Leveraging the Power of Place
The following post is related to Leveraging the Power of Place: Using Pay for Success to Support Housing Mobility, a new working paper published through the Federal Reserve Bank of San Francisco. Read the paper here.
Recent research on “neighborhood effects” and events in Baltimore and beyond have brought national attention to the plight of families living in poor, segregated neighborhoods—and also to the promise of leveraging the power of places to measurably improve their lives. It has become clear that confronting place-based disadvantage is a linchpin for reducing inequality and improving social outcomes for the least advantaged Americans—not to mention saving taxpayers a lot of money.
Thanks to a major Supreme Court ruling on the Fair Housing Act and federal action to support desegregation efforts, there is now hopeful momentum around increasing low-income families’ access to healthier and better-resourced neighborhoods. Although there is no prescribed path to putting this idea into practice, a few strategies have emerged.
One effective approach is housing mobility, which helps families living in concentrated poverty use tenant-based housing vouchers to relocate to healthier and better-resourced neighborhoods. Rigorous research—mostly from the Department of Housing and Urban Development’s Moving to Opportunity (MTO) experiment—has shown that housing mobility increases long-term earnings for children, boosts educational attainment, and improves health.
Despite growing support for housing mobility in concept, the strategy faces significant barriers to replication and scaling, including scarcity of funds. It is also a classic example of the “wrong pocket problem,” where investment in one area—housing-based services—generates impact in other domains, such as government health care spending and income tax revenue.
I teamed up with researchers at the Johns Hopkins School of Medicine, the Urban Institute, and the Poverty & Race Research Action Council to explore how Pay for Success (PFS) financing—a tool that leverages private capital to fund upstream social programs that generate impact over time, and which shifts the financial risk of program innovation away from government agencies—could help overcome these barriers and support housing mobility programs while generating new evidence on their social and fiscal impacts.
The result of our effort is Leveraging the Power of Place: Using Pay for Success to Support Housing Mobility, a working paper published through the Federal Reserve Bank of San Francisco. Using evidence from MTO and data from a contemporary mobility program in Baltimore, we develop a hypothetical PFS scenario to compare program costs and social benefits of over time. We conclude that it is possible that housing mobility could pay for itself, along with other costs associated with PFS financing, based on medical cost savings from adult metabolic health improvements alone.
Launching housing mobility PFS initiatives will require leadership, coordination, and willingness to learn on the part of many stakeholders—most of all from potential end payers. However, such an effort could spur fruitful partnerships across sectors and levels of government, while facilitating a housing intervention whose regional scale is critical for addressing neighborhood inequality and segregation but extremely rare in practice. We hope this paper helps potential early adopters decide whether and how a housing mobility PFS initiative could be implemented in their regions.
By Dan Rinzler, Manager of Special Projects and Initiatives at the Low Income Investment Fund