Massachusetts Chronic Homelessness Pay for Success Initiative

Last updated Tuesday, June 20, 2017

Quick Facts

Current Phase
Issue Area
Interventions
Term of Project

Massachusetts has more than 1,500 chronically homeless people who require a myriad of costly public and emergency services, such as hospitalizations, temporary shelter, and high Medicaid payments.  This led to the development of the Home & Healthy for Good (HHG) program, a Pay for Success initiative that provides 500 units of stable supportive housing to 800 of these chronically homeless individuals.  With $3.5 million in flexible funding, the program will incorporate evidence-based practices to build long-term housing and provide supportive services, including access to preventative and primary health care.  If successful, the HHG program will have measurably improved life outcomes for this population, in addition to realizing high cost savings for the state of Massachusetts.

Analysis

  • Market Overview

    • Year Launched
      2014
    • Service Delivery Term (Years)
      6
    • Motivation for Project
      1,500 chronically homeless people in Massachusetts lack access to stable housing and are high-cost users of temporary shelters, Medicaid and other emergency services.
    • Project Objective(s)
      Provide 500 units of stable supportive housing for up to 800 chronically homeless individuals
    • Individuals Served
      800
    • Geography
      Commonwealth of MA
    • Issue Area
      Homelessness
    • Initial Private Investment ($ millions) [Note 2]
      3.5
  • Project Partners

    • Service Provider(s) [Note 1]
      Massachusetts Housing and Shelter Alliance [Note 11]
    • Payor(s) [Note 2]
      Commonwealth of Massachusetts
    • Transaction Coordinator(s) [Note 3]
      Massachusetts Housing and Shelter Alliance; CSH; United Way of Massachusetts Bay and Merrimack Valley
    • Evaluator [Note 4]
      Root Cause Institute
    • Validator [Note 5]
      None
    • Project Manager [Note 6]
      Massachusetts Alliance for Supportive Housing [Note 12]
    • External Legal Counsel [Note 7]
      Nixon Peabody LLC; Goulston & Storrs; Weil, Gotshal & Manges LLP
    • Technical Assistance Provider(s) [Note 8]
      Government Performance Lab; CSH
  • Evidence and Program Design

    • Service Intervention(s) Model and/or Type
      Home and Healthy for Good Program
    • Evidence base for intervention
      Provider performance data; Medicaid data analysis [Note 6]
    • Has effectiveness of the intervention for PFS project target population been evaluated?
      Yes
    • Has the service provider provided this intervention previously?
      Yes
    • Is PFS project: Scaling an existing intervention by replicating at a larger scale? Demonstrating the effect of a new program model or combination of services? Transplanting an existing intervention(s) to a new target population and/or service delivery setting?
      Scaling
  • Evaluation

    • Evaluation Design Methodology
      Validated data
    • Data Source(s) for Evaluation
      Service providers
    • Outcomes Tied to Success Payments
      1) Stable housing for at least one year
    • Outcomes Tracked, Not Tied to Success Payments
      Health care service usage; Number of nights spent in shelter; Number of days incarcerated
    • Length of Evaluation Period
      5.25 years
  • Service Provider Characteristics and Service Delivery

    • Single or multiple service providers?
      Multiple
    • Service provider type(s) (nonprofit, government, private)
      Nonprofit
    • Service provider OR site selection method
      Selected by project manager from list of qualified providers pre-approved by state
    • Service Provider Experience with PFS Intervention
      Existing sites for Home and Healthy for Good model
    • Referral Method for PFS Target Population
      Voluntary enrollment with referrals made through providers’ outreach and networks; participant eligibility determined using uniform risk/needs assessment
    • Did the project have a ramp-up phase? (Y/N; brief description)
      Yes: 6-month early-start clause to allow for service delivery before financing was finalized; 2 year ramp-up to get to full housing unit capacity
  • PFS Contracting and Governance

    • Operational Oversight Structure [Note 1]
      Board of Managers includes two representatives of project manager, and one representative each of fiscal agent and technical assistance provider
    • Frequency of meetings and/or reports
      Monthly
    • Executive Oversight Structure [Note 2]
      Includes representatives of Commonwealth Department of Housing and Community Development and Executive Office of Administration and Finance, and Government Performance Lab
    • Frequency of meetings
      Quarterly
    • Investor role in project governance?
      Can attend any operating or steering committee meeting as non-voting member [Note 5]
    • Frequency of reporting to investors
      As needed, with quarterly reports to state
    • Non-standard Contract Termination Events [Note 3]
      1) Availability of 200 housing units by end of Year 2; 2) State failure to allocate housing and Medicaid resources; 3) Low retention of participants in housing
    • Appropriations Risk Mitigation Strategy [Note 4]
      Success payments backed by full faith and credit of Commonwealth
  • Investors

    • Senior Investor/ Lender and Total Senior Investment ($MM)
      Santander Bank ($1); United Way of Massachusetts Bay and Merrimack Valley ($1); CSH ($0.5); ($2.5 total)
    • Subordinate Investor/ Lender and Total Subordinate Investment ($MM)
      None
    • Deferred Fee Source and Total Deferred Fees ($MM)[Note 1]
      None
    • Recoverable Grant Source and Total Recoverable Grants($MM)[Note 2]
      None
    • Non-recoverable Grant Source and Total Non-recoverable Grants ($MM)[Note 3]
      Santander Bank ($0.25); United Way of Massachusetts Bay and Merrimack Valley ($0.75); ($1 total)
    • Guarantor and Guarantee ($MM) [Note 4]
      None
  • Basic Repayment Structure

    • Initial Investment ($Millions)
      3.5
    • Maximum Repayment Funds Committed by Payor ($Millions)
      6
    • Full service delivery term (years)
      5
    • Full repayment period (years)
      6
    • Interim outcomes reported? Tied to payments?
      Yes/Yes
    • Sustainability/ Recycling of Funds
      1) Housing vouchers and Medicaid services will remain with participants
  • Detailed Repayment Terms

    • Interest
      0 – 5.33% annually, based on success rates [Note 5]
    • Trigger for initial repayment of principal [Note 1]
      40% rate of 12 months of housing stability
    • Threshold for full repayment of principal
      80% rate of 12 months of housing stability
    • Threshold for full repayment of principal plus maximum success payments
      94% rate of 12 months of housing stability
    • Repayment timing
      Year 6
    • Return to Investor [Note 2]
      See Note 5
    • Success Payment to Other Stakeholders? [Note 3]
      No
  • Project Costs

    • Project Development Costs Not Covered by PFS Capital Raise
      Government Performance Lab fellow; Legal services
    • Funding source(s) for project development costs, if any
      Pro bono legal support
    • Project Implementation Costs not covered by PFS Capital
      $7 million in housing vouchers; $11 million in Medicaid services
    • Funding sources for implementation costs not covered by PFS capital
      -Commonwealth of Massachusetts