Private Equity in Homeless “Social Impact Bonding”

A Massachusetts $3.5 million initiative seeks to provide permanent housing and support services, including job training, for about 800 of the state’s chronically homeless.

Unlike previous homeless shelter programs, private funders – not taxpayers — assume the risk if the program does not meet objectives. The investment comes from non-profit organizations as well the private sector, including at least one bank.

According to a report in the Boston Globe, Santander Bank “is betting $1.25 million on the proposition that getting a person out of a shelter and into a stable home will not just prevent a return to the streets, but save millions in emergency room visits, Medicaid costs, and police activity.”

If the South Middlesex Opportunity Council and the other providers in the program can keep these chronically homeless in secure housing for at least a year, then the state will reimburse the investors with a small return. Massachusetts also uses “social-impact bonding” or the “pay for success” to reduce recidivism among juvenile offenders.

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