Pioneering Social Impact Bonds for Chronically Homeless (North Denver Tribune)

By Laurie Dunklee

NORTH DENVER — 2016 was the first year for Denver’s innovative Social Impact Bonds Initiative, partnering the city with homeless service providers and private investors to help chronically homeless people get off the streets and stay off the streets.

Denver is the ninth city in the U.S. to initiate social impact bonds (SIBs), but it is the first to use them to address the issues of the chronically homeless. “The results of this work will be of nationwide importance,” said Cathy Alderman, vice president of communications and public policy for the Colorado Coalition for the Homeless (CCH), the initiative’s primary service provider partner. “We’re hoping to show that by investing up front, we create cost-savings as well as improve lives.”

The key is bringing people into permanent supportive housing, Alderman said. Since the chronically homeless often struggle with substance abuse and mental health issues, the program provides onsite healthcare, counseling and social services.  “Everyone’s needs are different. The model is to provide intensive case management, meeting them wherever they are in their struggles.”

Several philanthropic foundations and a national bank are among eight investors providing $8.6 million to start and run the program. The city will repay funders based on future cost savings in city services, including jail, detox and emergency room services. Repayment will be based on the extent of the savings, with higher performance enabling investors to earn back up to $11.4 million—or as low as $2.6 million, if the program falls far short of its goals.

Denver’s homeless population is estimated at 3,700, according to this year’s point-in-time survey. About 861 of these are considered chronically homeless. Chronic homelessness is defined as living in places not intended for human habitation, or homeless shelters, for 12 full months, or for 12 months in a three-year period.

Chronically homeless people are an expensive population for Denver and its taxpayers because of their frequent interactions with police, jails, detox and emergency care. The Denver Crime Control and Prevention Commission (DCCPC) calculates that, in a year, the top 300 individuals spend more than 14,000 nights in jail and visit detox facilities more than 2,000 times. After tracking these interactions for the last four years, the DCCPC calculated that these 300 cost the city upwards of $11.4 million per year. Without appropriate intervention, the city and its taxpayers continue to pay a high cost for remedial and emergency care systems.

The goal of the six-year Social Impact Bond Initiative is to bring 200 to 300 chronically homeless people in from the streets and keep them in permanent housing. Specifically, success means that 83 percent of residents stay in housing for a year, with 40 percent fewer days in jail. The time period includes five years to meet these and other objectives, plus one year for evaluation. “An independent evaluator will calculate the savings to the city and the retention rate of the program,” said Alderman. “We’ll compare our numbers on the streets today to five years from now.”

The Colorado Coalition for the Homeless provided SIB-funded supportive housing for 75 chronically homeless people in 2016, in a combination of new and existing housing. The CCH’s new Renaissance at North Colorado Station, opened in March at 40th and Colorado Blvd., houses SIB participants in 25 percent of its 165 units. Other facilities throughout the city, including the Renaissance West End Flats at 1490 Zenobia, contain units designated for the program.

CCH has broken ground for the first all-SIB-financed permanent supportive housing, the 101-unit Renaissance Downtown Lofts at 21st and Broadway. The new facility will be CCH’s 19th housing facility for various low-income populations. “We have a 90 percent retention rate overall,” said Alderman.

How successful is the SIB initiative so far? “Since the first participants moved in this March, no one has left voluntarily,” said Alderman. “Anecdotally, it’s making a huge difference, though we can’t say for certain if the model is exactly right yet. Bringing people in from the streets, we stay pretty close to them for awhile to make sure they are adjusting and making their doctor appointments. They have nothing, so they need a bed. Case managers teach life skills, like maintaining their space and grocery shopping. They get vocational training. Re-connections with family are made if possible. It is intensive case management upfront, then less as they settle in.”

Investors that will be repaid based on retention rates include Northern Trust Co., a Chicago-based bank with a local office (providing $3 million); and the Denver Foundation and Piton Foundation, both locally based, providing $500,000 each. Five more investors will be repaid based on the reduction in days spent in jail by participants: the Houston-based Laura and John Arnold Foundation (providing $1.7 million); the Colorado Health Foundation ($1 million); the Walton Family Foundation ($1 million); the New York-based Nonprofit Finance Fund ($434,695); and the Living Cities Blended Catalyst Fund ($500,000).

District 1 City Councilman Rafael Espinoza voted against the SIB initiative. “It’s a good idea, but a bad contract for the city,” he said. “The wrap-around services are good. But the only way the city wins is if the program fails. It’s a weird deal.”

London implemented two social impact bond programs in 2012, raising 5 million pounds ($6 million) to help their 831 “entrenched rough sleepers.” According to Social Finance UK, the “payment by results” programs met their target goals for housing, retention and employment. Two years after the SIBs began, investor payments against targets were increasing consistently by quarter.

Helping the homeless begins with compassionate intervention, Alderman said. “The co-responder model works, where a mental health worker goes out with police. It’s important to identify people’s needs instead of just moving them along.”

Laurie Dunklee is a fourth-generation Coloradan and a resident of Northwest Denver since 1979. Her stories reflect a curiosity about new ideas taking shape in our community, as well as a respect for the neighborhood’s rich history. Passions include music, the arts, and the natural world.