How Denver Is Breaking the Homelessness-Jail Cycle

Maria* is finally starting to feel at home. After living on the streets for eight years and a brief stint in a halfway house, she now has a permanent home in the Sanderson Apartments in south Denver. With her brother’s help, she’s starting to decorate her one-bedroom apartment with personal touches: a gold lamp with a pink bow hugging the shade, a white Christmas tree that hangs from the ceiling, an open Bible resting on a stool.

“I love my life, and I love myself, and I love my family,” she said, beaming. “And I found myself, found out who I am, where I belong.”

Finding this stability wasn’t easy.

Maria became addicted to crack cocaine while living on the streets. Over a year ago, she decided she was ready to address her addiction, and she reconnected with her older brother and younger sister. A few months later, Maria found out she was on a list to receive help through the Denver Supportive Housing Social Impact Bond (SIB). Mental Health Center of Denver (MHCD) staff found her living on the streets and offered her stable housing through 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 United States.

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.

“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.

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.”

Understanding the Problem and Finding the Right Solution

Malcolm* knows where he wants to go next: Egypt, England, Peru, Brazil, maybe the west coast of Africa. “I would like to see if I can combine traveling and employment. I would like to be a tour guide, that’s what I would really like to do.” In his ideal scenario, he’d keep his current apartment at Sanderson as a home base and explore his interests of history and archaeology across the globe.

Malcolm has challenges to overcome before he achieves that goal, but he’s already made progress. After he left his home because of a divorce and struggled to find a secure job, Malcolm lived on the streets in downtown Denver for four years. Then MHCD found him at a day shelter and helped him move into supportive housing through the SIB program in September 2017.

Malcolm experienced severe hip pain while living on the streets. After moving into Sanderson, he worked with his case manager to arrange hip replacement surgery with the local hospital. Six months later, he finished rehab and started working as a janitor for other MHCD buildings.

“On so many different levels this has changed me, how I see things, how I see life, how I see the future,” he said. “Stability is a thing that most people who are stable take for granted. When you’re homeless, you’re totally in survival mode—where do I eat, where do I sleep, am I safe. When you’re stable, those things matter, but not as urgent and not as overwhelming. People who are stable don’t really understand the mechanics of being homeless.”

The road from first proposing the SIB to finally moving people into housing was long and arduous, but the planning process was key to the program’s success. It started with identifying the right target population: people like Malcolm who were chronically homeless and cycling in and out of jail but who weren’t being reached by other services that could help address their physical or mental health.

Regina “Regi” Huerter was instrumental to that first step. In 2012, she was executive director of Denver’s Office of Behavioral Health Strategies and oversaw the Crime Prevention and Control Commission (DCPCC), which sought to find ways to reduce jail overcrowding. Huerter asked the Denver County Court for five years of court data to understand who most frequently interacted with the criminal justice system in Denver. She expected to find data mostly on people with several traffic violations. Instead, the data revealed that most people involved with the criminal justice system were older men experiencing homelessness.

Their crimes were largely “homeless crimes,” such as public intoxication, trespassing, or urinating in public, which they likely wouldn’t commit if they had housing. Although these crimes would typically only lead to a ticket, they led to jail stays for people who failed to appear in court, which is common among people experiencing homelessness.

She then started connecting with staff in local hospitals, detox centers, and shelters to find out if they often saw the same people who were at the top of the arrest list. They all said yes. But none of them were tracking these people after they left.

“I was like, ‘I don't think anyone is really paying attention to this population. Everyone is providing services to them, but I don't think anybody is really taking responsibility for what these people need,’” she said.

Huerter also asked these local service providers to assign a cost to each visit. In total, DCPCC calculated that providing safety net services to the top 250 high-utilizers (people who were chronically homeless and who frequently interacted with the criminal justice system) cost the city approximately $7 million a year.

They had detected a clear problem, and they needed the right solution. That’s where the SIB came in.

Around the same time that Huerter compiled this list of people (which came to be known as “Regi’s list”), the buzz around SIBs was growing.

Tyler Jaeckel, a former program director with the Harvard Kennedy School’s Government Performance Lab, came to Denver in 2013 to explore how the city and state could use outcomes-based financing tools to address some of their complex problems. Jaeckel helped the city put out a request for information, and people in the community submitted their proposals for using a pay for success contract to solve certain challenges. ­­

After receiving dozens of responses, the city decided, with the help of DCPCC’s data, that chronic homelessness fit best with the city’s priorities and with the outcomes-based funding model.

“I like the fact that we like to try innovative approaches to things, and being open to that innovation, being open to be doing something creatively or approaching a challenge creatively, has led us to this place where we're doing something no one else has tried before,” Hancock said.

City officials needed to find investors to make the project feasible. They knew supportive housing could make a positive impact, but no single agency had enough money to fund such a large-scale program up front. Collaborating with private investors allowed the city to launch the initiative without committing millions in public funds. The SIB also allowed investors to make a measurable impact on people’s lives and see a potential return on their investment, depending on the program’s success.

The city partnered with Social Impact Solutions, a local firm working on SIBs, to attract eight investors comprising a combination of local and national organizations: the Denver Foundation, the Piton Foundation, the Ben and Lucy Ana Walton Fund of the Walton Family Foundation, Laura and John Arnold Foundation, Living Cities Blended Catalyst Fund LLC, Nonprofit Finance Fund, the Colorado Health Foundation, and the Northern Trust Company.

The Urban Institute was brought in as the evaluator and, working with partners, designed a randomized controlled trial to analyze the results by measuring participants’ housing stability and their days spent in jail compared with people who receive services as usual in the community. Urban had been involved in the SIB years before it launched, serving as a thought partner along with the city and other stakeholders to figure out the best ways to determine eligibility and implement the program. Urban has continued to work as a real-time, daily partner after the SIB’s launch.

Denver partnered with the Corporation for Supportive Housing and Enterprise Community Partners to manage funding to service providers and oversee the program’s day-to-day implementation. Then CCH and MHCD—two local service providers experienced with treating the target population—came on board to deliver program services.

Katie Bonamasso, the senior project manager at the Corporation for Supportive Housing who works on behalf of the project intermediary, said the SIB acted as a large-scale proof of concept for what evidence shows is a successful approach to ending chronic homelessness. “There’s 30 years of evidence behind this intervention.” she said. “Supportive housing changes lives.”

Managing so many stakeholders was challenging for the SIB in the program’s early days because each team member came to the table with a different background and expertise in this type of work. But the common goals among all the stakeholders drove them to seek solutions that would benefit the entire project. Regular phone calls with all SIB stakeholders allowed them to collectively find solutions to challenges. “Having that collaborative structure allowed everyone to come to the table and say, ‘How can we fix this?’” Jaeckel said.

Justin Milner, director of the Urban Institute’s Pay for Success Initiative, added, “One of the most compelling aspects of pay for success is that it acts as a forcing mechanism to bring different groups together and focus on a single set of services and outcomes to improve people’s lives.”

After finishing the complex process of setting up the project model, the SIB was faced with new challenges as it turned to its main goal: helping people get housed.

Taking the Program from Concept to Reality

Robert* lived on the streets of Denver for nearly 30 years after moving from Chicago in 1989, soon after his father’s death exacerbated his mental health challenges. “My address was 1800 USA. I didn’t care where I was. My ceiling was the atmosphere, or the stratosphere,” he said.

But when CCH offered Robert an apartment under the SIB program, he finally had stable housing for the first time in decades. After moving into CCH’s Renaissance Downtown Lofts in early 2018, Robert started looking to the future with optimism. “Your peace of mind, the stability of keeping your right frame of mind is upgraded ten hundredfold,” he said. “I speak with confidence in myself. I’m glowing. I feel enrichment. And that’s a good way to feel.”

Robert values the security he feels in his apartment after lacking that sense during the years he lived on the streets. And with a stable home, he has been able to take care of other aspects of his life, including his mental and physical health. “I’ve kicked the devils probably trying to reach me through my sleep through these walls,” he said. “I’m not breaking apart.”

Robert was recently approved to start receiving Social Security Disability Insurance benefits for his debilitating hip pain after years of manual labor. He knows exactly what he’ll do once he has more financial stability: “I’m on the first flight out of here to Chicago to see my mom.” It’s been more than 10 years since he has flown back home. “My family knows my issues that I have strived through and tried to handle. When they see me, they’re going to see a whole new me. They’ll be happy to see me, and I’ll be happy to see them.”

Robert was one of the first people CCH helped as part of the SIB after the program launched in January 2016.

People who had been arrested frequently over the last few years and who had been marked as transient (meaning they had no address or gave a shelter’s address) were considered eligible for the program. Once the SIB launched, the Denver Police Department referred eligible people to the Urban Institute within 24 hours after they had contact with law enforcement. This kind of data-sharing arrangement relied on the Denver Police Department committing time and resources to help the program succeed.

Because more people were eligible than could be served, Urban used a lottery to randomly assign people to the supportive housing program. The Denver Department of Public Health and Environment also played a critical role by providing Urban staff with data that allowed them to enroll participants in the SIB. The department then took the names chosen through the lottery and sent them to the service providers.

Staff from MHCD and CCH worked with local police, mental health co-responders, shelters, and peer specialists to find the people selected to participate. It wasn’t always an easy task: many potential participants moved around frequently and used nicknames. Others were skeptical of the outreach teams offering something that seemed too be good to be true, according to Lisa Bryant, a clinical case manager with MHCD.

“They thought it was a scam, they didn't think we were actually going help them,” she said. “They've had a lot of disappointments in the past, so they didn't believe what we were saying. That was kind of a challenge to get them to trust us.”

The project uses $2.7 million in Low-Income Housing Tax Credits ($27 million over 10 years) and over $3.2 million in gap financing provided by the city and state to fund the newly constructed SIB-designated buildings: MHCD’s 60-unit Sanderson Apartments and CCH’s 101-unit Renaissance Downtown Lofts, which opened in August 2017 and May 2018, respectively.

All the SIB housing units adopt a Housing First philosophy, meaning no requirements are placed on people moving in (such as maintaining sobriety or seeking substance use treatment). Participants are assigned a case manager who works with them to identify the best housing match. Once housed, the residents have access to a wide range of services, from mental health treatment to cooking classes.

Transitioning into housing can be challenging for the residents because most of them have lived on the streets for years, according to Kelly Eisentraut, resident services coordinator at Renaissance Downtown Lofts. “Some residents really seem to struggle with feeling closed in and adjusting to life indoors,” she said. “That was part of intentional design for this building that all of the apartments have really high ceilings because they're very small in square footage so not to feel boxed in. But it’s hard when you're coming from no walls to four walls.”

Another common challenge for new residents is the guilt they feel that they were selected for this housing program while their friends are still experiencing homelessness. Many residents also knew each other when they lived on the streets, and they sometimes bring conflicts that started there into the building. Eisentraut implemented a “good neighbor” program to incentivize positive relationships, and the building has a resident council that residents can use to voice their concerns and seek solutions.

Now that the SIB units are mostly full, service providers are focusing on strengthening relationships between case managers and residents and on helping the residents maintain their stability, according to Takisha Keesee, program manager of MHCD’s SIB team.

“A lot of the changes are small successes: The ability to connect with their family, the ability to finally have a space where you can keep your work boots so now you can go to work,” she said. “My focus is really keeping them engaged in services, and making that of quality. I think that's very important, because even after SIB, if they stay at Sanderson or if they don't, I really want this to have made an impact and impression on them.”

What’s next for the Denver social impact bond?

Despite moving in just five months ago, John* knows almost all his neighbors on the second floor of the Renaissance Downtown Lofts; for that matter, he knows most people in the entire building. His neighbors often knock on his door asking for something, and he’s always happy to help. “All the neighbors are very friendly. We all get along. If we need an egg or glass of milk, everybody’s cool,” he said. “It’s a friendly environment compared to what I was used to.”

When John moved into the building, which he said was like “moving into the Ritz Carlton” compared with his previous living situations, he had only a backpack, a sleeping bag, and a pillow. Since then, he’s furnished his home with the help of CCH, and he’s joined a community of neighbors that help keep him entertained and connected to others.

John and his wife split up soon after his medical discharge from the Navy in the late 1980s. After living in his own home for a few years, his alcohol addiction worsened and he lost his house. John then alternated between couch surfing in friends’ houses and living in mobile homes and on the streets. CCH staff found him while he was hanging out with a friend at a local library.

As a Denver native, John has lived all over the city’s suburbs, but he’s now able to live downtown for the first time. Although he hasn’t yet sought help to treat his alcoholism, John said his newfound housing stability has helped keep his drinking in check.

John isn’t sure what the future holds for him, but he knows this is where he should be right now. “I think this program is awesome. It’s totally helped me achieve a lot higher level than I thought I would. It helps me with my self-esteem and my daily habits and how I interact with others. And I think they should keep it up, cause it’s working.”

The SIB program will run through 2021. At that point, all outcome results will be reported, including housing stability and days spent in jail, and the city will make remaining payments to investors. The mayor showed his optimism in the program so far by committing $2.4 million within the city’s budget to expand the program from serving 250 people to 325, which the city council approved in July 2018. After the initial SIB program’s end in 2021, the city will decide how it wants to continue.

“As long as we see the kind of results that we're seeing, I think it justifies our further investment in the effort,” Mayor Hancock said.

Jaeckel expects investors to make a return on their investment by the end of the program, and he wants other cities to look to Denver as an example of using an innovative way to solve a common problem facing communities across the US.

All the project stakeholders noted that a pay for success contract might not be the best approach for every city and every problem. But its focus on outcomes, data, and collaboration is a valuable framework for solving complex challenges.

“Pay for success isn’t the end in and of itself,” said Sindhu Lakshmanan, a senior investment associate with Living Cities, one of the SIB investors. “It’s the means to the end of getting better outcomes for people. It’s taking these principles we’ve learned from pay for success and integrating them into all that we do so we see a broader systems change of paying for results and outcomes across the board.”

Cunningham added that the success of the Denver SIB demonstrates the importance of incorporating data into every step of the process, from assessing the problem to implementing the solution. “You don’t need a pay for success project to do that, but it certainly helps that in this case, the city and private investors are saying, ‘We need to see this data to see if we’re really paying for success.’ You could build in data to any of your social programs, and you should focus it on outcomes,” she said.

Huerter, who led the DCPCC, hopes the Denver SIB encourages public officials to find new ways to reach their most vulnerable populations.

“Shame on us for thinking that our current way of addressing the needs of people with such high needs is to simply keep putting a band-aid on and pushing them through the system,” she said. “I think that the future is, not just in Denver, but nationwide, to develop holistic solutions, to expect better service delivery evidenced through outcomes-based contracts and Housing First models, and to not just pass people through … but really say, ‘What is it we can do for you and with you, and how do we actually create some different outcomes?’’

* Program participants’ names were changed to protect their anonymity.

Editor's note: To hear audio of the people featured in this article, check out the original story at the Urban Institute website.