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A Holiday Municipal Bond Impact Story

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Sherman Family Art Trust

In this season of giving, it is a reminder that, by-and-large, Americans are a caring and generous people. Whether funding research to fight disease such as cancer or helping those in need because of natural disasters like fire or flooding, Americans consistently open their wallets. These are clear, universal, there-but-for-the-grace-of-God issues. They touch us at our heart. In fact in 2017, for the first time, contributions crossed the $400 billion mark for the first time.

A Long Way From Home

However, our reaction to the issue of homelessness is more complicated. Anyone who lives in a metropolitan area is likely to have some interaction with a homeless person. Encounters may be as benign as seeing someone on the streets or more directly by being aggressively panhandled for money. It’s nearly a daily event for many.

A swirl of emotions and thoughts run through us in the course of the few seconds we take this in. Initially the reaction is compassion. This is another human being, after all. Someone’s son or daughter or father or mother. In some ways, this person is a stark reminder of how fortunate we are to have the life and things we have.

Perhaps we feel a bit guilty about just walking by when we’re being panhandled. But if we say something, even saying “no,” then we may be engaged further, which means we have to disengage—making things even more awkward. Then emotion morphs into reason or at least doubt. If I give this person a dollar, what is it going to really be used for? Yes, they say they are hungry and just want money for food, but given the preponderance of drug addiction and mental illness among homeless people, is it really going for food? Maybe it’s for a drug fix—or a financial exchange for something worse.

Then a feeling of slight indignation creeps in. Why is it falling on me to give money? Aren’t there social welfare programs available? Isn’t it their job to do something to help these people? And why don’t homeless people seek help from these agencies?

And we walk by.  And every day we walk by, we become slightly more hardened and maybe even irritated that we have to deal with this every day. As we become desensitized, the homeless become dehumanized. Homeless people become the homeless problem. And it is not a pretty problem, like the faces of smiling children fighting cancer or the immediate sympathy we feel for fellow Americans who have lost their homes and photos and possessions due to a natural disaster.

We know something needs to be done about homelessness and, to some degree, we know something is being done, but the problem seems to not be getting any better regardless.

The difficulty in finding a solution to the homelessness problem is that the homeless are not the homogenized group the catch-all phrase “the homeless” tends to lead one to stereotype them as. The 2017 Department of Housing and Urban Development report to Congress broke down the demographics of the estimated total one-half million population of homeless persons in America.

Homelessness is defined as people living in “places not meant for human habitation.”  That’s an almost unbearably antiseptic way of saying people are living anywhere a modicum of shelter can be found—in tents, cars, parks, train or bus terminals, or just in doorways on the streets.

Statistics Can Be Cold, These Are Chilling
The majority are single with no family connection—nearly 365,000 persons, with chronic homelessness affecting nearly 20% of them. A shocking 185,000 are people with families of at least one adult and one child. If that’s not disturbing enough, of those, close to half are families with children under 18 years of age.

While an increase in housing costs for families living around the poverty line can be a homelessness factor, many people don’t realize that domestic violence is an equally major factor. More than 87,000 homeless persons are victims of domestic violence, many falling into the category of one-adult-one-child-family homelessness. Moreover, it is genuinely heartbreaking to see that over 40,000 homeless people are young, single, and under the age of 24, 10% of which are under 18.

The epidemiological schema of the homeless population is equally variegated. There is a high preponderance of severe mental and emotional illness as well as chronic substance abuse. There are persons with HIV/AIDS. There are homeless veterans, of which a large number are African-Americans. Moreover, these are not entirely independent categories; there can be considerable overlap.

The Economic Cost of Social Costs
All these demographic, health and welfare homelessness statistics become all too real to a community’s safety-net first responders: police, firemen, hospitals and social service agencies. Service cost time and money. The expenses can be in the millions of dollars.

The problem is particularly acute in California. Its homeless population was recently estimated at just above 134,000—the highest in the nation. The evidence-based research clearly shows that, for chronically homeless people with no family affiliation, the most effective policy solutions offers a comprehensive continuum of care integrating both housing and health care.

A Great and Powerful Program
That was in large part how California’s No Place Like Home Program came to be. The program’s name straight from the movies—this is California, after all—the policy intent was to develop permanent supportive housing for persons who are in need of mental health services and are experiencing homelessness, chronic homelessness, or who are at risk of chronic homelessness. Signed into law in 2016, the program is managed by the California Department of Housing and Community Development.

The Sudden Positive Impact Of Municipal Bonds
Legislation is one thing, funding is another and there is no better place to get multimillion-dollar funding for high impact public services than the municipal bond market. After all, municipal bonds are the original impact investment. To that end, Proposition 2 appeared on the November 2018 ballot in California, asking voters for their approval to issue up to $2 billion in municipal bonds to fund the initiative. The debt would be secured by a portion of funds from the 1% tax on incomes over $1 million, up to $140 million.

It passed by a margin of more than 3.25 million votes.

The first round of funding was posted, a $400 million allocation to California counties. Counties can apply on a competitive basis for funding to acquire, design, construct, rehabilitate or preserve “permanent supportive housing.” Another $190 million was posted as non-competitive funds, allocated by point-in-time counts and population.

Housing California, an advocacy organization working to end homelessness and create safe, affordable housing, estimates the No Place Like Home Program could bring around 20,000 supported housing units online across the state. Potentially, that’s roofs over as many as 30,000 homeless person’s heads.

The 50% Margin Solution
Two billion dollars is a lot money to direct at this problem. It comes to an eyebrow-raising $100,000 per unit and potentially only reduces the homeless population by around 20%—a positive impact for sure, but still limited. So naturally, the question arises—how effective is this really?

The policy’s potential effectiveness is answered by the recent experience of Los Angeles County, California. LA County has the second largest homeless population in the nation, an estimated 53,000 persons, only topped by New York. Providing safety-net services to this population was costing the county more than $35 million a year.

In response, the Los Angeles County Department of Health Services initiated the Housing for Health Program. Similar to what is expected for the statewide program, Housing for Health provides permanent supportive housing which, in coordination with other social service agencies, includes ongoing health and behavioral services. Following the nearly 900 program participants to measure this continuum-of-care program’s impact, a Rand study found 96% stayed in the program and visits to the ER dropped 70%, among other positive outcomes.

The most important outcome: 3,500 persons were moved off the streets and into permanent housing, improving those people’s lives and the overall quality of life in the community. A corollary effect--it freed up the resources of the police, fire department and hospitals to focus on other community needs.

These positive social outcomes translated into similarly positive economic outcomes. Expenses dropped an eye-popping $20 million—far exceeding the program’s $13.5 million budget. To put it in business terms, the program generated nearly a 50% margin.

That’s impact.

The leadership in California’s Department of Housing and Community Development feel the tremendous responsibility to have this program be successful. They are moving carefully and prudently to ensure the program’s positive outcomes are realized. There may be national implications; it is not lost that this could be a model for other cities and counties around the country trying to systematically address homelessness.

No one is saying the statewide program will have outcomes matching LA County’s experience. Each county’s homelessness issues and service costs vary and LA is an expensive place, irrespective of whether you’re homeless on Venice Beach or comfortably situated in the Hollywood Hills. But even if it parallels just half of the County’s experience, the savings could be in the tens-of-millions of dollars.

One thing is certain. As this program gets implemented, it'll be a Happy New Year indeed for many homeless persons and families in California in 2019.

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