From The Field J U L Y 2 1 , 2 0 1 5 How Much Do Healthy Communities Cost? NANCY O. ANDREWS President and CEO, Low Income Investment Fund F or most Americans, health and medical costs are pocket year!” Let us see how that hot-seat guesstimate stands up to book issues, and poor health can be a budget breaker. the cold light of day (and some serious analysis). The short Improving population health and controlling medical answer is as follows. To serve 100 percent of poor families and costs matter greatly to the nation’s future for the same reason. kids in these two critical areas, the price tag is around $90 bil- How do we ensure that Americans are healthy and save on the lion per year. That level of investment would pay rich cost of care at the same time? The answer forces a focus on the dividends in better long-term health for our citizens. social determinants of health, and we quickly understand that Here is how I developed this estimate: health happens in neighborhoods. This means that the com- munity development sector’s work at the intersection of • Affordable Housing: There are several ways to make rental people and place offers many promising solutions. But, we housing affordable to poor families, but the most common must ask ourselves what achieving impact at scale would look and possibly cheapest way to do so is with rental assis- like and what it would take to get there. tance—such as with the federal Housing Choice Voucher At a 2014 Institute of Medicine (IOM) roundtable on (HCV) program, formerly known as Section 8.1 Under the resources for population health improvement, I was asked HCV program, the government fills the cost gap between for an on-the-spot dollar estimate to provide full coverage the rent that is affordable to a family and what a landlord for critical community development supports to help charges for a unit on the open market. Meeting the need for vulnerable children and families achieve better health affordable housing among the poor population could thus and economic mobility. I quickly narrowed it to two vital be quantified as what it would cost to provide rental assis- areas of upstream investment: decent, affordable housing and tance to all poor households who are “rent-burdened,” high-quality education, particularly early learning and child meaning they pay more than 30 percent of their incomes development programs. My organization, the Low Income on rent. Only around one in four families who currently Investment Fund, has invested hundreds of millions of qualify for rental assistance gets it, and often only after years dollars in these areas, leveraging private capital at a four-to- of being on a waiting list. one ratio. For many years, research has linked both to a range of positive social outcomes—including improved The Bipartisan Housing Commission, part of the Bipartisan health—and each is a critical platform for addressing health Policy Center, recently completed this analysis in support disparities. of its recommendation that the HCV program be “fully On stage at the IOM, I did some quick math in my mind funded” for very low-income households making at or and leapt forward with an answer: “About $100 billion per below 30 percent of area median income—a reasonable proxy for the poverty population.2 The cost to provide rental assistance to the approximately 6.3 million cost- Type of Support Annual Cost burdened, poor renters in 2013 would have been $56.7 billion for the year, although the actual cost would likely Housing Subsidy $56.7 billion have been much lower because participation would not be 100 percent (Bipartisan Policy Center et al. 2013). Early Childhood Education $33.5 billion • Early Childhood Education: Similar to rental subsidies for Total $90.2 billion affordable housing, federal funding for early childhood education falls far short of meeting current need. As of 2013, only 4 percent of the eligible poor infants under age 1 The other most common way is to provide subsidies for the construction of housing that is required to remain affordable to low-income households in exchange for government support. Today, the HCV program supports more families. 2 For the full recommendations and report, visit http://bipartisanpolicy.org/sites/default/files/BPC_Housing%20Report_web_0.pdf. three who qualified for Early Head Start were able to access a significant boost to the future economic and social fabric it, and Head Start was only funded to serve 41 percent of of our country and would be a smart population health eligible poor three- and four-year-olds (U.S. Census 2014). strategy. Accounting for my estimate of the number of poor children served by the federal Child Care and Development Block Grant program, the annual cost of expanding Early Head About the Low Income Investment Fund Start to cover all remaining poor children under age three would be $27.8 billion, and expanding Head Start The Low Income Investment Fund is a nonprofit to cover all remaining poor children ages three and four community development financial institution that would be an additional $5.7 billion (HHS 2014; New provides innovative capital solutions that support America Foundation 2014).3 These calculations are based healthy families and communities. As a financial on cost-per-slot data provided by the New America intermediary, the Low Income Investment Fund helps Foundation. And same as with rental assistance, participa- bridge the gap between low-income neighborhoods tion would not be 100 percent, so accounting for actual and public and private capital sources, and serves as a participation rates would lower cost estimates. steward for capital invested in housing, child care, education, and other community-building initiatives. CONCLUSION For more information, visit www.liifund.org. While my original back-of-the-envelope estimate of $100 bil- lion per year seemed large, a reasonable analysis bears it out at an order of magnitude of accuracy. And while these up-front costs are significant, a growing body of evidence suggests even greater short- and long-term cost savings to taxpayers from SOURCES these upstream interventions. Estimates from random assign- ment experiments suggest an annual rate of return between Bipartisan Policy Center, Economic Policy Program, Housing 7 and 10 percent for early childhood education, and there is Commission. Housing America’s Future: New Directions for a wealth of research demonstrating the central role that National Policy. Washington, DC: February 2013. affordable housing plays in children’s educational perfor- http://bipartisanpolicy.org/library/housing-americas-future- mance, health, and long-term economic prospects (Chetty new-directions-national-policy/. et al. 2015). Housing-based interventions can also pay Chetty, Raj, Nathaniel Hendren, and Lawrence F. Katz. shorter-term dividends for adults in areas such as diabetes The Effects of Exposure to Better Neighborhoods on Children: and obesity (Ludwig et al. 2011). New Evidence from the Moving to Opportunity Experiment. Finally, it is worth noting that public-private partnerships Cambridge, MA: National Bureau of Economic Research, could leverage that $100 billion per year in public subsidy May 2015. into even larger investments. The community development capital delivery system, of which the Low Income Investment Ludwig, Jens, Lisa Sanbonmatsu, Lisa Gennetian, Emma Adam, Fund is a part, is particularly adept at using risk-absorbing et al. “Neighborhoods, Obesity, and Diabetes—A Randomized public and philanthropic dollars to attract much larger private Social Experiment.” The New England Journal of Medicine. 365 investments from financial institutions, which enables (October 2011):1509-1519. doi:10.1056/NEJMsa1103216. powerful interventions at scale. The affordable housing system is a great example, where even a small government New America Foundation, Federal Education Budget Project. subsidy can set the stage for a much larger transaction “Background and Analysis: Head Start.” April 25, 2014. comprised of investments from a variety of private sources. http://febp.newamerica.net/background-analysis/head-start. Foundations can play an even greater catalytic role for U.S. Census Bureau. “2013 Current Population Survey.” 2014. developing new models that have the potential for generating http://www.census.gov/hhes/www/cpstables/032014/pov/ even larger social impact, where public agencies and tradi- pov34_100.htm. tional financial institutions are willing to participate but require additional partners to take on some of the risk of U.S. Department of Health and Human Services (HHS), Office programmatic innovation. As such, $100 billion in new of Child Care. “Characteristics of Families Served by Child Care funding for rental assistance and child care would provide and Development Fund (CCDF) Based on Preliminary FY 2012 Data.” November 17, 2014. http://www.acf.hhs.gov/ programs/occ/resource/characteristics-of-families-served-by- 3 These calculations also do not account for Temporary Assistance child-care-and-development-fund-ccdf. for Needy Families dollars spent directly on child care, nor does it account for the range of state and local subsidies for child care serving poor children. Accounting for these additional funding Views from the Field is offered by GIH as a forum streams is complicated, but doing so would lower any calculation of for health grantmakers to share insights and experiences. If you are a funding gap to serve poor children four years old and younger. interested in participating, please contact Osula Rushing at 202.452.8331 or orushing@gih.org.