I started to familiarize myself with the idea of value capture when I wrote about energy efficiency and land use, in particular Progressive tax financing. In my opinion, roaming is generally not just an economic issue. In fact, it is much more complex, with people struggling with mental health issues, addictions and a lack of help to recover from these issues and become independent. Generally speaking, a set of keys to a “unit” will not solve the underlying problems that lead to homelessness. But working on it is expensive. How could borrowing money and using it extensively in interventions that can improve outcomes be truly compassionate and effective?
What is value capture?
Value capture involves investing money borrowed today with the intention of managing the investment in such a way that it pays for itself with future savings or income. Imagine borrowing money to make an older home more energy efficient. These upgrades may not be affordable now, but if the homeowner borrows at a favorable rate, she can make the repairs now, save money over time, use those savings to pay off the loan, and the home will have more. great resale value. This way the owner can “capture” future value and use it today.
How is value capture used today?
Most, if not all, large-scale capital investments are made up of bonds, money borrowed from investors in the securities market looking for stable returns over time. Bonds backed by a dedicated source of income are the most attractive. A bond for a new bus line, for example, paid with a combination of dedicated fare revenue and sales tax is easy to sell.
Here is a very simple graph showing how value capture can work. As promising interventions are implemented and start to save money, debt is reduced and eventually more dollars become available for additional housing or other uses. Obviously, this is an oversimplification. Interventions like intensive case management for chronically homeless people can take longer, face challenges, or experience setbacks. But this approach encourages innovation; the more effective and efficient the intervention, the more the local jurisdiction derives from it financially.
How might Value Capture address chronic homelessness and related issues?
The local government would quantify the cost of homelessness in annual expenditure, propose interventions that are currently too expensive to implement today but promising, and then set targets to reduce this expenditure over time. The local government would borrow money from investors to implement the interventions and, if successful, repay the loans on the savings made. Once the debt is paid off, the local jurisdiction can reuse the savings.
Has this ever been done successfully?
So far, the results are mixed but some are promising. One group, Social Finance, claims to have backed $ 150 million in Social Impact Bonds, a popular name for value capture finance. There are also examples of programs in New York focused on youth incarceration reduction, Massachusetts on homelessness and harm reduction in Seattle.,,Each of these versions is different from Capturing Value to Solve Chronic Health and Social Problems, but has shown promise.
The benefits of this approach are to fund ideas that might be cutting edge or current practices, but which are only partially implemented. Intensive case management can be expensive and time consuming. But as case management begins to show success, it saves lives, improves outcomes, and saves money. Additional resources can be redeployed to maintain the effort or directed where there are other needs.
 Not Your Older Brothers Bonds: The Use and Regulation of Social Impact Bonds in the United States, Contemporary Law and Problems, Duke University, Duke Law School, Kevin W. Humphries, 2014
 Massachusetts tries new solution for chronic homelessness, Forbes, Roger Valdez, 2016.