A New Approach to Helping People Who Need it Most

California’s First Pay for Success Project Kicks Off

Richard Maldonado (r) with Abode Services’ Executive Director, Louis Chicoine. Thanks to the new Pay for Success program, Abode will provide housing and services to 150-200 homeless people.

Last month, I had the chance to meet a gentleman named Richard Maldonado. He’s 68, and retired from his job as a security guard. For the past five years he’d been living in his van in San Jose, California, and showering at the Salvation Army or the local Baptist Church. “I was about ready to give up,” he told my colleague Annelise Grimm, banging his cane on the floor for emphasis.

The problem of homelessness in Santa Clara County, as with many communities in California, is bad and it’s getting worse. From 2011 to 2013, the number of homeless people in the county increased by almost eight percent. The state’s homeless population is no less significant – one in every five homeless people in the country live in California.

There are not nearly enough programs that work – that get people off the streets and into safe, clean housing for good. Fortunately there are organizations like Abode Services, which is helping people like Richard get their lives on track with quality housing that lasts. Thanks to Abode, Richard now has a place to live that’s clean, safe, and comfortable.

But our story doesn’t end there.

Funding projects like Abode isn’t easy. For one thing, Abode uses an approach called Housing First, in which vulnerable people are first provided homes, and then they receive customized social services like counseling, help with obtaining benefits, and other supports. Usually it works the other way around. Vulnerable people first go into shelters, then halfway houses, and then, if they make it all the way through, permanent housing. Is Abode’s approach better? Research says that it can be, but it can be challenging for governments to shift resources away from current commitments to proven alternatives and preventative approaches.

What if we could guarantee results? What if governments only had to pay for a project if it solved a community problem? What if governments only had to pay for success?

This is where the Irvine Foundation and a group of other funders comes in.

On the day I met Richard, I was in Santa Clara County to announce the launch of such a project, which will work with Abode Services to provide housing and supportive services to 150-200 of the most vulnerable members of the chronically homeless population. The initiative is the state’s first project funded through an innovative new financing method called Pay for Success.

In a Pay for Success project, private funders and investors pay for social services up front, working with counties, states, and service providers. In this case, the goal is to reduce chronic homelessness. If the project succeeds, the County will pay the funders back, with a small return on their investment. If the project does not reduce homelessness at the agreed-upon levels, the County doesn’t have to pay. It is a model designed to both improve outcomes, reduce costs, and open the door for more funding.

Irvine is so intrigued about this approach, which has been used in other states, that last year we launched the California Pay for Success Initiative to identify and fund new projects here. The Santa Clara announcement was the first of what we hope will be many such endeavors across the state.

In this project, Santa Clara County is working with the Irvine Foundation, the Sobrato Family Foundation, The California Endowment, The Health Trust, The Reinvestment Fund, the Corporation for Supportive Housing, Google.org, and the Laura and John Arnold Foundation to provide funding for the project and to evaluate its impact.

The purpose of these agreements is to provide high-quality social services to a greater number of society’s most vulnerable individuals, for the benefit of all. Santa Clara’s effort to reduce homelessness represents a life-changing opportunity for those, like Richard Maldonado, who need it most.

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