilies and seniors. The NHP Foundation is actively seeking innovative solutions to affordable housing financing and operations to help future generations of Americans in need. This report and collaboration with the University of Virginia is a product of our “thought leadership” philosophy. Championed by President & CEO Richard F. Burns, thought leadership challenges NHPF and other housing advocates to go beyond providing safe and affordable housing by engaging with critical issues and searching for thoughtful answers and innovative solutions that anticipate, rather than address, critical changes in the affordable housing

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industry. By sharing our extensive knowledge of the affordable housing world and demonstrating a committed and complex understanding of the culture and needs of lower income Americans, NHPF seeks to engage affordable housing leaders, policymakers, civil rights advocates, and everyday Americans alike to make the fight for affordable housing personal.

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“We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all—regardless of station, race, or creed. Among these [is] . . . the right of every family to a decent home.” —FRANKLIN D. ROOSEVELT, 1944 Our Neighborhood, Our Community Housing—where we live and who we live with—is a fundamental and anchoring part of our identities as human beings. From the neighborhoods we grow up in to the communities where we plant our roots, and the homes we occupy throughout our lifetimes, the physical and social environment we call “our home” shapes us and the opportunities we encounter in our day-to-day lives. Access to a safe and nurturing home, one that is structurally sound and located in a safe, desirable community full of opportunities for personal development and growth, is cru- cial for childhood development. 1 In turn, positive early development is linked to higher academic performance, better personal health, and access to more socio-economic opportunities as an adult. Conversely, homes and neighborhoods that fail to provide a nurturing environment makes it increasingly difficult for disadvantaged children to access a better standard of living as adults. Thus, it is no surprise that almost eighty years ago, President Roosevelt platformed the right of every American to have access to a decent place to call home. Although much progress has been made in the ensuing decades to address the housing needs of Americans, we still live in a society where tens of millions struggle to maintain a proper housing, or are otherwise relegated to less desir- able neighborhoods devoid of opportunity. Failure of both liberal and conser- vative policies to adequately address affordable housing have led to permanent exclusion of the poorest Americans from affordable housing, perpetual housing insecurity among working class Americans, and (reduced, but) persistent dis- crimination by race in all communities, regardless of income. 2 There is no debate that a vast number of Americans currently lack access to affordable housing. Yet there is much disagreement over exactly how many Americans are affected, and what constitutes “affordable.” Such questions have widespread ramifications in the economic and policy field, which directly affects the types and quantities of aid that individuals and communities receive. Any approach to solving the affordable housing crisis must begin with a clear under- standing of who is affected and what can be done to help.

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What is Affordable Housing?

How to Define “Affordable” Wide bodies of academic literature and common sense both suggest that one’s ability to afford housing depends largely on household income. In turn, housing costs are both the first and largest expenditure for most American families, one that is uncompromising and inflexible. 3 Thus, most definitions of “affordable” housing are based on the premise that each family can afford or ought to allot a certain percentage of its monthly income to housing costs. Despite this eco- nomic approach, there is no true consensus on what is “economically affordable” to families of varied socioeconomic background. Percent of Income The most commonplace definition of affordable housing states that less than 30% of a household’s income should be spent on housing expenditures. 4 Thus, renters and homeowners who spend 30 to 50% of income on housing-related costs are considered “moderately cost-burdened” and those who spend over 50% of income on housing are considered “severely cost-burdened.” By this defini- tion, about half of all renters today are cost-burdened and, and of those, over 50% are severely cost-burdened, resulting in a shocking population of about 21 million Americans who struggle to maintain housing. 5 These figures have doubled since 1960. Although policymakers generally rely on this definition because of its simplicity, percent of income calculations overlook the complex- ities of household dynamics and assumes household costs are relative, despite certain “absolute” costs (such as groceries, bills, etc.) that are not proportionally priced by family income. Critics of the percent of income definition like J. David Hulchinski challenge the logic of using descriptive statistics as measurements of housing needs. Scholars identify six major uses of the percent of income ratio: descrip- tion of households, analysis of trends, administration of regulation, definition of housing needs, prediction of household ability to pay costs, and selection of households for a house. 6 These uses demonstrate the impact that the percent of income definition of housing has on economically disadvantaged families. Critics express concern over such widespread use of ratios, which dramatically simplify complex household behaviors into unreliable and invalid definitions of housing affordability; others find that the ratio “rule of thumb” has been wrong- fully transformed into an iron rule of affordability. Ultimately, the percent of

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income ratio fails to account for “absolute” price floors, or the minimum costs of housing units that are independent of a household’s income. Housing prices are not priced “relatively” to families’ incomes as a certain percentage, and defining affordability as a ratio is flawed logic. Finally, what a household “can” pay is not necessarily what a household can realistically afford; defining affordable hous- ing as “housing a family can afford” does not make logical sense. Housing and Transportation Costs To account for the related costs of housing, some advocate for a “housing and” approach that more comprehensively evaluates the cost of housing, namely the transportation costs incurred during commute to work, school, etc. 7 The Center for Neighborhood Technology allots 18% of income to transportation costs as reasonable. Though factoring in transportation costs gives a more realistic understanding of what is “affordable” and helps fight misleading statistics on low-cost housing that is far from an urban center, it still fails to account for other hidden costs and still relies on an arbitrary assumption that a certain percentage of monthly income can afford absolute expenses. Shelter Poverty/Residual Income Michael Stone’s “shelter poverty” concept was proposed in the 1980s as a new barometer of housing insecurity that used a sliding scale of affordability that accounts for household composition (since larger households incur more costs) and affordability burdens that are not proportional to income. 8 Though this approach does not dramatically alter the number of individuals identified as housing insecure, it provides an innovative approach to understanding housing affordability that is sensitive to the real-world implications of economies and family life. Further Criticisms of Economic Definitions of Housing Insecurity Critics of a purely economic definition of affordable housing note that other neg- ative experiences of housing, such as overcrowding or substandard conditions, also stem from issues of affordability, and thus should be factored into official calculations. They also note that “affordability” is not an absolute character- istic of housing, but rather one that is relative to each individual based on 1) what standard of “affordability” 2) individual characteristics of the renter, and 3) length of occupancy. Standards of affordability are also normative, yet regarded as empirical; what a household spends on housing may not be what they ought or want to spend. 9 Understanding the Numbers No matter how the affordability pie is cut, there is no disputing that the slice of Americans who are housing-insecure is disproportionately large.

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Who makes up these numbers? Among the nation’s lowest income rent- ers (with incomes less than half of their area’s median) over 7.7 million live in substandard 10 housing or are severely cost-burdened. About half a million people are homeless on any given night, with about 83,000 qualifying as “chronically homeless,” or disabled and homeless for over one year. 11 In addition, estimated tens of thousands of people are “pre-homeless,” living in cramped, illegal hous- ing conditions. Over 9 million households live in overcrowded units (defined as units exceeding a person-to-room ratio of 1:1) or physically inadequate housing. 12 Millions of families face one or more of these problems. In addition, these numbers fail to reflect the increasing number of mil- lennials who return home to live with their parents because they cannot find affordable housing to live in, as well as senior citizens who must choose alterna- tive living conditions because they cannot afford to keep their homes. Finally, these numbers do not reflect families who deliberately choose to live in housing that is of a substantially lower quality than they can afford in order to offset high housing costs. Factoring in these “hidden” cost-burdened individuals shows how widespread an issue affordable housing has become, and how diversely it affects countless Americans. Ultimately, even the most conservative estimates indicate that affordable housing has become a steadily growing issue in the United States that affects a growing segment of Americans. New Standards of Affordability The current standards for affordable housing used by the federal government leave millions of low income Americans vulnerable and unaccounted for. There is a pressing need for a new standard of housing affordability that goes beyond per- cent of income. Future policymakers must conduct extensive research that takes into consideration, among other things, yearly changes in purchasing power and wages, consumption patterns of Americans at different socioeconomic levels and family sizes, and relative costs of living in different localities. The new affordabil- ity index must be a dynamic measurement of the true costs of living and account for the full (not just bare minimum) expenses every individual needs to main- tain a decent (not just livable) standard of living. This measurement must break down affordability by cities and neighborhoods to account for the vast fluctua- tions in living costs, even in the same city or county. Finally, this index must be flexible, shifting periodically to stay up-to-date. Such a task is no easy feat, but a major step in the right direction to providing every American with a safe and affordable place to live.

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The Importance of Housing

“Where we love is home—home that our feet may leave, but not our hearts.”


Like food and water, shelter is a fundamental and necessary part of existence. Article 25 of the 1948 United Nations Universal Declaration of Human Rights rec- ognizes housing as a component of every human’s right to an adequate standard of living. Beyond the physical importance of shelter, homes occupy a psycholog- ical and ideological significance that is constant and central across cultures and history. The place we call our home is a part of who we are; without such a place, or with our homes under siege by social and economic forces beyond our control, we struggle to achieve health and happiness in our daily lives. Given the fundamental centrality of our homes, it comes as little sur- prise that housing affects many aspects of our lives, such as health, education, and economic opportunity. In turn, these individual effects coalesce into larger societal trends. When Americans are denied access to affordable housing, the social and economic burden incurred by governments in addressing these effects through subsidies and social services, as well as the loss of benefits of having a strong, healthy, and happy nation, often outweighs the preventive costs of ensur- ing every American access to affordable housing. Affordable Housing and Homelessness The hardest-hit in the fight for affordable housing are those who cannot afford a house at all; burdened by unemployment, rising housing costs, and personal difficulties that make stable housing inaccessible. Hundreds of thousands of Americans live on the fringes of our communities and in the shadows of our streets. Despite recent improvements in homelessness rates across the nation due to targeted federal aid and permanent supportive housing initiatives, home- lessness remains a key problem, especially among veterans and the mentally ill. Over 350,000 people experience homelessness as individuals, while there are over 216,000 homeless families. 13 The number of chronically homeless indi- viduals, defined as individuals who have gone without shelter of their own for over a year, hovers at around 84,000, with over 60% of these individuals living on the street. Though this number has decreased by 21% since 2010, homeless- ness remains such a geographically widespread problem that it affects all of our communities.

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Who Are the Homeless? Homeless individuals do not have consistent access to a place of their own. The Department of Housing and Urban Development breaks down homelessness into four categories:

• Individuals living in emergency shelters, transitional homes, or areas not meant for human habitation (such as streets) • Individuals who lose temporary housing every 14 days • Families with children facing unstable housing conditions • I ndividuals fleeing domestic violence who do not have perma- nent residence 14

Measurements of homeless populations employ a point-in-time count method, conducted over a ten-day period where communities document how many shel- tered and unsheltered individuals live in their communities. These measure- ments do not count the sizable population of at-risk individuals who are housed but face economic burdens like unemployment or severe rent cost burdens, or live doubled up with family and friends to save on rent. The National Alliance to End Homelessness finds that doubling up is the most common living situa- tion prior to homelessness; in 2014, about 7 million individuals from poor house- holds doubled up 15 contributing to high rates of overcrowding in low-income neighborhoods. HUD Programs for the Homeless In addition to local and statewide initiatives aimed at fighting homelessness, the federal government provides four major resources; emergency shelter grants, per- manent supportive housing, shelter plus care, and housing voucher programs. 16 Emergency shelter grants provide states and communities funding to rehabilitate and operate facilities like shelters, as well as provide essential ser- vices for the homeless. Permanent Supportive Housing (PSH) initiatives seek to provide homes for the homeless. Often coupled with wraparound support ser- vices to assist individuals, PSH initiatives tackle homelessness directly through housing. Shelter plus care models, like wraparound services, provide assistance to individuals with chronic disabilities. Housing vouchers aimed at low-income and homeless individuals such as Rapid Rehousing vouchers help bridge housing cost issues, which often are the primary causes of homelessness. Other federal programs, such as the Section 8 Single Room Occupancy (SRO) program, man- date an allotment of units that must be made available to the homeless. Case Study: Homeless in Charlottesville A 2012 study conducted by theThomas Jefferson Area Coalition for the Homeless calculated the average cost of homelessness per person on the local government

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in Charlottesville, Virginia. These costs include more than the traditional home- less assistance programs offered; calculations also accounted for costs incurred from providing social services to the homeless, like hospital and ER visits.

TABLE 1 Cost of a Single Homeless Person in Charlottesville, VA over One Year, April 2011–March 2012 Source: Thomas Jefferson Area Coalition for the Homeless 70 nights in shelter $ 2,100.00 206 days at day shelter $ 2,266.00 350 soup kitchen meals $ 420.00 25 arrests $ 532.00 15 overnight jail stays $ 1,035.00 20 EMS calls $ 780.00 20 ER visits $ 7,000.00 2 hospital admissions $ 8,000.00

The $22,000 annual cost to the city government of a single homeless individ- ual demonstrates the incredible price communities pay to keep people on the streets. These numbers are higher in cities like New York, where the average cost of sheltering a single homeless adult in 2014 was $28,609; the figure is $37,047 for families. 17 These numbers do not include the costs of social services provided to address issues stemming from homelessness, such as arrests for vagrancy and hospital visits for exposure to the elements. Housing First It makes more sense for governments to provide quality affordable housing for homeless individuals and families than to continue paying for social services that are incurred because of homelessness. Permanent supportive housing ser- vices in NYC, for example, balanced the books by reducing usage of homeless shelters, ER visits, hospitals, and prisons. For about the same cost, the city was able to keep individuals off the streets and make social services more efficient. 18 Evidence also demonstrates that providing housing to the chronically homeless was far more cost-efficient to governments than traditional forms of assistance. 19 Beyond economics, governments have a strong incentive to keep individuals and communities safe and desirable by combatting homelessness. Research demon- strates that homeless adults report more psychological distress, such as depres- sion, which is exacerbated by chronic homelessness. 20 Communities suffer from high numbers of homeless individuals, who might detract from the perceived safety of communities and may contribute to neighborhood deterioration. Public policy attitudes towards homelessness have shifted in the past

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decade from beliefs that the homeless were not ready for permanent housing and had to be gradually eased back into society through transitional programs to embracing a “housing first” approach that provides families and individuals with homes and supportive services. Research shows that housing first initiatives are more successful in fighting recidivism and medical costs than transitional hous- ing, even for chronically homeless individuals with mental illness. 21 Ultimately, providing safe and affordable housing to all individuals, even the homeless, is a win-win solution for all. Affordable Housing and Health Safe, affordable, and well-maintained housing in thriving neighborhoods is crit- ical to individuals’ health, especially young children, the elderly, and those with chronic illness. Numerous studies find that residents of lower income neighbor- hoods are at an increased risk of physical and mental health problems due to a variety of housing-related factors. 22 How Neighborhoods and Housing Affect Health Research shows that inadequate housing in less desirable neighborhoods affects individual health through short-term influences on behavior and long-term con- sequences of poor health choices. 23 Lack of proper neighborhood institutions such as health facilities and supermarkets discourage healthy habits such as healthcare utilization and proper diet. 24, 25, 26 In addition, unhealthy neighbor- hood norms and stress (such as trauma from violence) undermine the attitudes of residents towards maintaining a healthy and active lifestyle. The cumulative effects of years of neglect and deprivation “weather” down individuals’ well-be- ing, leading to all-around poor health and high mortality rates. 27 The Effects of Affordable Housing on Health Nutrition : Housing instability and food insecurity are major barriers to proper health among low-income Americans, 28 and the two go hand-in-hand. Food costs remain relatively constant regardless of income; unlike affordable housing costs, which are defined as a percentage of monthly income, food costs are not propor- tional to salary. Thus, unaffordable rents negatively impact nutrition by reduc- ing the residual income (after housing costs) families have to spend on food. 29 A study by Fletcher et al found that every $500 increase in annual rent led to a 10% increase in food insecurity rates among low-income families. 30 These sta- tistics are especially troubling in their implications for families with young chil- dren, who need constant nutrition to develop and grow. Children who grow up in low-income families living in unaffordable houses are more likely to be vita- min deficient, underweight, and exhibit slower mental development than their peers. 31, 32, 33 Programs that assist struggling families with lower utility costs decrease instances of food insecurity and unstable housing.

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In addition, lower income neighborhoods are less likely to have super- markets, resulting in their being “literally starved for resources.” 34 Because most poor families lack private transportation and live in areas poorly serviced by pub- lic transportation, getting to the nearest supermarket and bringing home bags of groceries is arduous and discouraging. Analysis of the Moving to Opportunity programdemonstrates a statistically significant reduction in obesity rates among families who moved to neighborhoods with more food and health resources. 35

Percy, age 8, is a resident of Walnut Square in NewOrleans and has been a participant in Operation Pathways’ Brighten Up afterschool and summer program since 2015. When he first came to the pro- gram, his least favorite part of Brighten Up was the daily physical fitness activities. Percy was overweight and often teased at school by his classmates. So in addition to physical health concerns asso- ciated with childhood obesity, Percy also suffered from the emo- tional stress from the bullying and harassment at school. Percy’s lack of self-confidence also had a negative effect on his schoolwork. Over the last year, Percy’s willingness to participate in fitness activ- ities gradually increased. Operation Pathways offered encourage- ment fromboth staff and fellow participants through a supportive and bully-free environment, which allowed Percy to feel comfort- able engaging in activities that were new and challenging for him. Now, Percy participates in and fully enjoys his fitness program. His new attitude towards physical activity is showing through his fitness evaluations. He continues to improve in all three moni- tored fitness areas—push-ups, sit and reach, and shuttle run. Last year, he was able to do only two push-ups and now is able to do 10 consecutively. And, his flexibility has improved as he went from 1 inch to 3.5 inches in the sit and reach assessment. Even more importantly, Percy is gaining self-confidence, doing better in school, and just finished his first season of football with the New Orleans youth football league. Way to go Percy!


Physical health : Unaffordablehousing impactsphysical healthmost significantly through over-crowding and substandard physical conditions. Overcrowding (most commonly defined as exceeding a 1:1 ratio of rooms to occupants), in addi- tion to the mental effects noted above, promotes the spread of infectious disease among occupants through extended close contact in cramped quarters. 36 Lower income families also exhibit higher rates of respiratory illnesses, such as asthma, as well as exposure to allergens and mold. 37, 38 Especially concerning is the dan- ger of lead poisoning to children with families in older housing stock. The Center

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for Disease Control estimates that over 3.8 million homes in the United States built before 1978 still have lead-based paint; a similar study found that 35% of low-income units observed had lead-based hazards. 39, 40 Though the paint itself is harmless on the wall, paint chips eaten by children pose a dangerous health hazard to lower income families. The health and supply concerns of affordable housing in America necessitate more construction of up-to-date and nurturing homes that are available to those in need. Access to healthcare : Like food costs, healthcare is often the first to go when rents are unaffordable. Studies indicate that the high price of housing may cause households to avoid purchasing insurance; a 2005 analysis found that severely cost-burdened households spent half as much on healthcare and health insur- ance than households with stable housing. 41, 42 In addition to financial difficulty, lower income neighborhoods often lack proper healthcare facilities altogether; like trips to the supermarket, hospital visits for non-emergency purposes are pro- hibitively difficult. 43 Mental health : Greater residential stability leads to better mental health. Financial insecurity from unaffordable rents and frequent moves exacerbate stress, especially among children, and negatively impact self-esteem and attach- ment to the community. Crowded conditions lead to both psychological distress and tension in social ties. 44, 45 Neighborhood violence has severe negative psy- chological effects on traumatized individuals; these adverse consequences of unaffordable housing magnify during early childhood development. Evictions result in higher self-reported stress among families; coupled with an inability to make meaningful emotional investments in a home and a community, instabil- ity limits social ties and isolates individuals, contributing to more stress. 46, 47, 48 In addition, children whose families move often perform less well than their peers and exhibit more behavioral issues. 49 Affordable Housing and Education Early education experts suggest that stable and affordable housing has a posi- tive impact on a child’s opportunities for educational success. Disruptive moves, which sometimes occur due to a family’s need to find more affordable housing, lead to declines in educational achievement. Why is this the case? Residential moves often lead to interruptions in a child’s academic envi- ronment, including socialization with peers. This leads to behavioral difficul- ties and attention problems, especially at early developmental stages of a child’s life. 50 In addition, teachers are unable to establish quality contact and nurtur- ing relationships with students who change schools frequently or are frequently absent. Children whose families face housing affordability issues are denied instructional care and often perform poorly on standardized tests. 51 Affordable

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housing can reduce the need for families to move to less expensive housing in less desirable neighborhoods, allowing students time to develop and grow in a consistent environment.

Alisson and Carol Canales are twins in second grade at Sheffield Elementary School. The school is in the bottom quarter of North Texas schools, with a high student-to-teacher ratio and a lower operating budget compared to other schools in the district and state. Only 58% of students met state standards in reading last year. Luckily however, Alisson and Carol are participants of Operation Pathways’ afterschool program at The Grove at Trinity Mills in Dallas, Texas. While the Canales family only speaks Spanish at home, Alisson and Carol are excelling in their English skills partly because of their participation in our reading program during afterschool time. They are both avid readers and their test scores show it! This year alone, Carol has improved her reading by one grade level putting her in the fifth grade for reading. Her sis- ter Alisson gained two grade levels in reading and is now reading at the seventh-grade level!! Many new immigrant families strug- gle to assimilate while also trying to provide for their children’s basic needs. NHPF and Operation Pathways work together to help immigrant families stay safe and stable in their affordable hous- ing, and build the skills they need to become successful, self-suffi- cient citizens. There’s no doubt that Alisson and Carol are on that path. Where THEY Live Matters!

Alisson and Carol

Not all residential moves, however, lead to declines in educational achievement. In fact, moving to communities with better and higher quality schools is beneficial to children. Research finds that individuals who live in LIHTC-financed affordable housing units are more likely to live near high-per- forming schools in good neighborhoods than voucher holding families or public housing residents. 52 Analysis of the HOPE VI program, a 1990s initiative by HUD to revitalize the worst public housing projects into mixed income properties, and its residents, shows that affordable housing units anchor holistic community development, which in turn provides a nurturing and stable environment for children in their neighborhoods and communities. 53 Evidence shows that pro- viding safe and affordable housing is not enough if their housing is not located in neighborhoods and communities that foster opportunities for advancement. 54

A few weeks ago, Pam (the resident services coordinator at NHPF’s Ships’ Cove property) saw Shalimar in the lobby of the building. Shalimar was Pam’s summer intern in 2015, and Pam

20 Pay for Success & Affordable Housing | Stefano Rumi

hadn’t seen her in several months. Shalimar reported that she has been very busy working her full-time job, while attending college. She’s currently in a certificate program to become an interpreter, and plans to continue her education towards a bachelor’s degree in business management. Shalimar told Pam that she’s working hard to achieve her goal to buy a house someday, and because of her internship with Operation Pathways, she understands the planning and effort needed to achieve that dream. Shalimar thanked Pam for helping her manage her income last summer, teaching her the importance of prioritizing her expenses. “Now I look at those sunglasses, that shirt, that milkshake . . . and I think, that’s one hour of work!” Shalimar also had a positive influence on her family, who she claims never saw the importance of saving money. This year, they will go on their first family vaca- tion ever because Shalimar encouraged everyone in her family make a monthly contribution to a vacation fund. Shalimar is also encouraging her younger sister to be responsible with money. She told Pam to make sure that there will still be a summer internship program for her sister when she turns 16. Shalimar is working hard every day, continuing her education, prioritizing her expenses, modeling good fiscal behaviors to her family, mentoring her sister, and working towards her goals.


Affordable Housing and Economic Opportunity Economic opportunity and housing have an interesting “chicken and egg” rela- tionship. A stable income is crucial to obtaining affordable housing, but consis- tent access to quality housing often dictates one’s ability to hold down a steady job. Without affordable rents, families are unable to save up to own their own homes, locking them in a perpetual cycle of renting instead of homeownership. Income is the most important determinant of housing affordability. Data shows that no city in America is affordable to individuals who work a minimum wage job. 55 The Center for Housing Policy finds that the salaries and wages of 34 occu- pations in the United States are too low for workers to afford rents. The increasing divergence between business booms and worker earnings, combined with the failure of “trickle-down” economic beliefs, leads to wage stagnation, while costs of living, such as housing costs, continue to climb. 56 Macroeconomic trends of globalization and the decline of blue-collar industry jobs in American cities due to deindustrialization have led to a “spa- tial mismatch” between jobs and affordable houses. 57 Current housing patterns exacerbate inequality by spatially separating affordable housing from economic

Pay for Success & Affordable Housing | Stefano Rumi 21

opportunities. This means that individuals must commute longer hours to and from workplaces, and have more difficulty finding jobs. Research shows that urban areas with lower levels of economic segregation lead to higher levels of upward mobility among families. 58 The neighborhoods and communities NHPF serves are the economic backbone their residents rely on. Access to affordable housing in neighborhoods of opportunity is fundamental to helping millions of Americans find and main- tain gainful employment and improve their economic standing.

Joy is a single mother of two children currently living at Bayview Towers in Stamford, CT. For several years, she bounced among family members’ homes in central Connecticut, just trying to keep a roof over her children’s heads. Her name was on a waiting list for a Section 8 voucher, but she had been waiting for more than a year and was now faced with having to move out from her cousin’s apartment. Joy qualified for a rent subsidy on a LIHTC unit at Bayview Towers. Being at Bayview meant that she could have a permanent address to list on her resume and job appli- cations; and being in Stamford broadened her radius for her job search. Joy accepted a position in New York City working in an HR department. She was well aware that her wage increase meant an increase in her rent, but this also meant that she was working towards her goal of moving out of subsidized housing and buying her own home. “When I was able to afford to live on my own and provide for my own children, it gave me the motivation to push forward. I’m on a learning ladder. I have had many life lessons, each one giving me another step up and I still have work to do. I am not where I want to be yet, but I will get there. Without the help of rental assistance and the services from the resident ser- vice coordinator, I believe I would still be jumping from home to home and job to job. I have a steady job now and we no longer just have a place to lay our head, but a place to call home.”

Fighting Discrimination in Affordable Housing The United States has a long and harrowing history of explicit and subtle racial segregation that has left a legacy that affordable housing advocates are still fight- ing to overcome today. Across America, minorities, especially African Americans, occupy different residential patterns than white Americans in the same commu- nities, regardless of socioeconomic status. 59 Some scholars suggest that socio-economic differences between racial and ethnic groups prevent minorities from moving into affordable neighbor- hoods and contribute to residential segregation. They argue that economic

22 Pay for Success & Affordable Housing | Stefano Rumi

inequality, due to stagnating wages and loss of industrial work from urban cit- ies, then later from non-urban areas in the United States, have stranded working class African Americans on an “economic island” devoid of opportunity and far removed from affluent, predominantly white suburbs. 60 In turn, black and white socioeconomic disparities are reinforced by residential segregation, with mea- sures such as unemployment, labor market performance, education, and family structure all attributed to housing segregation. 61 Some studies find that African Americans reside in neighborhoods of similar racial composition regardless of income, while others find that high-income African Americans are more likely to live in whiter neighborhoods. 62 For most of the twentieth century, widespread efforts have been made to deliberately segregate neighborhoods by race. With the tacit approval of the federal government, landlords, banks, and sellers actively prevented African Americans from entering white neighborhoods. When such efforts failed against pioneer black families, neighborhoods used violence and intimidation tactics to further discourage more integration. When even violence failed, white families moved en masse out of neighborhoods, leading to high levels of residential segre- gation. 63 Despite the dismantling of discriminatory policies and tactics through the Civil Rights movement and other efforts to promote racial equality, infor- mal discriminatory practices against African American families persist today. Match-pair audit studies that use black and white names have found evidence of discrimination by real estate agents and renters alike. 64 Through experimental studies, scholars find significant discriminatory behavior against minority renters and homebuyers, such as showing fewer units, responding less frequently to inquiries, and denying that available units are still on the market. Audit studies demonstrate that cities with high levels of discrim- ination are more segregated, thus demonstrating that discriminatory practices have notable ramifications on neighborhood diversity. However, the degree to which discrimination affects segregation is debated. Subsequent studies using different model specifications provide varying results, although housing dis- crimination never accounts for more than half of total residential segregation. 65 Affordable housing providers must work to actively combat residen- tial segregation and discrimination of African Americans and Latin Americans in neighborhoods and communities. Despite the Department of Housing and Urban Development’s commitment to “affirmatively further fair housing” there are few mechanisms in place to proactively fight racism. Ambiguity in rules gov- erning racial concentration for public housing programs like LIHTC and HOPE VI developments leads to litigation that has weakened interpretations of the rules. For example, the LIHTC program has been instrumental in financing construc- tion of thousands of affordable housing units in the United States. However, it contains specific contradictory incentives that prohibit low-income housing construction in racially concentrated neighborhoods, yet makes exceptions for

Pay for Success & Affordable Housing | Stefano Rumi 23

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