Interest-free micro-loans: the new tool for philanthropists to prevent homelessness

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The apartment in Inglewood has never been such a great deal. So when Courtney Bailey received three days’ notice, she had already booked a better place with more space for her children and lower rent.

But she was afraid. She had no money for moving costs – and feared she was heading for another bout of homelessness.

The new owner then found a solution. She could get an interest-free loan to cover the costs and pay them back when she could, or not at all if she couldn’t.

It sounded like a joke, but it wasn’t. Her landlord connected her with the Short-Term Eviction Prevention Fund, a philanthropic venture created by West Los Angeles software entrepreneur Adam Miller, to test his theory that nonpunitive microloans could reduce homelessness.

11-month-old Brandon Morris, whose mother Courtney Bailey was evicted when she received a $500 loan, at his four-bedroom, two-bathroom apartment in Los Angeles.

(Gary Coronado/Los Angeles Times)

Miller established a $1 million fund to provide interest-free loans to people facing imminent eviction. They will have three years to repay, and those who default will be forgiven.

After running a small pilot project, the fund is now aiming to provide 1,000 loans up to $2,500. Mirroring Miller’s experience in cloud computing, data collected from applications and payment histories is fed directly to a poverty researcher at Notre Dame University who evaluates the effectiveness of the loans.

Early results were encouraging enough that Miller, who has invested tens of millions of dollars in his philanthropic foundation, said he was open to extending it to 10,000 loans.

“If it can really help people not become homeless, it’s a lot more cost effective than trying to remedy someone who has become homeless,” Miller said.

Miller, who grew Cornerstone OnDemand into a global training and development company, started the 1P Foundation (short for One Planet) with his wife Staci to apply their business and research acumen to philanthropy.

“We wanted to do the hard stuff,” he said in an interview. “We focused on the unsolvable problems.”

Software Developer Adam Miller

Adam Miller, a software developer, is experimenting with a new way to prevent homelessness, providing interest-free micro-loans to people facing imminent eviction through his 1P Foundation.

(Gary Coronado/Los Angeles Times)

Miller sold Cornerstone in 2021 for $5.2 billion. While pursuing new business interests, he’s also dedicating more time to 1P.org — a company that includes the foundation and separate entities for research, advocacy, and social impact investing — which Staci Miller runs as CEO. general director.

To date, most of his work has focused on national gun safety, supporting the search for common ground between gun owners and gun control advocates. fire.

The micro-loan fund is his grassroots initiative focused, of course, on Los Angeles’ intractable problem: homelessness.

After researching the landscape of existing homelessness initiatives, the Millers concluded that they could have the most impact in helping people retain their homes.

The need couldn’t be clearer. Even though city and county outreach has successfully moved tens of thousands of people off the streets into housing over the past five years, the number of people on the streets has continued to rise as new people lost their homes.

Even so, city and county efforts to prevent homelessness have been limited. Less than 4% of sales tax revenue from Measure H is spent on prevention programs. A confusing question is who to target: Hundreds of thousands of Angelenos live under extreme rent pressure, but only a tiny percentage become homeless.

Various strategies are tested as solutions. They range from the Los Angeles County Board of Supervisors’ pilot program to supplement the incomes of the poor to a UCLA research project analyzing data from county social service agencies to predict who is most likely to lose their housing. .

The Millers decided to focus their intervention on people facing imminent eviction due to a crisis but who can afford to pay their rent in the future.

Initially, they invested $1 million in a revolving loan fund and assembled a core team to administer it. Staci Miller, who had a research background in entertainment companies and nonprofits, is the unpaid executive director.

Rickey Robinson works with the Short Term Eviction Prevention Fund.

Rickey Robinson works with the Short Term Eviction Prevention Fund.

(Brian van der Brug/Los Angeles Times)

Their only employee was Rickey Robinson, a former outreach worker with Venice-based Safe Place for Youth. In June 2021, Robinson launched a pilot project in South Los Angeles, notifying homeless people and housing agencies that loans were available.

Its first clients were four tenants referred by SoLa Impact, a South Los Angeles real estate investment and development firm that owns about 200 buildings and builds thousands of affordable housing units.

Among them, Bailey was pregnant and on unpaid leave from a new post office job. Bailey received an eviction notice after her COVID rent relief payment arrived late. She had a new apartment aligned with SoLa. But she didn’t have any money for the move-in expenses and the apartment was going to go to someone else.

Her $500 loan opened the door to what she calls “a forever home for me and my family.”

For Stacie Charles, a $2,500 loan this month paid off the rent arrears on her apartment in South Los Angeles. A series of events—his car breaking down, a daughter graduating from high school, a granddaughter being born—have piled on top of the cost of inflation.

“Everything was going crazy,” she said. “The races are high. The gas is high. Electricity bills. It’s just hard to follow it all. »

Its owner was understanding, but was losing patience.

“I negotiated with her and tried to give her what I could,” Charles said.

Now that she’s caught up, her salary as a clerk is back in line with her budget.

In total, about 43 loans were granted under the pilot project.

The program is now open to all Los Angeles County residents who meet three basic criteria: they must have an income below 50% of the region’s median, have suffered a recent financial shock and face eviction. imminent accordingly.

Applications can be submitted on the STEP Fund website. If applications exceed the capacity of the fund, preference will be given to those with an income below 30% of the median, who have been homeless in the past or who have been in the foster system.

Currently, however, no one who qualifies will be turned away, Staci Miller said. Despite the obvious need, the program got off to a slow start, in part because of eviction moratoriums and government assistance during the pandemic.

“The complexity of the rental market and COVID has complicated things,” Miller said. “We’ve seen ups and downs as different things have changed. I expect that towards the end of the year the demand will increase.

Courtney Bailey, mother of five in their Los Angeles apartment.

Courtney Bailey, mother of five, with children Noelle Morris, 7, left, Aullie Morris, 5, Brandon Morris, 11 months and Wynter Morris, 24 months, in their apartment in Los Angeles.

(Gary Coronado/Los Angeles Times)

One of the main hurdles is that applicants must prove their income exceeds their monthly expenses, which leaves many ineligible, Robinson said. Although there is no penalty for those who default, the goal of the program is to recover the money so that it can be loaned out again. Applicants who cannot repay the money are not eligible.

“The #1 reason is that their net income is negative,” Robinson said. “We don’t want to put anyone in debt. It was kind of a struggle.

For those who qualify, reimbursement is flexible. No payment is required for 60 days, then the balance is spread over 36 months. But the software is designed to accept any payment.

“If someone pays $20, we’re happy to take the $20 because the intention to get into that repayment habit is important,” said Staci Miller.

Initially, the Millers expected a repayment rate of around 70%, much lower than a conventional loan program.

In practice, it hasn’t turned out that high, but Staci Miller said she doesn’t consider the percentage to be representative so far because the rate was improving as they learned from it. ‘experience.

The Millers said they hope their experience will help government and large nonprofits design prevention programs, but they will wait for the results of the Notre Dame study to make recommendations. Rob Collinson, assistant professor at Notre Dame Wilson Sheehan Lab for Economic Opportunity said he will need a sample of around 500 loans to draw further conclusions.

“The results might show that these small loans are effective in preventing people from losing their homes, but it might show that the repayment rate is so low that they don’t make sense as loans,” Staci said. Miller. “They may make sense as grants.”

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