The Denver City Council on Monday approved a pair of contracts for a new, privately funded supportive housing program aimed at helping up to 250 of the city's most chronically homeless people.
It's the city's first "social impact bond," in which investors provide $8.6 million to help launch and run the program with the potential to profit if it performs well, or lose money if it doesn't.
The city will repay investors based on how many participants stay in the housing program and out of jail over the next five years, saving the city money on that and other law enforcement and health services.
The council voted 10-2 to approve the overall contract along with a separate $937,500, six-year evaluation contract with a team led by the Urban Institute. Council members Kevin Flynn and Rafael Espinoza voted no.
The program is intended to save money that's now spent on services used heavily by the homeless like jail and emergency room visits.
Flynn said he liked the idea but had concerns and questions, including how homelessness is addressed in his southwest Denver district. One of the new housing developments will be built in Mar Lee.
"I hope we do continue to push those envelopes, including with the administration and our homeless providers," responded Councilwoman Robin Kniech.
She voted yes Monday and said the new program was one of several needed to address the city's homelessness problem.
The council is set to discuss homelessness more broadly in a committee Wednesday.
Espinoza questioned the need for private financing because it could cost the city more than if the city contracted directly with providers.
"I would rather us, as a city, take on this responsibility wholeheartedly," he said, and Flynn echoed that desire.
The Colorado Coalition for the Homeless says nine apartments will be available immediately as homeless people are recruited to join the program, and another 25 will be added in the coming week. The bulk of the apartments will become available next year when 210 units are completed in new developments planned by the coalition and the other provider partner, the Mental Health Center of Denver.
Northern Trust Co., a Chicago-based bank with a local office, will provide $3 million for the program. The rest of the money will come mostly from philanthropic foundations and community investment funds, as The Denver Post reported Monday.
Repayment would be based on the Urban Institute's evaluation of program performance and cost savings. The investors could earn back as much as $11.4 million — or as little as $2.6 million, if the program falls far short of its goals.
Denver city officials say the deal is the ninth in the nation to use the social impact bond model, which also has been used in Europe.
"Through this innovative social impact bond program, Denver is serving our most vulnerable population smarter and more effectively by getting these individuals out of a cycle of jail and hospital visits and into permanent supportive housing with wraparound services," Mayor Michael Hancock said in a statement issued after the vote. "We're addressing a critical need to expand affordable housing options and mental health services with this new program."