Denver Social Impact Bond Supportive Housing (Proposal)

Denver Social Impact Bond Initiative: Supportive Housing Problem to be Addressed: The City of Denver, like many other communities around the country, faces limited resources to invest in existing preventive programs for the chronically homeless and individuals who struggle from mental health and substance abuse challenges. As a result, too many of these individuals frequently interact with the police, jail, detox, and emergency care systems. These current interactions are extremely costly and ineffective. The Denver Crime Control and Prevention Commission (DCCPC) has tracked these interactions across systems for the last four years and has calculated that the top 300 heavy-utilizers cost upwards of $11.4 million per year. Lacking an effective intervention, they will continue to be very costly to the City – including the cost of police time, jail days, detox programs, emergency room visits, and other health care expenses. Without an appropriate intervention, the City and its taxpayers will continue to pay a high cost for ineffective remedial and emergency care systems. On a given year, DCCPC has calculated that the top 300 individuals spend over 14,000 nights in jail and visit detox facilities over 2,000 times. In addition, supportive housing resources available for operation and services have decreased, forcing many providers and housing developers to scrap together various grants or abandon plans for the creation of new housing and programming. Without a consistent source of funding, future housing programs targeting the most vulnerable homeless populations may not move forward. Proposed Approach: Denver has committed to fully developing a Social Impact Bond to ensure the City is delivering the most effective services, paying for results, “Paying for Success,” and shifting its spending from short-term band-aids to long-term, sustainable solutions. The supportive housing initiative will target chronically homeless individuals who also struggle with mental health and substance abuse challenges. Denver is committed to addressing the challenge of chronic homelessness through the very best, evidenced-based, data-driven programs and the most innovative and modern funding mechanisms. Through its partner organizations, the Corporation for Supportive Housing and Enterprise Community Partners, the City & County of Denver will implement an initiative to serve 200-300 chronically homeless individuals over the next six years using Social Impact Bond financing. The program will be based upon various proven models that combine the approaches of Housing First with intensive case management. Given the overall affordable housing needs of Denver, the initiative will likely make use of a combined housing approach—using an existing scattered-site housing units in the short-term and building new permanent supportive housing units for the long-term. Both housing models will include either mobile or onsite units that will provide intensive case management that will focus on physical health, behavioral health, substance abuse, and daily needs. Over the next year, the City and its partners will work together to develop the program model, the housing financing needed to build new, permanent supportive housing units, and develop a market-ready structure for the Social Impact Bond. The City brings a vast knowledge of the population to be served and a commitment to funding preventative solutions, which will combine with its partners’ strong housing expertise and resources to create long-term solutions for the City’s vulnerable population. Social Impact Solutions 1 The initiative will attempt to combine existing services and housing development resources together with new innovative funding structures in order develop a new model for increasing supportive housing. Through its continued work to promote supportive housing, the State of Colorado has made great progress in using Low-Income Housing Tax Credits and Medicaid reimbursement of behavioral health treatment to promote supportive housing across the state. Denver will work to build upon this framework using Social Impact Bond financing to raise $8-15 million in financing. This initiative will expand upon Denver’s Road Home and other past efforts by leveraging the new financial tool of Social Impact Bonds, scaling up existing programs targeting this population, and bringing in new expertise and best practices to help target this vulnerable population. The City has recently completed a feasibility analysis of conducting a Social Impact Bond for chronically homeless individuals in Denver. Once the development process is complete, the City and its partners will begin to implement a five to six year program. 2 Denver Social Impact Bond Initiative: Frequently Asked Questions Program Overview: The City & County of Denver is developing a Social Impact Bond initiative to provide supportive housing to chronically homeless individuals who also struggle with mental health and substance abuse challenges. The 6-year initiative will aim to promote housing stability, better life outcomes, and reduce contacts with the police and criminal justice systems and the use of emergency services. What is Social Impact Bond financing? Social Impact Bond financing, also called Pay for Success contracts, combine nonprofit expertise, private sector funding and rigorous evaluation to transform the way government and society respond to chronic social problems. In a Social Impact Bond, funders provide the upfront funding needed to deliver the program and taxpayers only repay these funder if the program achieves verified outcomes that create benefits and generate savings for government. All outcomes are rigorously evaluated and verified to ensure that the intervention is producing results. Why is the City using Social Impact Bond financing over other funding mechanisms? Social Impact Bond financing allows the City to pay only for outcomes, transfer the risks of program performance to private investors, and make an important transition away from costly, ineffective remedial services to less costly, preventative programs. The use of upfront private financing allows the City to move towards results-based and performance-based financing while ensuring that nonprofits have the funding needed to prove the effectiveness of their program. The City only expends resources when results are achieved and when benefits and savings are generated to the public. Overall, this innovative form of performance-contracting and financing enables the efficient use of taxpayer dollars by allowing the government to purchase social results (e.g. increased housing stability and reduced use of emergency services) rather than outputs and services (e.g. number of meetings with a client) that might not achieve the desired results. Why is the City addressing chronically homeless individuals who also struggle with mental health and substance abuse challenges? The City of Denver, like many other communities around the country, faces limited resources to invest in existing preventive programs for the chronically homeless and individuals who struggle from mental health and substance abuse challenges. As a result, too many of these individuals frequently interact with the police, jail, detox, and emergency care systems. These current interactions are extremely costly and ineffective. The Denver Crime Control and Prevention Commission (DCCPC) has tracked these interactions across systems for the last four years and has calculated that the top 300 heavy-utilizers cost upwards of $11.4 million per year. Lacking an effective intervention, they will continue to be very costly to the City – including the cost of police time, jail days, detox programs, emergency room visits, and other health care expenses. On a given year, DCCPC has calculated that the top 300 individuals spend over 14,000 nights in jail and visit detox facilities over 2,000 times. Social Impact Solutions 3 Both local and national organizations have proven that by targeting this hard-to-serve population and providing them with housing and intensive case management, significant savings and benefits for the City can be achieved. Will this initiative attract more individuals to Denver in order to access the program? The initiative will target individuals who have already been identified as interacting with the police, jail, detox, and emergency care systems. The target population consists of individuals who suffer from mental health and substance abuse issues and often find themselves in cities in order to survive. Because of their vulnerable conditions and needs, moving from one location to another is not viable option. Therefore, the individuals served by the program will likely be and continue to be people who have been in Denver for multiple years. As the most recent Metropolitan Denver Homeless Initiative point-in-time survey indicates, homeless individuals and families are just as likely to migrate away from Denver as they are to move into Denver. Given the needs and conditions of the target population nationally, Denver is unlikely to attract more individuals by trying to treat the current needs of individuals already in Denver. How much money will this initiative cost? The ultimate cost of this initiative to the City will depend on the ability of the program to qualify individuals for health and Social Security Benefits, the total amount of individuals served, and the performance of the program. Current estimates of providing services and housing to 250 individuals range from $8 to $14 million. Additional State, Federal and private dollars may be needed for the capital costs associated with building new housing units. Who are the partners that are a part of the initiative? Corporation for Supportive Housing—For 20 years, CSH has been the leader of the supportive housing movement, demonstrating supportive housing’s enormous potential for improving lives of very vulnerable individuals and families. CSH has been a national leader in designing and supporting programs that address vulnerable populations through supportive housing. Enterprise Community Partners— For more than 30 years, Enterprise has introduced solutions through public-private partnerships with financial institutions, governments, community organizations and other partners that share their vision that one day, every person will have an affordable home in a vibrant community, filled with promise and the opportunity for a good life. Since 1982, Enterprise has raised and invested nearly $16 billion in equity, grants and loans to help build or preserve nearly 320,000 affordable rental and for-sale homes to create vital communities and more than half a million jobs nationwide. Social Impact Solutions (SIS) – Mary Wickersham and Ken Weil have a combined several decades of high level policy development, financing and implementation experience. Through SIS, they are leading Pay for Success / Social Impact Bond efforts throughout the state. They support clients in positioning successful programs for innovative finance through feasibility studies, financial modeling, identification of funders and structuring deals. Harvard Kennedy School Social Impact Bond Lab—The SIB Lab conducts research on how governments can foster social innovation and improve the results they obtain with their social spending. An important part of the research model involves providing pro bono technical assistance to state and local governments implementing pay-for-success contracts using social impact bonds. Through this hands-on involvement, the lab gains insights into the barriers that governments face and the solutions that can overcome the barriers. By engaging current students and recent graduates in this effort, the lab is able to provide experiential learning as well. 4