Urban Institute
Research Associate I
Meg Massey
Urban Institute
Outreach Manager, Pay for Success

Three ways that impact investing can help end homelessness

February 8, 2018 - 10:45am

Of all the challenges facing social services in the US, homelessness can feel particularly intractable: its drivers vary so much from person to person that a solution feels out of reach. Meanwhile, the continued visibility of people experiencing homelessness across the US may make the national goal of ending homelessness seem unattainable.

But what if the various resources used to manage the problem could join forces? That was the question explored at the Sorenson Impact Center’s Winter Innovation Summit, where panelists Maya Brennan, Danielle Cerny, and Stephanie Mercier took on the bold question posed in the session title–“Can Impact Investing End Homelessness?”–and identified the ways that pay for success (PFS) and other forms of impact investing can help get us closer to that solution.

  1. It brings key players together. The promise of a new funding stream can catalyze dialogue between people and organizations who work on different components of an interconnected social challenge. Conversations between diverse partners around a common goal may unearth new ways of delivering services as partners share and blend knowledge.

  2. It surfaces issues that must be dealt with through traditional channels. PFS projects, like most impact investment tools, work best when the projects are specific and targeted, with clearly defined metrics. These projects can’t address systemic issues by themselves. In the case of ending homelessness, a PFS project may target a portion of current housing resources to a specific population, add funding for service delivery, and track outcomes to allow for continuous improvement. PFS can also shine a light on the shortage of low-cost rental housing throughout the country, lengthy waits for federal rental assistance, and rules or regulations that impede innovation or partnership. Advocates and policymakers, rather than impact investors, ultimately must tackle these sorts of systemic concerns.

  3. It can lead to lasting changes. Lessons learned from a Massachusetts PFS project targeting chronic homelessness are now informing the state’s traditional contracting process with providers that serve people experiencing homelessness. The potential to spark systems change may be the most compelling reason to pursue PFS. While the appeal of new funders draws people to the table, PFS transactions are time-limited and have transaction costs that consume a portion of the resources. If the goal of impact investing is just to fund a specific project, it may not be worth the added cost. The costs and approach, however, can add substantial value in effecting system change or building knowledge about the applicability of evidence-based solutions in new contexts or with new populations.

In short, impact investing tools, such as PFS, can grease the wheels when the current approaches to solving a complex challenge seem stuck—and can energize key stakeholders to effect systems change to carry evidence-based solutions past the initial investment timeline.

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As an organization, the Urban Institute does not take positions on issues. Scholars are independent and empowered to share their evidence-based views and recommendations shaped by research. Photo via Shutterstock.