2017 Symposium Industry Report: Pay for Success

Using Pay for Success to Finance Affordable Housing

What is Pay for Success (PFS)? Pay for Success is a service contract through which governments purchase pre- ventive social services from non-governmental service providers. Instead of up-front capitalization, service providers use an operating loan, acquired from third-party investors, which buffers governments from financial risk. In the event of success, the government pays out the contract and interest to investors; in the event of failure, the government pays out nothing. Measures of success are pre-determined by the government and service provider and evaluated by an independent organization after the project is completed. 80 Table 2 below provides an overview of the PFS financing Mechanism. See Appendix A for a detailed explanation of the Pay for Success model. Pay for Success is ideal for projects that cannot be funded through tradi- tional mechanisms because of high up-front costs, risky or unsympathetic target populations, or success outcomes measured over a longer period of time. 81

TABLE 2 Pay for Success Project Mechanics

Investors provide upfront programmatic funding

Funding transferred for service delivery

1 7

Service Providers




Performance based load repayment

Payor provides success payments

Intervention delivered by service providers



Collection of outcome data by Program Evaluator

Evaluator determines achievement of outcomes

Outcome Payor

Program Evaluator

Target Population



Pay for Success & Affordable Housing | Stefano Rumi 31


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