At the cutting edge of new social innovation financing are social impact bonds (SIBs), a potentially transformative idea. The deals transfer risk from the government to the private sector and generate new capital to invest in evidence-based interventions that would otherwise go unfunded.
State, county and municipal governments are mainly in the business of buying services for their constituents, paying providers to tackle a broad spectrum of social problems. But these governments face significant barriers to reducing costs and delivering high-quality services.
SIBs are currently being used to invest in people, not places. But, for cities looking to innovate, SIBs may provide a promising model for funding reclamation of blighted areas cities inherit or want to develop.