Housing First – the Aspire Social Impact Bond


Housing First – the Aspire Social Impact Bond

South Australia’s Aspire social impact bond targeting homelessness has reached its halfway point and has demonstrated that a well-designed program can achieve real social outcomes as well as generating a competitive financial return.
13th September, 2021

The Aspire Social Impact Bond was launched in 2017 as Australia’s first social impact bond (SIB) focussed on homelessness.

It has reached the halfway point in its 7¾ year term and all the signs are that it is well-achieving its objectives.

Like all SIBs it is a quintessential example of impact investing.  It offers investors the opportunity to generate a competitive financial return while making a lasting difference to the lives of people – in this case people experiencing homelessness in Adelaide, South Australia.

Housing First

The Aspire Program is designed to provide support over a 4 year period to about 600 adults who are experiencing homelessness.  Each individual is offered support for up to 3 years.

The program is based on the “housing first” model.  The premise of this model is that stable housing is central to all support that is provided to individuals with complex care needs.  It is based on evidence that a homeless person’s mental health and/or addiction can only be successfully dealt with after their housing has been stabilised.  There are no behavioural or treatment prerequisites that must be met before an individual is provided with suitable and appropriate accommodation.

The Aspire Program focuses on strengthening community engagement and employment participation.  Participants are provided with stable accommodation, job readiness training, pathways to employment and life skills development.  They also have the long-term support of a “Navigator” to help them connection with wider support services and to identify and achieve their aspirations.

Social impact bonds

Social impact bonds, sometimes called social benefit bonds, have been used by State Governments across Australia over the last 10 years to design and deliver new service programs targeting complex and difficult social challenges.

They are driven by the recognition that social challenges have a financial cost to government that can be measured.  Programs that are well targeted to improve social outcomes can generate savings for government which it can share with the service provider.  Investors can then fund the service provider’s program on the basis that they will receive a financial return out of the payments made by government to the service provider.

Aspire Program

In the case of the Aspire Program those savings are generated by reducing the participants’ use of health, justice and homelessness services.  They are measured by factors such as:

    • reduction in the number of days spent by a participant as an admitted hospital patient
    • reduction in the number of a participant’s criminal convictions – which has flow-on savings for police, courts, legal aid, victim support and prison services
    • reduction in the number of short term/emergency accommodation support periods required by a participant

If the Aspire Program delivers its target outcomes, overall investor returns are expected to be about 8.5%pa – not bad in the current market.  If the program outperforms, returns would be approximately 13% per annum.  Conversely, the worst-case scenario would lead to early termination after 5 years and investors could lose up to 50% of their initial investment – that risk now seems vanishingly small.

The Legal Angle

The Aspire SIB adopts a legal structure that was first developed in Australia for the NSW Newpin SIB, itself based on learnings from the UK SIB market.

The key legal vehicle is a new trust – the Aspire SIB Trust – the trustee of which:

  • issues loan notes (ie the “bonds”) to the investors as the mechanism through which they make their investment,
  • contracts with the South Australian Government in the SIB Program Deed to provide the Aspire Program in return for the payments the Government promises to make to the extent that the agreed outcomes are achieved
  • contracts with the lead service provider – in this case, Hutt St Centre – in the Services Agreement to provide the program services
  • contracts with the manager of the trust – in this case, Social Ventures Australia – in the Management Deed to provide fund and investment management services.

While the structure and template documents are now well known, there is quite a substantial legal task in setting up a SIB.

As used to date in Australia it is a form of government procurement so the usual tender and probity processes apply.

In addition, the outcome measures and the measurement metrics are developed with laser-like precision.  They are tested against a counterfactual – what would have been the cost to government attributable to the target group of individuals if the program was not introduced – which itself requires detailed data and analysis to develop.

This means that there is a lot of bespoke work involved in developing the outcome measures and measurement metrics to be reflected in the documents, along with the related risk allocations.  Australia’s tax, securities and financial services laws and regulations also need to be taken into account.

Where to next?

The Aspire SIB has another 3 or so years to run.  What will happen when it finishes?

The social challenge will still be there.  The 2016 census reported 116,000 homeless across Australia.  The number of homeless is expected to have increased since then.

There is always an issue with successful SIBs as to whether Governments will continue their commitment to address the challenge, and more, whether the success of the SIB can be scaled up.

Perhaps the South Australian government will follow the lead of the NSW Government which has continued to fund the Newpin Program through a new payment-by-results contract after the Newpin Social Benefit Bond matured in 2020.