How and Why to Increase Neighborhood Access with Pay for Success

Families with housing assistance face numerous barriers to living in low-poverty neighborhoods. Housing mobility programs reduce these barriers through services, information, and counseling – including engaging landlords and housing authorities. Yet effective mobility programs can be challenging to fund. Using real data from a Baltimore mobility program and a hypothetical Pay for Success scenario, the working paper “Leveraging the Power of Place: Using Pay for Success to Support Housing Mobility” shows how to fund mobility programs by using upfront private investors and a public end payer to capture long-term health savings. Pay for Success offers promise for mobility programs in part because it may enable agencies with missions outside of housing to pay back investors when programs successfully deliver on promised outcomes, rather than assuming the risk of paying upfront.

Assumptions:

• Total ten-year program costs per family that moves: $5,572 (Rationale: $3,235 cost per family for initial move, per Baltimore data, plus followup costs and counseling for subsequent moves)
• Direct annual per-person medical cost of diabetes: $6,000 (Rationale: Conservative reduction from the American Diabetes Association estimates to account for undiagnosed cases or younger patients)
• Diabetes and obesity rates drop by year ten in response to moving to a lower-poverty neighborhood. (Rationale: MTO dose-response model)
• Four scenarios test the impact of gradual health benefits that begin at different points in time (immediately, at year 1, year 3, and year 5).
• Although additional benefits may be expected from moving to a low-poverty neighborhood, the model only monetizes the direct health savings from reductions in adult diabetes and obesity.

Projected results:

• If health benefits begin immediately, the program breaks even in year 8 and has an internal rate of return of 10.5%.
• If health benefits begin at year 1, the program breaks even in year 9 and has an internal rate of return of 7.7%.
• The year 3 and year 5 scenarios break even in year 10. The internal rate of return for the year 3 scenario is 4.0%. For the year 5 scenario, it is 0.5%.

To assist early adopters, the paper concludes with a model Pay for Success program structure and ideas for end payers from the public, private, and philanthropic sectors.