2017 Symposium Industry Report: Pay for Success

• E valuator: Urban Institute, in conjunction with the Evaluation Center at the University of Colorado Denver, and the Burnes Institute PFS Contract Outcome Goals: • H ousing Stability—Participants spend at least one year in housing • Jail Reduction—Participants spend less overnight stays at jails Payment Structure & Success Measures: The following tables demonstrate how payment will be made based on successful interventions. Minimum payment is $0 (investors lose all invested money); max- imum payment is $11.4 million (investors make $2.8 million).

TABLE 4-A Housing Stability Source: CSH Stable housing days*

TABLE 4-B Jail Bed Reduction Payment PERCENTAGE

PAYMENT PER PERCENTAGE POINT

$ 15.12 per day

< 20%

$ 0

Minimum payment

$ 0

20 to < 30%

$ 160,000

Maximum payment

$5,292,188

30 to < 6 5%

(30 x $ 160,000) + $ 38,000 per percentage point above 30%



* Subtract any days spent in jail

≥ 65%

Maximum Payment ($6,130,00 total)

Beyond Supportive Housing: Pay for Success and Housing Construction Pay for Success contracts have significant potential to facilitate construction of affordable housing stock in high opportunity communities. PFS can capitalize risky construction projects by mitigating the government’s risk to zero on the public sector side and providing a formalized structure for philanthropic and impact capital to make risky interest-free or low-interest loans that traditional markets would not make or would otherwise make at prohibitively high interest rates. In addition, PFS financing can help save affordable housing construction deals that would have otherwise failed due to financial difficulty, which would result in lost time and money to housing providers and less affordable housing for the community. However, Pay for Success projects fundamentally rely on a government agency willing to provide reimbursements upon successful comple- tion of projects; without a government partner able to capitalize affordable hous- ing construction with its own money (through federal grants, affordable housing trust funds, bonds, or other financing mechanisms), PFS projects cannot solve the housing crisis. Affordable housing projects today are primarily financed through two sources of capital: debt equity and gap funding. In order to cover the remaining costs after debt equity financing (and thus fill the “gap”) developers often take out loans and mortgages, which accrue high interest. In order to pay back the

36 Pay for Success & Affordable Housing | Stefano Rumi

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