The Social Impact Hub together with the Mercy Foundation has released a report highlighting the significance impact investing holds, in reducing youth homelessness in New South Wales (NSW).

With over 60% of Australia’s homeless population being under 35 years of age, young people in this demographic, are over represented. Each year, 12,000 people aged under 25 present to specialist homeless services in NSW, representing about a quarter of the State’s homeless population.

Impact Investing to Reduce and Prevent Youth Homelessness in NSW proposes the consideration of two proven social impact models (social impact bonds and ‘payment by results’) to address youth homelessness that could be trialed and implemented in NSW. These models are expected to facilitate and scale the funding of innovative homelessness services to halt young peoples’ trajectories towards homelessness, and offer the support they need to flourish.

A social impact bond (SIB), also known as a social benefit bond is a funding mechanism which engages private capital for the execution of social initiatives.

In the case of a homelessness SIB, the project might aim to see people transition into stable housing and employment, yielding savings in the cost of social housing, welfare, interactions with the justice system and presentation at healthcare services. The government may contract an intermediary to broker the SIB, which will raise capital from investors to fund the project. The service provider will repay investors upon their achievement of agreed outcomes, usually with a return that increases relative to the achievement of outcomes.

As allocating funding for deserving projects becomes harder, governments are increasingly looking to capital markets to take the pressure off already strained budgets.

NSW is no stranger to SIBs. In 2013, the NSW Government pioneered Australia’s first two social benefit bonds – the Newpin bond and the Benevolent Society bond, both focusing on prevention of out of home care for children.

The report draws on insights from impact investment projects in the USA, Canada and the United Kingdom to consider possible applications of these international experiences to youth homelessness programs in NSW.

It also proposed that the Foyer model (NSW) and Kids Under Cover program (Victoria) be considered for implementation through an impact investment in NSW. Both are innovative and holistic responses that foster independence and a sense of community among young homeless people, enabling and empowering them to carve a bright future for themselves.

Beyond that, it presents a greater opportunity for Government to invest savings in other pressing areas.

For more insights, please download the report.