In 2016, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Justice (DOJ) entered an interagency agreement and launched the Pay for Success Permanent Supportive Housing Demonstration (HUD-DOJ Demonstration). The purpose of the HUD-DOJ Demonstration is to strengthen communities’ ability to reduce recidivism and homelessness among the reentry population by increasing Permanent Supportive Housing (PSH) through Pay for Success (PFS), a promising financing mechanism that unlocks private and philanthropic investment in social programs.
Permanent supportive housing combines a housing subsidy with intensive supportive services; it helps a subset of the reentry population that experiences long-term homelessness and that cycles in and out of crisis services, including jails, homeless shelters, hospital emergency departments, and psychiatric and detoxification centers. This cycling is detrimental to their health and well-being and comes at a high cost to the public. Despite strong evidence to support its expansion, permanent supportive housing is not yet available at the scale needed in many communities.
The HUD-DOJ Demonstration aims to help scale PSH by launching partnerships between government agencies and private investors through PFS. Under PFS, investors pay the up-front costs of PSH and are repaid by the government if the program is successful, as measured by performance measures; these include reductions in jail stays or the use of shelters and are agreed upon in advance. The PFS structure involves multiple actors within a jurisdiction, including governments, funders, financial intermediaries, knowledge intermediaries, service providers, and independent evaluators, who measure the success of the program’s performance. PFS projects proceed through three phases: feasibility analysis, transaction structuring, and contract implementation (including evaluation of performance outcomes and success payments).
As part of the interagency agreement between HUD and DOJ, DOJ made Second Chance Act (SCA) funds available for the Demonstration and designated HUD with responsibility for issuing a Notice of Funding Availability (NOFA) and providing oversight for the Demonstration, in partnership with DOJ. Congress passed the SCA (Public Law 110-199) with bipartisan support in 2008. The goal of the act is increasing reentry programming and improving recidivism outcomes for individuals released from state prisons and local jails. SCA grants support efforts related to education and employment assistance, substance use and mental health disorder treatment, housing, family programming, mentoring, victim support, and other reentry efforts. Grants must be collaborative across criminal justice and social service systems and collect data to measure performance. Because evidence shows a subset of the reentry
population experiences homelessness and that PSH is a cross-sector solution that results in both housing stability and reductions in recidivism, it is a good fit for achieving the goals of the SCA.
In June 2016, through a competitive process, HUD-DOJ awarded $8.7 million in funding to the seven grantees, who are listed in Exhibit 1 below. In each site, the grantee organization is the intermediary organization that is primarily responsible for overseeing the PFS process, including responsibility for assessing the feasibility of PFS, overseeing the process to structure a transaction, and then overseeing the implementation of the PSH project.
Since different sites had different degrees of experience with both PFS and with PSH, sites were funded for different phases of PFS, as shown in the exhibit. The grantees also had varying degrees of experience collaborating across sectors, using data, serving a reentry population, implementing supportive housing, and evaluating outcomes.
Pay for Success Permanent Supportive Housing Demonstration Sites
Anchorage and Matanuska-Susitna Borough, AK
Pima County, AZ
Los Angeles County, CA
Montgomery County and Prince George’s County, MD
Lane County, OR
Rhode Island Austin/Travis County, TX
Intermediary (Grantees) United Way of Anchorage
The Sorenson Impact Center at the University of Utah
Corporation for Supportive Housing (CSH)
American Institutes for Research (AIR) Third Sector Capital Partners
The Rhode Island Coalition for the Homeless
The Ending Community Homelessness Coalition (ECHO)
PFS Phase at Demonstration Launch
Transaction structuring Feasibility
￼￼￼￼￼￼￼￼The NOFA required each to launch a PFS project to fund at least 100 units of PSH for individuals in the target population who are chronically homeless, involved in the criminal justice system, and have high needs. For this Demonstration, participants either needed to meet HUD’s definition of chronic homelessness or have been homeless for the past 12 months cumulatively during the past 3 years or have been homeless for at least one night during each of the last 3 years.1 The criterion for criminal justice
1 “Chronically homeless’’ is defined in section 401(2) of the McKinney-Vento Homeless Assistance Act, 42 U.S.C. 11360 (McKinney-Vento Act or Act), as an individual or family that is homeless and resides in a place not meant for human habitation, a safe haven, or in an emergency shelter, and has been homeless and residing in such a place for at least 1 year or on at least four separate occasions in the last 3 years. The statutory definition also requires that the individual or family has a head of household with a diagnosable substance use disorder, serious mental illness, developmental disability, posttraumatic stress disorder, cognitive impairments resulting from a brain injury, or chronic physical illness or disability, see Chronically Homeless Final Rule.
￼￼￼￼EVALUATION OF THE HUD-DOJ PAY FOR SUCCESS PERMANENT SUPPORTIVE HOUSING DEMONSTRATION: BASELINE REPORT
involvement was specified as having had multiple jail or prison stays within a 3-year period, with the most recent being in the past 12 months. The criteria for “high needs” were specified as having a history of high- cost utilization of services or significant health or behavioral health challenges that require high-cost support.
Each site is required to contract with an evaluator to determine the success of the PSH intervention and monitor the success measures that trigger payments. HUD-DOJ contracted with the Urban Institute to conduct a national formative evaluation of the Demonstration. The goals of the national evaluation are to examine how PFS is implemented in the different Demonstration sites, capture the lessons learned across sites, and examine the feasibility of using PFS to fund PSH for a high-need, high-cost, homeless, reentry population.