Sun, Feb 04, 2018 - Page 15 News List

Social impact bonds help cities lower homelessness

By Carey L. Biron  /  Thomson Reuters Foundation, WASHINGTON

The past couple of years have been a roller coaster for Maurice Cushinberry — first of homelessness, substance abuse and legal trouble, and then of sudden stability.

Although he had tried to find a home during that time, he was discouraged by the paperwork and process. However, shortly after Easter last year, a social worker contacted him and said he had been selected to participate in a new housing program.

“Within two weeks, I had a place to stay,” Cushinberry told the Thomson Reuters Foundation from Denver, Colorado. “They gave me housing first, and then we tried to work out all the other kinks in my life.”

The program is one of a rising number of initiatives around the world bringing together government departments, service providers, foundations, banks, pension funds and more to address complex social problems.

The key innovation is how they these programs are financed.

Rather than rely on handouts by cash-strapped governments, private investors step in to provide money through a financing tool known as a social impact bond.

The investors — most of them philanthropic organizations and entrepreneurs — provide up-front capital to deliver social services and only get a return if the program achieves predefined results.

The approach, also known as “pay for success,” is motivated by a simple set of questions: How can public services ensure they are accomplishing what they set out to achieve, and can they prove they are effective to prompt more investment?

Since 2010, the idea has started catching on across the globe. This week, the Social Finance Global Network announced 108 social impact bonds are now in existence in 24 countries.

“Because it’s so complicated and involves so many sectors, bringing these uncommon partners around a common goal, I would never have projected how swiftly it went from concept to reality,” said Tracy Palandjian, cofounder of the US arm of Social Finance, a London-based pioneer on the issue.

Social Finance UK spearheaded the world’s first social impact bond in 2010, raising £5 million (US$7.1 million at the current exchange rate) for a program aimed at reducing repeat offenders among former inmates of HM Peterborough Prison in England.

Dozens of such initiatives addressing issues such as housing and low-income healthcare have since been launched globally, Social Finance said, raising almost US$400 million and affecting more than 700,000 people.

Out of the 27 social impact bonds that have been completed, 10 have been successful enough to return a full investment, the organization said.

Last year saw 32 new launches in nine countries, and others have been announced over the past month.

While many social impact bonds have originated at the national and state levels, homelessness is an issue typically addressed directly by cities.

Globally, housing issues make up the third-largest area for social impact bonds, Social Finance data showed.

“What’s interesting about cities is they’re much more agile in terms of decisionmaking. They concentrate on improving their communities using their own budgets,” said Ronald Cohen, chair of a global steering group on social impact investing and a prominent supporter of the bonds.

Tackling social problems can often be more manageable at the urban scale, and cities are notable in their ability to get local communities involved in a social project, he said.

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