The New South Wales Government has committed to two social impact investment transactions per year. In 2015, it identified reducing or preventing youth homelessness as a priority area.

Each year, 12,000 people aged under 25 present alone to specialist homeless services in NSW. Whilst this number represents about a quarter of the State’s homeless population, the true number, including those who may be couch surfing or surviving without assistance from homeless services, is even greater. As well as damaging young peoples’ relationships, physical and mental health, and prospects of thriving in education and finding employment, youth homelessness drastically increases the risk of chronic homelessness in adulthood.

Social impact investment models such as social impact bonds and payment by results have the potential to facilitate and scale the funding of innovative homelessness services that can interrupt young peoples’ trajectories towards homelessness, and offer the support they need to flourish. While patient capital and investment pooling vehicles such as Real Estate Investment Trusts have the potential to fund the development and purchase of affordable housing, it is the potential mechanisms for funding support programs that are the focus of this report.

In the last four years, North America and the United Kingdom have pioneered the use of social impact bonds to tackle homelessness. As those investments reach and approach their terms, they offer valuable insights that could inform the approach taken for a youth homelessness bond in NSW. Above all, those lessons stress the importance of:

• significant scope for government savings;
• striking a balance between innovation and risk mitigation;
• measurability; ! setting realistic targets;
• measuring success across a broad field of outcomes;
• sharing risk and opportunity between multiple service providers;
• a strategy for responding to difficult cases;
• a conducive policy and economic context;
• co-operation between stakeholders;
• attention to the end of the project’s term and its legacy; and
• a viable housing solution for beneficiaries during and after the term of the intervention.

There are youth homelessness services currently operating in NSW that could benefit from replication and scaling through an impact investment. This report considers the Foyer model and Kids Under Cover studio housing model as especially promising models for realising the NSW Government’s objective of preventing or reducing youth homelessness through an impact investment.