Voices from PFS Pioneers: Austin Pay for Success Project

Published Thursday, September 29, 2016 | by Martin Lenarz-Geisen

Nonprofit Finance Fund spoke with Ann Howard at the Ending Community Homelessness Coalition (ECHO), Dianna Grey, Corporation for Supportive Housing (CSH), and Social Finance about the Austin Pay for Success Project. This blog is part of an interview series with selected project partners from our Social Innovation Fund Transaction Structuring Competition.

NFF: Tell us about the genesis of this Pay for Success (PFS) project. What was the original impetus? How were the stakeholders who have been moving the project forward brought together?

Ann Howard: ECHO and our partners across Austin/Travis County have been working hard over the past several years to end homelessness, and a key part of that has been expanding the stock of permanent supportive housing, which includes not only deep rent subsidies but robust services. Our anticipated end payors – the City, County, and health care partners – were already at the table. Those entities, and a variety of other stakeholders, have been coming together regularly over the past five years to work on assembling funding for supportive housing. We’ve made incredible progress, but it had become really clear that we’d need some non-traditional funding sources if we wanted to come to scale more quickly.

Dianna Grey: In late 2014, CSH announced that it was seeking communities ready to do feasibility work around Pay for Success and supportive housing. The timing couldn’t have been better for Austin. There was considerable interest in PFS for a variety of interventions community-wide. We had a new Pay for Success Task Force looking at how to do this in Austin, we had strong data on the effectiveness of permanent supportive housing across systems, and a real movement toward system transformation among our public partners, especially in the health care realm.

CSH: Austin is one of six communities we selected for support through our first-round competition funded by the Corporation for National and Community Service Social Innovation Fund award we received in 2014. Our initial focus with ECHO was to study the feasibility of using the PFS model to create more supportive housing. We were impressed with the commitment, openness, and community-wide interest we encountered. The team spent about a year gathering and analyzing data, assessing cost benefit, and engaging with potential end payors. By late in 2015, it was apparent that there was a real opportunity to move forward.

Ann Howard: As we looked at moving forward into the project structuring phase, we decided to bring Social Finance onto the project team, which by then had established a local office in Austin. ECHO applied for the NFF grant with all partners on board. As a group, we’ve also secured support from U.S. Department of Housing and Urban Development / Department of Justice for the project, as criminal-justice-involved individuals are among the people we serve. We have a lot of cooks in the kitchen, but each partner brings specific and valuable skills to the table.

NFF: The two project intermediaries, Social Finance and CSH, are working on a number of projects nationwide. What makes Austin attractive as an environment for Pay for Success, in general and for permanent supportive housing specifically?

CSH: We are impressed with Austin and ECHO on several levels. There is a strong history of collaboration among key stakeholders, particularly as it relates to access to data critical in evaluating the feasibility of PFS. There are providers with a strong history of delivering quality supportive housing and the community is focused on creating additional units. Most importantly, Austin is willing to explore new ideas to solve complex challenges like homelessness and invest in innovative tools like PFS to create effective solutions.

Social Finance: As one of the country’s fastest growing cities, affordable housing is becoming more of a challenge in Austin, contributing to a rise in homelessness. City and County leaders are actively looking for innovative ways to address both homelessness and other social challenges and, as a leader in innovation, Austin is a ripe environment for Pay for Success.

NFF: There are several layers of innovation in this project including the back end payor structure – with a City, County, and healthcare entity all potentially paying for different permanent supportive housing outcomes. Can you tell us a bit more about the intervention model, and how this project appeals to all of these parties?

Dianna Grey: I’m not sure we knew that the multi-payor structure was ground-breaking when we proposed it. It just made sense. We know that giving formerly homeless individuals access to housing and services results in substantial cost avoidance in our county jail, emergency departments and hospital inpatient settings, shelters, and the emergency medical services system. We wanted to see if we could create a model through which the costs of the intervention could be shared proportionally across those systems.

CSH: The multi-payor structure obviously adds complexity to the project. One of the things we really hope to contribute to the field via this project is a better understanding of how this multi-payor model might work in practice; identifying its benefits along with its challenges and ways to address them.

Social Finance: Establishing the viability of a multi-payor project is a great opportunity to showcase how governments can collaborate within a PFS construct to address challenges that are not neatly confined to the borders of one jurisdiction. Supportive housing has obvious positive impacts across a variety of systems – and there are many other issues, such as healthcare and education, that affect multiple systems across multiple payors.

NFF: As you know, the road to launching a PFS project is a long one! Can you share with us what the biggest challenge to date has been? How are you and your partners approaching this challenge?

Ann Howard: Having more than one payor means that we need to navigate more than one public system. We have engaged a broad array of political leaders, and taken into account the budgeting calendars and fiscal realities of each entity. We’re having many concurrent conversations, and constantly assessing where we are with each to gauge our readiness and timeline. Social Finance is providing great leadership to keep us all on track, and as a team we’re working to be very agile and respond quickly to the needs of our partners.

Social Finance: The first PFS project in a new jurisdiction always requires a period of time for initial education to stakeholders. Project partners and community supporters need to first become informed about the PFS mechanism before jumping into project development. As Ann mentioned, we have been actively working with all payors to ensure they have a strong understanding of the project and feel adequately supported throughout the process.

Dianna Grey: Our PFS project is intended to fund the supportive services in permanent supportive housing. As a community, we have to ensure that the rental subsidies and housing units will be available when we are ready to launch the service component funded via PFS. That’s a labor intensive and long-term effort, but the prospect of having secured service resources has really energized the system players to come together and build our capacity on the housing side as well.

CSH: ECHO is a great example of the key role a strong nonprofit catalyst plays in convening pivotal stakeholders, building consensus, and driving system change. In their capacity, they can look across the whole system and see which entities are touching the lives of vulnerable individuals and families, and then find creative ways to bring them together. ECHO has an innovative model for engaging multiple end payors. Although this work can be a little more complicated and take longer, the potential for lasting, big-picture system change is significant.