Pay for success? Investors benefit if new housing program helps RI's homeless residents

Wheeler Cowperthwaite, Providence Journal
·3 min read

PROVIDENCE − Four service providers for homeless residents have started vetting candidates for a new permanent supportive housing program that rewards private investors if the clients do well.

The public/private partnership is being spearheaded by the Rhode Island Coalition to End Homelessness while four service providers have signed on to provide permanent supportive housing and wraparound services to 125 people who are "using a disproportionate amount of Medicaid, Department of Corrections (DOC) and Homeless services," Coalition Spokesman Juan Espinoza said.

While the four organizations providing the case management will be paid for their work, investors are fronting the cash for the operation, led by Shelby Kohn at Maycomb Capital. If the program hits its benchmarks and its participants have fewer costly interactions with the state, the investors get paid back with interest from a $6-million fund the state approved in the last session.

Is this the answer? Is 'Pay for Success' the key to solving RI's homelessness crisis?

Kohn declined to say what the interest rate is, but said it is in the high single digits, a rate set in 2022. The federal funds effective rate, one way to track interest rates, began climbing in early 2022 from near zero to about 4%.

The program won't be adding any new capacity to Rhode Island's housing system, which is seen as being in a crisis, as home prices and rents continue to hit all-time highs despite interest rates that are also at high points not seen in 20 years.

Maycomb Capital managing director Shelby Kohn speaks at a Friday news conference on the "pay for success" program her group is funding to provide permanent supportive housing to the state's homeless population.
Maycomb Capital managing director Shelby Kohn speaks at a Friday news conference on the "pay for success" program her group is funding to provide permanent supportive housing to the state's homeless population.

OpenDoors to serve women getting out of prison

For provider OpenDoors, the plan is to find rental units on the open market and use some housing units they already own or control. The nonprofit operates the state's only municipally owned shelter, in Pawtucket, and focuses much of its services on people coming out of prison.

OpenDoors program manager Cara Cote said their clients will likely start at one of the nonprofits' sober houses before finding somewhere with a lease.

The nonprofit will help 25 people in the program, mostly women who have been recently released from prison, OpenDoors co-executive director Nick Horton said.

One woman is already in the program, living in a sober home and working on getting a job, OpenDoors case manager Kim French said.

Crossroads Rhode Island, East Bay Community Action Program and House of Hope are the other providers working the program.

What is the 'pay for success' model?

Pay for Success programs are a type of public-private partnership, often known as "social impact bonds," designed to harness private investment to solve complex and costly social problems.

In the "pay for success" model of funding, some agency or group, often a state or federal agency, agrees to pay for services, but only if the program reaches its specified "measurable outcomes," according to the federal Office of Social Innovation and Civic Participation's website.

If the agreed-upon outcomes are not reached, then the government does not pay for the services, or only pays a portion for whatever level of success was measured.

"For example, instead of paying for job training simply to be provided, a community might use PFS to pay only when individuals gain stable employment in good jobs," according to the federal website.

When did the program start?

In 2016, the coalition was awarded a $1.4-million federal grant to start planning a program. It wasn't until the 2022 legislative session that the state set aside $6 million for the program, allowing it to move forward.

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Reporter Patrick Anderson contributed to this report. Reach reporter Wheeler Cowperthwaite at wcowperthwaite@providencejournal.com or follow him on Twitter @WheelerReporter.

This article originally appeared on The Providence Journal: RI homeless coalition launches investor-backed housing program