Charitable donations and private-sector investment would be used to ease chronic homelessness in Massachusetts, under a plan Gov. Deval Patrick has unveiled.
The Pay for Success initiative, announced Monday, aims to create 500 units of stable housing for up to 800 chronically homeless people over the next six years, Patrick's office said.
"It is critical that we reduce the reliance on emergency services and provide individuals safe and stable housing that will help strengthen our communities and last for generations to come," Patrick said in a statement announcing the program.
Administration officials say the program will leverage $1 million in philanthropic funding and $2.5 million in private capital from Santander Bank, the Corporation for Supportive Housing and United Way of Massachusetts Bay and Merrimack Valley.
Under Pay for Success contracts, also known as social impact bonds, investors provide upfront funding and are repaid only if an outside evaluator finds the program has achieved a goal that benefits society and saves taxpayer dollars.
The maximum return on investment would be 5.33 percent.
"Pay for Success contracts are a smart way for government to raise resources to invest in innovative approaches to solving chronic social problems," Glen Shor, state administration and finance secretary, said in a statement. "We only pay for programs that work, helping us improve the well-being of those served while saving the Commonwealth money."
Massachusetts has approximately 1,500 chronically homeless individuals, Patrick's office said.
State law allows Massachusetts to authorize up to $50 million for social bonding. The first was a $27 million juvenile justice program announced in January that aims to reduce the rate of incarceration among young men.
With reporting by The Associated Press and the WBUR Newsroom