RigenERPrato: Social Impact Bonds as a possible solution to the housing emergency?

The project RigenERPrato, financed by the Department of Public Administration within the Social Innovation Fund, aims at supporting the process towards achieving personal autonomy for families hosted in public housing units in the Municipality of Prato. The project main programmed activities include the provision of personalised support services that can meet the specific household needs as well as the requalification of unused public flats. By facilitating and speeding up this process and by increasing public housing units availability, the Municipality also aims at cutting public expenses for each supported household.

Increasing the efficiency of welfare services provided by Municipalities in order to achieve a social impact opens up to a range of opportunities to test impact investing mechanisms, the so-called “Outcome Payment” or “Pay by Results” systems. In order to verify whether there are the necessary prerequisites for the application of such systems to the project RigenERPrato, the Municipality of Prato, together with its partners PIN – Polo Universitario Città di Prato, Edilizia Pubblica Pratese S.p.A. (EPP S.p.A) and the Consorzio Fabrica, part of CO&SO Group, involved ARCO to conduct a feasibility study.

The feasibility study

The project was born with the idea of building an innovative intervention in the field of Public Housing. The first data collection and preliminary analysis carried out by ARCO demonstrated that the intervention could not bring the hypothesized results in terms of desired social impact and savings for the Municipality. The latter, in fact, are fundamental prerequisites for structuring “Outcome Payment” systems such as a Social Impact Bonds.

A new analysis allowed to identify a different scope of intervention, the Emergency Housing, which, indeed, entails significant cost for the Municipality, hence allowing for a greater potential for savings.  The Emergency Housing financially burdens the Municipality both in terms of expenditure for accommodation and in terms of economic contributions provided to each household in need.

ARCO carried out a comprehensive analysis on the available database of the Municipality, the public Social Services and EPP S.p.a., which allowed to have a better understanding of the addressed social need, the project intervention and its estimated costs, the expected public savings and, finally, to carry out an assessment of the potential social impact.
In order to design a Pay By Results system such as a Social Impact Bond, data is absolutely fundamental: a scientific and rigorous approach is required to properly collect, systematise, analyse and interpret relevant data.

In a hypothetical third phase of the project, ARCO will contribute to the creation of an automated database connecting data collected by Third Sector organizations, the Municipality and the Social Services. Therefore, the Municipality will be able to know with greater precision which type of social intervention works best on individuals with specific features identified during the initial phase of the project.

Social Impact Bonds

The role of a Social Impact Bond is to enhance the social impact of an intervention having a social objective. Setting up a Social Impact Bond requires a great deal of engagement from the public or private body in terms of time and competences necessary to identify areas of potential savings, to collect and analyse the relevant data and, ultimately, to find and involve impact investors and qualified programme implementers.

Therefore, in order to set up a Social Impact Bond it is first of all necessary to find areas in which the Public Administration or other public or private bodies, provide a welfare service that can be  optimised, but do not have the necessary resources to improve its efficiency. At that point, one looks for a private party to invest in that sector and an organisation with the qualified capacity to improve the service. If the mechanism works,  positive economic returns for all the actors involved are expected.

For a broader overview of the actions undertaken during the project you can read the publication here:

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