The voices of Urban Institute's researchers and staff
October 30, 2015

How cities are using pay for success to fight homelessness

Funding what works isn’t just about balancing budgets—it’s about making sure that resources go beyond maintaining an imperfect status quo to actually help move people out of poverty and into healthy, productive futures. A close examination of data can tell us whether a new or existing program can achieve those results.

Last week, the White House and several partners announced a new pay for success (PFS) deal that will scale permanent supportive housing for chronically homeless individuals in Santa Clara, California. Permanent supportive housing is an evidence-based housing intervention that offers subsidized housing and wraparound social services for people who frequently move in and out of many costly public systems, such as criminal justice, homeless services, and emergency medical care.

The impact of the intervention can be dramatic: an evaluation of the Corporation for Supportive Housing’s (CSH) New York City Frequent User System Engagement study, which targeted individuals with at least four stays each in jail and shelter in the past five years, found that 91 percent of those receiving supportive housing remained housed over the first year and experienced a 40 percent reduction in days in jail over two years, as compared with a control group that did not receive the intervention.

The federal government has taken notice as well— the Department of Housing and Urban Development and the Department of Justice are making $8,679,000 available for PFS initiatives in states and localities that implement the permanent supportive housing model for a population that, like the one identified in Santa Clara, is continuously cycling between the criminal justice system and homeless services.

For scaling an evidence-based intervention like permanent supportive housing, PFS can be an optimal funding model. Although housing stability leads to far-reaching impacts and cost savings across multiple city systems, the upfront implementation costs can be high and no one agency wants to foot the bill if they won’t end up with all of the savings. By leveraging private investment to cover those costs and paying back those investors only if and when results are achieved, programs that are proven to have a measurably positive effect on city programs and the people who use them can be more widely implemented.

The city of Denver is also establishing a supportive housing initiative through PFS. The Denver project aims to help people who frequently touch the public systems that are large drivers of the city’s costs, such as police contacts and arrests, jail, and detox centers. As with Santa Clara, helping this population isn’t just about balancing budgets, nor is it merely about putting a roof over heads. It’s about identifying the most effective ways to address the myriad multi-system challenges that drive homelessness and then advancing those solutions.

To ensure that this intervention makes the greatest possible impact, Urban, along with CSH and Enterprise Community Partners, has been helping Denver’s PFS team use local administrative data to develop targeting criteria to identify the right people to receive services.

Urban has found that, based on Denver’s arrest data from 2012 to 2014, the population that creates the largest costs for the city can be identified by targeting individuals who have at least eight arrests over three years and identified as transient (having no address or providing the address of a shelter) at least three times over that time period.

The team ran data matches on this target population to understand their level of system use during the same time period for homelessness, jail stays, and detox services. Over two-thirds of the target population had shelter enrollments recorded in the city’s Homeless Management Information System, and a sample from the target population showed that individuals spent, on average, 77 days in jail in the year following their eligibility for the program.

These data confirm that the targeting criteria will identify a population that the evidence shows can be stabilized through a supportive housing intervention, thus using city resources most effectively to prevent unnecessary costs.  

PFS is an innovative way to scale up evidence-based programs like permanent supportive housing, and is at its most effective when the intervention is delivered to the population that needs it most. As cities like Denver and Santa Clara move forward with their PFS projects, we look forward to discovering what their results can teach us about solutions to homelessness—and how it can further the conversations about effective uses of city and county resources.

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