Giving Compass' Take:

• Massachusetts is using a pay for success model to fund housing and holistic services for homeless individuals that make frequent use of emergency services. In the pay for success model, investors stand to profit if the conditions are met. 

• Is this a good model for impact? How can the requirements be written to ensure impact without negative externalities? 

• Learn more about pay for success policy structures.

For most of his career, Sander Schultz has observed a frustrating disconnect between what emergency responders expect to do on the job, and what they actually do. Most of the people his crew picks up are familiar faces who experience repeated crises related to addiction or mental illness, or both.

The common thread most of this population shares? They’re homeless. Until recently, people in Schultz’ position faced a frustrating reality. They could stabilize the person temporarily, but they couldn’t provide permanent solutions.

But around 2014, a local nonprofit joined a statewide experiment to use public rental vouchers and Medicaid dollars to house and treat long-term homeless individuals in the city. The initiative was a “housing first” approach. The services, which would be tailored to the individual’s needs, could mean everything from literacy classes to job training to addiction counseling. The experiment is ongoing, but it’s already had a positive impact on emergency responders, Schultz says.

It’s an ambitious initiative that puts Massachusetts among the leading states in terms of addressing chronic homelessness. But there’s something else that makes this program unique: If everything goes according to plan, some investors stand to make a profit from it.

That’s because the program uses a funding mechanism known as “pay for success,” a type of performance-based contracting in which private investors pay the upfront costs of a social program, reducing the risk of experimentation for government.

Read the full article about homelessness programs by J.B. Wogan at Governing.