Mack Donohue, who has been homeless since 2008, carries his belongings into a shelter in Boston, Massachusetts February 27, 2015.
Brian Snyder/Reuters

One nonprofit wants to reward results, and change the funding model in the process.

Muzzy Rosenblatt takes issue with the conventional way of sheltering the homeless. As the executive director of the Bowery Residents Committee (BRC), a provider of shelter and services to New York City’s homeless population, he wants to go beyond just putting up beds. Instead, he proposes a whole new consideration of how shelters are both run and funded.

In a new volume entitled What Matters: Investing in Results to Build Strong, Vibrant Communities, from the Nonprofit Finance Fund (NFF) and the Federal Reserve Bank of San Francisco (FRBSF), Rosenblatt authors a chapter that charts out a blueprint for change. His suggestion: a shift toward a results-based funding model. Rosenblatt plans to apply this vision for the social sector to the BRC’s latest project—an amalgamation of a housing development and a shelter. CityLab spoke with Rosenblatt about the in-progress venture, slated to open in the Bronx in 2018, and about how shelters can maximize their funds and their reach.

How could shelters help more people?

An overarching challenge is to do with expectations—those that funders have, that communities have, and that our users have—of what a shelter is. When you think of a disaster, say like a flood or an earthquake, the expectation to mitigate the aftermath is [along] the lines of temporary assistance, and not necessarily transformation. Similarly, there is a notion to look at shelters and homelessness as a crisis that requires an emergency response. After decades of work and research, we know that it is much more of a public health challenge and a need that demands a more transformative and strategic response than the ones we currently see.

In general, policy makers or funders look to purchase quantity and capacity—places for people to stay—more than they look at investing in services that lead to positive outcomes and results for those who use the shelters. Do we want to have a place or do we want to have an impact? Of course, you need the place and the beds, but the bigger question (and challenge) is how to provide [people] with a shelter to change their lives.

You propose rethinking the way shelters are funded and run. What are the pitfalls with the current model?

The way the current funding model prioritizes capacity. For example, let’s say shelter A has a hundred beds for hundred people who stay for 12 months. Shelter B, on the other hand, serves 200 people with the same hundred beds, because its clients stay for an average of six months. Even though shelter B is serving twice as many people in a year’s time, both shelters get paid the same amount for their work. So these two shelters are going to be funded similarly, if not identically, on the basic costs of inputs—the number of beds filled, the number of meals prepared, or linens used.

It doesn’t account for or distinguish between the impact of results: how many people may use these beds and then go on to actually improve their lives. This is what I would call a positive outcome—something that the current funding model does not necessarily incentivize.

You bring this up in the chapter, as well—the idea of pay-for-success financing. What is the risk with focusing only on results?

The danger here is that the success is determined both by internal variables—like the quality of the shelter provider—and external factors that we have no control over, like the job market. If I were running a shelter in 2009, I would have seen a huge drop in the number of people finding employment due to the recession. And this would impact the number of homeless clients returning back to the shelter, even if we were prioritizing positive outcomes as the long-term goal.

What counts as a successful outcome? What variables would you measure?

The most important measure comes down to how many people left the shelter to a better outcome—housing, for example. Relatively speaking, we want to make sure we’re moving clients out at the highest possible rate with the lowest rates of recidivism. There needs to be data on what happens after—are they still housed six months later? What about a year later? The data should point towards stability—that’s the best outcome possible.

Shifting the focus toward making sure that shelters service their clients with more than just beds is a start. Hypothetically, by putting the dollars behind results, poor-performing shelters will either have to step up their services or face elimination.

Where do shelters tend to get most of their funding?

This varies based on the region. In New York, and I can only speak to this region since this is where BRC operates, it comes from the public sector. BRC, for instance, gets most of its funding from the city and state, with a small amount of philanthropic dollars.

I’m saying that there needs to be a major shift in how government funding of homelessness and shelters is determined.

The BRC’s latest project in the Bronx is an interesting mix of a housing development and a homeless shelter. What makes it different from conventional shelters?

We are going to build our own facility. It’s the first time in nearly 30 years that a new shelter has been built in New York City. It’s being built to the function, as opposed to trying to fit the function in a building.

Often, shelters are put in buildings that weren’t originally designed for them. They’re likely old hotels or hospitals. In New York, you’ll see old armories that were used by the military in the early 20th century. Many shelters housed in hotels, for example, only provide accommodation and some shower facilities. It’s not often that they would house a kitchen, even.

Think of going to college and they give you a dormitory but they don't give you a classroom to study in. They don't give you faculty to teach you. They don't give you a dining hall to sit and socialize with your peers over a meal. Maybe they give you a voucher to go get the food someplace, but there's no socialization. We wanted this shelter to reflect a transformative space. There will be communal spaces where people can socialize, classrooms where they can learn together, as well as having a place to sleep and a place to shower.

This project is unusual because we’ve wiped out the private landlord. This changes the whole dynamic. When a shelter pays rent to a private landlord, there’s a profit collected by the landlord—that’s the usual business model. What we’re doing here is paying ourselves the same rent we would pay a private landlord to cover all our costs: Instead of having a profit, we have surplus income that we reinvest in the shelter’s mission.

The surplus money is going toward building a low-income housing project within the same building. The first two floors will be the shelter, which, according to our estimates, will leave us with a $400,000 surplus. This money will now be used as a subsidy for affordable housing upstairs—around 135 apartments with rent under $500 a month.

Can this approach, be it results-oriented funding or BRC’s new project, co-exist within existing programs?

In the short run, it can co-exist. But in the long run, my hope would be that the emphasis on value is so evident that it will demonstrate just how inefficient and costly the conventional model is. And so in that sense, it won’t co-exist with the alternative because it will make the other model so obviously superfluous.

CORRECTION: This story has been updated to correct the name of the Nonprofit Finance Fund (NFF).

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