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U.S. Department of Housing and Urban Development: Pay for Success Permanent Supportive Housing Demonstration Program

Deadline: February 12, 2016

The purpose of the Pay for Success (PFS) Demonstration is to strengthen communities’ ability to prevent and end homelessness and reduce avoidable incarceration by increasing the provision of Permanent Supportive Housing (PSH), a proven evidence-based practice. The PFS Demonstration is an opportunity to equip communities with a new financing mechanism for funding PSH projects that will prevent returns to homelessness and reduce recidivism among the reentry population. The PFS Demonstration is also a valuable opportunity to test ways of achieving greater cost-effectiveness in providing homeless assistance while expanding communities’ access to available funding for PSH.

The key stakeholders in a PFS-finance arrangement are typically a government entity (which pays for negotiated outcome targets once they are achieved and validated), service provider(s) (which carry out the evidence-based intervention), investor(s) (which provide the initial investment that pays for the provision of services), and independent evaluator(s) (which validate outcomes to trigger Success Payments). Typically, an intermediary manages the PFS-finance project entering into an agreement with the government entity to achieve specified outcomes, raise any capital needed from investors, and oversee service providers to ensure that the project achieves the specified outcomes. Because the government entity’s Success Payments are dependent on successful outcomes, the private investor(s) take on the risk that the project will be successful (as opposed to the government entity). For this reason, Success Payments include a modest return on investment. Ideally, the intervention will generate cost savings for the government entity, which will cover the initial investment as well as the positive return.

A High-Quality PFS-Finance Project includes the following components:

  • A well-defined problem and associated target population.
  • A preventative service delivery strategy that is managed, coordinated, and guided by the service provider and/or the intermediary and is flexible and adaptive to the target problem and population. In addition, the strategy has a robust, rigorous evidence base or a compelling theory of change with pre- and post-intervention outcomes suggesting at least a preliminary level of evidence, meaning that, at a minimum, the model has evidence based on a reasonable hypothesis and supported by credible research findings. Examples of research that meet the standards include: 1) outcome studies that track participants through a program and measure participants’ responses at the end of the program; and 2) third-party pre- and post-test research that determines whether participants have improved on an intended outcome. The PSH model using a Housing First approach is the strategy that will be employed for the PFS-finance project for this NOFA.
  • One or more well-defined, achievable potential outcome target(s) that are an improvement on the current condition anticipated for the target population and have been agreed to by all required project partners.
  • A plan for program evaluation using a randomized control trial, quasi-experimental evaluation, or other scientific methodology to be executed by an evaluator.
  • A binding commitment of funds from one or more independent investors to cover costs associated with delivering the intervention, including administrative and overhead costs of the intermediary, if needed.
  • A financial model that shows public sector cost savings or efficiency gains.
  • A commitment from an individual or entity to act as an outcomes payor, whereby its Success Payments may be directed to Investors if they have covered, in part or in whole, costs associated with delivering the intervention.
  • A PFS Contract and any associated necessary agreements that incorporate all elements above.

Grantees may be funded for one or more of the following activities:

  • Feasibility analysis
  • Transaction structuring
  • Outcome evaluation
  • Success payments

Amount: $8,679,000 is available for grants up to $1,300,000 each. Recommended thresholds by activity type are:

  • Feasibility analysis: Up to $250,000
  • Transaction structuring: Up to $600,000
  • Outcome evaluation: Up to $250,000
  • Success payments: Any amount up to the $1,300,000 maximum individual award amount

Eligibility: Public and State controlled institutions of higher education; nonprofits with or without a 501(c)(3) status; and private institutions of higher education. Grantees will act as an intermediary that is responsible for assessing the feasibility of a PFS project and/or structuring a PFS transaction and/or overseeing implementation of a PFS project. These activities may include partnership building, capital-raising activities, program design for the target population at the Demonstration Site, managing contracts with service providers, making Success Payments on behalf of the government entity or other payors, and managing third-party evaluators. Intermediaries may carry out all activities directly and/or subaward funds to subrecipients or procure the services of contractors to carry out PFS activities. Applicants should have knowledge and expertise in PFS models.

Eligible subrecipients are government entities or public or private nonprofit organizations, including educational institutions and area-wide planning organizations or tribally-designated nonprofits. For-profit entities are also eligible subrecipients for the purposes of Success Payments and Outcome Evaluation activities

The target population for the PFS Demonstration is a subset of the reentry population that consists of people experiencing homelessness who are high users of corrections facilities, homeless services, health care and other crisis services.

Link: http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/grants/fundsavail/nofa2015/pfspshdemo

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