09/25/2012 12:45 pm ET Updated Nov 24, 2012

Is Betting on Ending Homelessness a Good Investment?

Policymakers are changing the business of addressing social problems in America.

America's poverty-reduction efforts used to be an initiative called a "War on Poverty" back in the 1960s, where large government programs, like Jobs Corp and Head Start, were entitlement tools used to battle hunger, unemployment, and homelessness. Conservative cynics said this was just a desperate attempt to throw money at a problem in hopes it would go away.

In the 1990s, it was the "thousand points of lights" campaign where the federal government relied on community-based organizations. But liberal critics blasted the lack of financial backing from the government as just paying lipservice.

The end result of political bantering over how to address poverty has resulted in 30 years of out-of-control homelessness in this country. Many people, today, are throwing their hands in the air and hoping some new approach to America's version of extreme poverty will be introduced.

We saw outdoor feeding programs, food banks, and shelters become the natural response to homelessness in the 1980s, and these approaches still persist today. But a 30-year-old solution is not the answer to today's problems.

We've seen the federal government try to weave community services together into an integrated "continuum of care." But without enough permanent housing for people on the streets, the continuum dead-ends at transitional housing. You can't transition out of temporary housing if there is no permanent place to go.

The most recent approach is what experts call "Housing First," a model where people are placed in permanent housing first and then surrounded by support services after they are housed. But this approach is only successful if there is enough capital to provide housing, and enough long-term revenue to continue services for years.

So, creative policymakers have found a new, long-term way to fund today's creative approaches to addressing extreme poverty.

In England, they are called Social Impact Bonds. Here in the states, they would be called Pay For Success Bonds.

The simple explanation is that the federal government would issue "social bonds" that private investors could purchase. The money would be invested in social programs that show a cost savings to society. If programs meet their goals, investors get a return on their investment.

In England, they are issuing these bonds to address street homelessness, which they call "rough sleeping." Their specific outcomes are:

  • Reduce the proportion of regular rough sleepers returning to London's streets,
  • Reduce admissions to hospital Accident and Emergency Units, and
  • Increase the number of rough sleepers moved into settled accommodation and employment.

Accomplishing such outcomes here in America would certainly be a worthwhile investment. Perhaps buying Apple stock would be a better financial investment, but putting money towards ending street homelessness is undoubtedly a better social investment.

I guess it's time to call my stock broker.