How social impact investments can help end chronic homelessness

In a Victorian first, Sacred Heart Mission and the Victorian Government recently launched the state’s first Social Impact Investment, an innovative financing structure that supports positive social change.

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Since Sacred Heart Mission first opened its doors in 1982 in the Melbourne suburb of St Kilda, it has worked to provide homeless people with access to a wide range of services that address the underlying causes of long-term homelessness and disadvantage. Over the past decade, Sacred Heart Mission has developed a housing-first approach to addressing chronic homelessness — the Journey to Social Inclusion program. This program, known as the “J2SI program”, works with homeless people who have suffered significant trauma in their lives.

Journey to Social Inclusion is one of the most effective programs to end chronic homelessness in Australia and is an innovative departure from the traditional crisis-oriented approach. It takes a housing-first and relationship-based approach, provides rapid housing pathways, three years of intensive support that wraps services around the person and has a trauma-informed lens to the service delivery.

The program works from the premise that if people can sustain their housing, they have a solid foundation to improving other areas in their lives. This includes support to get and stay in housing, improving mental health and wellbeing, resolving drug and alcohol issues, building skills, and increasing connection with community and contributing to society.

Escaping the cycle of chronic homelessness

Sacred Heart knew the J2SI program was a model that worked. Over the past 10 years, they have been developing, piloting, modifying, evaluating and scaling the program. This has been achieved through extensive research on the causes and consequences of homelessness in Australia, and continuous improvement to learn and test intervention approaches that enable people to escape the cycle of chronic homelessness. It was now time to scale the model and take it nationally.

Sacred Heart started working with the Victorian Government’s Social Impact Bonds Pilot to expand the program and scale up. Social impact investments are an innovative way to reduce deep-seated disadvantage in communities and relieve pressure on social services and represent a more efficient funding model.

For government, collaborating in partnerships with different stakeholders such as the social services sector, private investors and philanthropists, provides alternative ways to address systemic and complex social issues in our communities.

Social Impact Investment

NAB has a long history with Sacred Heart – both as a customer and our people have volunteered their dining hall, op shops and other skilled volunteering projects since they opened. We also believe that everyone has a right to safe, affordable and adequate housing.

James Waddell, Director, Corporate Finance at NAB, said the bank has been working with Sacred Heart since 2016 about how to structure the transaction.

“We understood that the work they had been doing in this space paved the way for a social impact investment – this  is a proven model that has been successfully trialled since 2009 and has delivered great outcomes for participants from a social perspective while simultaneously reducing the cost to government of service delivery to the treated cohort. They had the clear evidence and data to demonstrate effectiveness in their approach.”

NAB advised and acted as arranger for the financial aspects of the transaction. The social impact transaction with the Victorian Government contracts Sacred Heart to deliver the J2SI program and means they can expand the program to reach 180 people across Melbourne.

New financing model

Importantly, it also enables the J2SI program model to be scaled and replicated under licence by social service organisations and state governments across Australia. Sacred Heart will assist with the replication of the project and funding model, and work to continuously improve service delivery.

What is new about this Social Impact Investment is the structure of the transaction – it is an innovative financing mechanism to pay a return based on agreed achievement of social outcomes in the community such as people staying housed and a lower use of healthcare services.  It brought together various stakeholders from the government, the Catholic Development Fund of the Archdiocese of Melbourne to provide the funding, and philanthropists (including the NAB Foundation) to provide loan guarantees to enable the funding of the program.

“As a corporate foundation aligned with one of Australia’s major banks, we believe we have a responsibility to engage in financial innovation to help address complex societal challenges,” said Lucy Doyle, Manager of the NAB Foundation.

“Impact investing has the potential to unlock philanthropic capital, giving us an opportunity to move beyond traditional grant making to support the scaling and sustainability of proven impactful projects like J2SI.”

The government and the churches are ultimately interested in the same thing — achieving outcomes for those in need and achieving positive social change.  The program will be measured in terms of both social outcomes for participants and savings to taxpayers, demonstrating the social impact of this intervention.