Pay for Success Initiative to Reduce Chronic Individual Homelessness Exceeds Goals; Issues First Dividend Payments to Investors

February 13, 2018

BOSTON – The first-in-the-nation Pay for Success initiative to reduce chronic individual homelessness has significantly exceeded targets and successfully placed over 656 high-need individuals into stable, supportive housing, with 92% remaining housed after one year. These achievements have triggered dividend payments to partners investing in this unique social innovation financing model that so far has saved Massachusetts an estimated $2.2 million in shelter, emergency room and in-patient hospitalization care costs.

Launched in June 2015, the Massachusetts Pay for Success Initiative to Reduce Chronic Individual Homelessness is a partnership of the Commonwealth of Massachusetts, the Massachusetts Housing and Shelter Alliance (MHSA), Corporation for Supportive Housing (CSH), Santander Bank, N.A. and the United Way of Massachusetts Bay and Merrimack Valley that aims to house up to 800 chronically homeless individuals by 2019.

“The Baker-Polito administration is proud of the shared success we have realized with our project partners on improving the quality of life for many of the most vulnerable, chronically homeless residents in the Commonwealth,” said Secretary of Administration and Finance Michael J. Heffernan. “We congratulate our partners on achieving the project’s ambitious targets and look forward to continuing to work with them on this important initiative.”

“The Pay for Success initiative has successfully met its targets for housing retention, demonstrated a reduction in utilization of medical services by clients, and demonstrated a cost-benefit,” said Joe Finn, President & Executive Director of the Massachusetts Housing & Shelter Alliance. “By focusing on housing chronically homeless individuals and long-term homeless individuals who are high utilizers of emergency care, the Pay for Success initiative is having a significant impact on the utilization of emergency resources. It has also brought much needed services to clients who could not otherwise have accessed services.”

“Santander is proud to be the lead private sector investor in this Pay for Success initiative and to provide grant and capital investments to finance this partnership. This first payment demonstrates that the housing-first model is an excellent investment that can be delivered at scale and has led to collaboration across sectors that has resulted in systemic change in Massachusetts,” said Gwen Robinson, Managing Director, Corporate Social Responsibility at Santander Bank.

“While we are proud to return dividends to the investors, the real dividends here are the dignity and supportive services we are providing to some of the Commonwealth’s most vulnerable individuals,” said Michael K. Durkin, President at United Way of Massachusetts Bay and Merrimack Valley. “It is very exciting to be able to scale programs that work, significantly reducing our state’s chronically homeless individual population and creating potential savings in other costs like incarceration, shelter and emergency care.”

“The successes we are seeing in Massachusetts are unparalleled,” said Deborah De Santis, President and CEO of CSH. “We are directly involved in several major Pay for Success initiatives across the country and they are all making good progress, but nowhere near the pace and numbers we find in Massachusetts. We are delighted to see so many people being helped so quickly and are holding up this initiative as an example of best practices in Pay for Success.”

The Pay for Success initiative leverages a mix of philanthropic funding and private investor capital from Santander Bank, CSH and United Way to provide the upfront funding for social services. Under the innovative financing model, if the goals of the PFS initiative are met, the government compensates the investors for undertaking the investment risk. If the goals are not met, the government is not obligated to repay the investors. An independent evaluator, Root Cause, determines whether the Pay for Success initiative has achieved its goals.

Individuals in the Pay for Success initiative are high utilizers of emergency room services, health services and shelters, and many have lived on the streets for years. To break this cycle of high utilization, the model focuses on providing permanent, low-threshold supportive housing, through a network of 18 homeless service providers, to those who would otherwise rely on costly emergency resources. The stability of supportive housing allows participants to address their often complex health issues more effectively than they would on the streets or in shelters.

Of the 656 tenants, 518 are now enrolled in the MassHealth Pay for Success Community Support Program for People Experiencing Chronic Homelessness (CSPECH) program, an innovation of the Massachusetts Behavioral Health Partnership and MHSA that is recognized nationally for improving health outcomes and as a model for funding the support services component of supportive housing with Medicaid dollars.

The MHSA found that prior to securing supportive housing the individuals now housed through the Pay for Success initiative had accumulated (through February 1, 2018):

  • 49,891 nights in shelter;
  • 3,110 days in the hospital;
  • 1,162 emergency room visits;
  • 865 nights in detox.