More from that barrage of material from SSIR, with a fascinating article by George Overholser, alongside some more on New South Wales state’s plans for SIBs in Australia and public housing issues in Toronto, Canada.
Response To “The Payoff Of Pay-For-Success”
George Overholser – SSIR
In their article “The Payoff of Pay-for-Success,” V. Kasturi Rangan and Lisa Chase assert that the future of pay-for-success lies in philanthropy. Their main point is this: the crucial up-front risk capital needed for pay-for-success (PFS) deals to work in the long run will not come from profit-seeking investors; instead, it will be philanthropic dollars that will finance these deals. Philanthropy, according to Rangan and Chase, is the future of PFS. I do not share their view.
In the long run, it is not philanthropy that will keep the fires of PFS burning. Nor will it be return-seeking investors, who play such a vital role in today’s pioneering efforts. If PFS is to be widely embraced by the mainstream, then it must be government itself that will make it happen—with little or even potentially no private risk capital needed. Before I explain how this is possible, let’s start with a quick review of the PFS model.
After Friday’s Tracy Palandjian & Jeff Shumway’s response.
NSW Premier Mike Baird’s Financial Experiment Brings Broken Families Together
Kirsty Needham – SMH
They are among the 66 returned children, and 35 families who successfully prevented their children from entering care, that have triggered a payout to private investors under the Baird government’s financial experiment of Social Benefit Bonds.
The first in Australia, the $7 million bond was issued to investors in 2013 with the purpose of expanding Newpin, which is run by UnitingCare.
New bonds will soon be issued for youth homelessness and prisoner reoffending programs, and Premier Mike Baird told a New Zealand audience this week he wanted to tackle obesity through a bond later this year.
Announcing this year’s results of the Newpin bond – a return of 8.9% to investors – NSW Treasurer Gladys Berejiklian said the bonds were the “cutting edge” of finding new ways to tackle social challenges.
Toronto’s Public Housing Needs Bold Solutions
Sarah Thomson – The Star
Toronto Community Housing Corp. (TCHC) is a huge problem that Mayor John Tory has vowed to address.
It is the second largest housing organization in North America and is fully dependent on government funding, but as it now operates that funding isn’t enough. The organization has failed to adapt and the lack of visionary leadership has created a rigid environment where following procedure matters more than innovative ideas. Instead of adapting to the lack of funding, TCHC has allowed its housing to fall into such a state of disrepair that they estimate it will take approximately $2.6 billion to cover all the capital repairs required over the next decade.
The horrendous conditions at TCHC aren’t unique to Toronto. London’s Council Housing and the “projects” in New York suffered from the same shortcomings that happen when government organizations try to be landlords. But these cities have found some very creative solutions.
In London non-profit housing associations run by a volunteer board of residents, local business and community leaders have had great success at improving living conditions for their tenants. By properly managing a building and capturing the value of the property the housing associations have managed to create safe, clean and affordable housing.
In New York the introduction of housing vouchers to allow low-income households to rent modest market-rate housing of their choice allow a large part of the private housing industry to provide social housing rather than placing the burden to maintain and repair onto the government.
New York is also developing Social Impact Bonds (SIBs) that allow the government to partner with private investors to pay for social programs. Unlike a loan, a SIB requires that all the services it pays for have a quantifiable impact.
For example, in Toronto a SIB could be used to attract investors to fund a nonprofit organization to manage and operate some of TCHC’s worst buildings where repairs and maintenance have fallen far behind and where living conditions are horrendous. The results of the work the non-profit organization does are then measured and the city pays investors back once benchmarks are achieved. Given the positive impact that the nonprofit housing associations have had in the U.K., this solution allows government oversight while connecting with the broader community.