Could Pay for Success Increase Housing Mobility? Some Funders Want to Find Out

Low-income families continue to face high hurdles when it comes to housing. Areas of concentrated poverty have surged in recent years, and families can't easily transition out of tough neighborhoods into better ones. But one group of thinkers wants to get Pay for Success working on housing mobility in a big way.

The idea here is that housing mobilitya rigorously tested and proven method for improving long-term earnings and health outcomes for childrencould be enhanced for low-income families and tracked for its effectiveness, and if benchmarks for improvements are met, investors would be paid back with interest.

It all sounds too good to be true, and sometimes, it appears, Pay for Success models don't reach the goal of paying for success, but rather end up providing object lessons of efforts that don't work. This is the case with the recent Pay for Success program at Riker's Island in New York, which did not achieve the stated goal of reducing recidivism for teenagers caught up in the juvenile justice system.

One of the lead organizations behind a working paper to get funders thinking about Pay for Success and housing mobility is the San Francisco-based Low Income Investment Fund (LIIF). Manager of Special Projects and Initiatives Dan Rinzler is one of the authors of a working paper called "Leveraging the Power of Place: Using Pay for Success to Support Housing Mobility." Other collaborators on this working paper include Philip Tegeler of the Poverty & Race Research Action Council, Mary Cunningham of the Urban Institute, and Craig Pollack of Johns Hopkins School of Medicine.

The Low Income Investment Fund is a community development financial institution that "provides innovative capital solutions that support healthy families and communities." In its housing work, LIIF has supported affordable housing developments in California, Massachusetts, New York, Texas, Washington State, and Washington, DC. 

Rinzler and his co-authors base their idea on models for increasing housing mobility that emerged in the 1970s, and particularly on HUD's Moving to Opportunity (MTO) for Fair Housing experiment that began in the 1990s and ran for a decade. The results of this experiment were dramatic—families with access to both housing vouchers and housing mobility services fared much better in several important ways.

First, children of families who moved when the kids were still young (by age 13) had much higher college attendance rates and earnings than the control group, lived in better neighborhoods, and were less likely to be single parents. The younger children were when they moved, the larger their gains were across each of these outcomes. As the study details:

Incomes are estimated to increase by $300,000 over the lifetime of those who moved at age eight, which would generate enough federal tax revenue to offset MTO’s program costs for their families.

Housing mobility can also act as a “vaccine” for the negative physical and mental health effects of living in high-poverty neighborhoods. By the end of the MTO study period, for example, prevalence of diabetes and extreme obesity among adult women who moved to low-poverty neighborhoods was 40 percent lower than the control group, and rates of major depression had also dropped.

This is all a very big deal. Housing mobility is clearly a case in which an ounce of prevention is worth a pound of cure.

But why use Pay for Success as the mechanism to get housing mobility off the ground? Several good reasons. First, the need is great right now for help with our segregated communities. Federal housing has continually lost resources. A recent example: an estimated 85,000 housing vouchers lost during the 2014 sequestration. Now is the time to act at the ground level to support family housing mobility.

Second, housing mobility could help to correctly align incentives in the economy—investing in housing mobility could generate cost savings in health care, and create income tax revenue for the government. With the way inequality and segregation are trending now, the cost burden for society from these problems will only increase, and more potential tax revenue will be lost due to lack of wages earned.

Incentives in the health care delivery system are realigning to support long-term investment in the social determinants of health. A Pay for Success trial on housing mobility could demonstrate to health care payers and providers that housing mobility is a worthy investment. Thus, the model has the potential to serve a dual purpose of expanding options for low-income families in the short term, while also building the case for future support by validating and building on housing mobility's existing evidence base. In essence, a Pay for Success trial on housing mobility could catalyze a focus change in social sector impact investing. This could yield big results for funders working on both health and social equity.