Two and a half years into the social impact bond, 85 percent of the 285 participants had remained in housing without ever exiting the program.

After moving into her apartment in November 2018, Maria has focused on staying on track. She takes three buses each way to get to her job at Noodles & Company, but she’s hoping to find a new job closer to home. And as the bitter winter descended on Denver, she was happy to be able to keep her apartment warm. “Living in the cold on the outside, I never wanted to fall asleep because I was afraid I would never wake up,” she said. “So now I sit here in the warmth, and I’m so grateful.”

Maria wants other people in a similar situation to know “there is hope and there is light at the end of the tunnel.” And for people who can’t imagine what it’s like to experience homelessness, she asks for just one thing: compassion. “It’s hard. Sometimes we get people that look at us like we’re nothing. But we’re something.”

Maria was one of 975 people experiencing chronic homelessness in Denver in 2018. The city faces a growing population and ballooning housing prices, and this housing crisis can in turn lead to other problems. People experiencing chronic homelessness often cycle in and out of jail, detox centers, and emergency care, which can negatively affect them and inflate city budgets that fund public services.

Denver Mayor Michael Hancock and his administration knew they had to stem the growth in chronic homelessness and break this homelessness-jail cycle. But nationwide funding shortfalls for housing programs meant Denver had to be prudent with its spending to make sure it was paying for a program that worked. So Denver took a less common approach and entered its first SIB. The SIB uses the pay for success funding model, in which investors commit to paying for improved social outcomes that save the city money. Only about 25 such projects have been implemented in the US.

Launched in 2016, the Denver Supportive Housing SIB aims to support residents struggling with homelessness, substance use, and mental health problems by increasing the number of people getting and staying housed and reducing the number of days they spend in jail. The permanent supportive housing model combines a permanent housing subsidy with wraparound services, such as mental health counseling, to help people improve their stability. In Denver, MHCD and the Colorado Coalition for the Homeless (CCH) were selected to offer these services as part of the SIB.

The program requires payments to investors only if the SIB meets its goals. Denver hopes to save money by shifting away from the common approach of applying short-term band-aid fixes to social problems, instead pursuing a new model of implementing a long-term, evidence-based program that emphasizes outcomes.

Denver Mayor Michael Hancock supports the social impact bond's new approach to tackling pervasive problems in the city. He said local leaders should use their political will to advocate for outcomes-based programs and make the case that the results are worth the time and investment.

“I love when I presented it to mayors … to see their eyes light up like, ‘Why in the world didn't we think about that?’ Because every one of us across the country are dealing with similar issues.” Michael Hancock

“The program is different from most government programs for two main reasons: Private investors are taking on the risk, so if the program fails, the government isn’t paying. And the government is really paying for success as defined by outcomes, not process,” said Mary Cunningham, vice president for metropolitan housing and communities policy at the Urban Institute.

The Urban Institute is studying how the program is being implemented and evaluating the SIB’s progress to determine investor payments and to better understand the effectiveness of supportive housing programs. When the five-year project ends in 2021, the Denver SIB will be one of the largest, most robust evaluations of such programs in the country.

So far, the results are positive. As of July 2018, two and a half years into the SIB, 85 percent of the SIB’s 285 participants had remained in housing without ever exiting the program. During their first year in housing, 44 percent of participants did not return to jail. Though many people in the program still went to jail, the share is lower than what the literature says is typical for this population.

Eight private investors loaned Denver’s supportive housing program $8.6 million up front, which has largely paid for the services component of the SIB. They’ve received a total of $1,025,968 from the city based on the program’s outcomes so far.

When the project ends in 2021, the Denver SIB will be one of the largest, most robust evaluations of supportive housing programs in the country

As well as addressing Denver’s challenge of high rates of chronic homelessness, the SIB offers an example of how initiatives like pay for success (those that focus on outcomes, evidence, and cross-sector collaboration) can help cities solve some of their most complex problems.

Hancock is optimistic about this model’s ability to address similar problems in other places. “It was phenomenal that possibly using this tool in a way we've not seen before could create a model, but also be very effective in addressing the chronically homeless challenge,” he said. “I love when I presented it to mayors … to see their eyes light up like, ‘Why in the world didn't we think about that?’ Because every one of us across the country are dealing with similar issues.”