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The US and the global economies are facing a contraction not seen since the Great Depression. The downturn has produced much hardship for those directly impacted—individuals and families who have lost homes, jobs, and access to basic necessities. The government has responded with nearly a trillion dollars of public financing. But no matter how well crafted and well meaning, government financing of this scale is too diffuse and distant to reach all those in need effectively.
Alongside government spending, there is a critical role for private philanthropy. Philanthropists have the ability—if they choose to use it—to target programs, assess the cost/benefit of actions before spending the funds, and directly support the community organizations engaged in alleviating and preventing the human costs of the economic meltdown. Though dwarfed by public financing, private philanthropy brings a nimbleness and responsiveness unmatched by government’s efforts.
Unfortunately, not all philanthropic spending is effective. Like any form of funding, private philanthropy can fail to deliver results. Worse yet, it can do more harm than good when not invested wisely.
To transform good intentions into meaningful impact, individual philanthropists require information about what issues are most in need of philanthropic attention, what practices and models offer the best promise for impact, and what costs are involved to determine where dollars can be used most efficiently. Over the next three months, the Center for High Impact Philanthropy is working to provide that information and will develop a philanthropic investment guide for individuals seeking to address the suffering caused by the current economic crisis.
Unprecedented rates of foreclosures and rising unemployment have escalated need in three areas where private philanthropists have a unique role to play: (1) housing, (2) health, and (3) nutrition.
The foreclosure crisis that began in earnest at the end of 2006 is triggering significant instability among families and in communities across the country.¹ The scope is vast: the Mortgage Bankers Association estimates that there were 2.2 million foreclosures initiated in 2008 alone.² Foreclosure can be devastating not only to the individual household, but also to the broader community as vacant properties corrode property values and invite crime. Case in point: in August 2008, nearly a third of mayors and police chiefs in 124 cities reported an increase in crime that appears to be a consequence of the growing number of foreclosures.³ Based on examination of foreclosures in Chicago, researchers estimate that direct municipal costs (e.g., costs related to inspections, court actions, police and fire department responses, unpaid water and sewage bills, and trash removal) can reach $34,000 per unit. Plus, an additional $220,000 is lost in reduced property values and home equity for the homes nearby.4
With increasing unemployment comes a corresponding rise in the number of uninsured Americans with limited healthcare access. It is estimated that for every one percentage increase in the national unemployment rate, 1.1 million more Americans will become uninsured and join the ranks of the 46 million Americans already without health coverage.5 Research shows that uninsured adults and children are less likely to receive preventive care. Such lack of preventive care will almost certainly translate into worse health outcomes for individuals and higher costs to society.
A particularly troubling health-related impact is the growing number of people unable to meet their basic nutrition needs. In March 2009, the USDA confirmed that participation in the Supplemental Nutrition Assistance Program (SNAP) (i.e., food stamps) had reached a historical high: in December 2008, about 32 million Americans received SNAP benefits, 4.5 million more than in Dec. 2007. In December 2008 alone, recipients of SNAP benefits increased by 700,000 people.6 Food banks are also seeing an increase in demand. In a survey of its members in late 2008 by Feeding America (a national network of food banks), almost all member food banks (99%) reported seeing more first-time users and were experiencing growth in demand between 28% and 37%. Nearly three quarters of these food banks (72%) also reported not being able to meet the need adequately with the resources available to them.7
Potential Roles for Philanthropists
In our preliminary conversations with funders, policy analysts, researchers, and nonprofit leaders, several examples have already emerged where philanthropists are filling the gaps not covered by government programs or funding. For example:
Helping those left out. While new initiatives in the stimulus plan expand Medicaid coverage for the poor and help offset the costs of continuing health coverage (COBRA) after lay-offs, many Americans still do not quality for these benefits. Located in high-need communities and governed by community boards, community health centers that serve the poor and uninsured are able to provide comprehensive, primary care services tailored to local needs. A 2008 estimate of community health center programs’ impact on local economies found that for every $1 million invested in health centers, a $6 million rate of return can be expected, while providing needed care for an additional 8,400 patients.8 Philanthropists can support local community health centers to meet the growing demands for basic health services.
Covering the “last mile”. The federal government’s plan to prevent foreclosures includes incentives for lenders to cut mortgage payments for at-risk borrowers.9 However, such incentives will have little impact if borrowers are unaware of these options, or fall prey to illegitimate offers of refinancing. In fact, some estimate that more than half of those (some estimates reach as high as 80%) who have lost their homes never contacted their lenders,10 even though housing counselors trained to facilitate a fair restructuring for the borrower are available at no charge. Philanthropists can support “door knock” programs that send representatives of legitimate nonprofits to the doors of homes at risk of foreclosure. For as little as $25 per household, these representatives can explain these options and help homeowners arrange meetings with housing counselors. Such programs cover that needed “last mile” of service delivery necessary for the success of federal intervention.
Breaking down service silos. Sadly, the breadth and severity of this economic crisis has meant that more families are grappling with clusters of problems that include legal, financial, physical, and psychological needs. While programs exist to address food needs, childcare, health insurance, mental health, joblessness, etc., too often these programs are housed in different agencies located across the community, with different and oftentimes complicated eligibility requirements, and different procedures for securing desperately needed help. Philanthropists can break down service silos and support single-stop counseling centers that provide one-on-one counselors to help low-income individuals navigate the public benefits available to them. A McKinsey & Company study of one such program in New York found that for every dollar invested, the program immediately returned to its clients at least $3 in benefits; $4 to $13 in legal counseling; $2 in financial counseling; and $11 in tax credits.11
A Call to Collaborative Action
From now through June, the Center for High Impact Philanthropy will examine these and other promising models for philanthropists to have impact. Our goal is to produce a philanthropic investment guide that outlines specific ways philanthropists can help. However, our ability to produce effective guidance relies on others joining our effort. To that end, we invite researchers, funders, policymakers, community leaders, and nonprofits to respond to the ideas outlined here and work with us to unlock the philanthropic capital that is so urgently needed.
We welcome your feedback!
¹ Pierce, S. (2009, February). Emerging Trends: State Actions to Tackle the Foreclosure Crisis. National Governors Association. Retrieved April 3, 2009, from https://www.nga.org/Files/pdf/0902FORECLOSUREREPORT.PDF
² Mortgage Bankers Association. (2008, December 5). Delinquencies Increase, Foreclosure Starts Flat in Latest MBA National Delinquency Survey. News Release. Retrieved April 3, 2009, from https://www.mbaa.org/NewsandMedia/PressCenter/66626.htm; Pierce, S. (2009, February). Emerging Trends: State Actions to Tackle the Foreclosure Crisis. National Governors Association. Retrieved April 3, 2009, from https://www.nga.org/Files/pdf/0902FORECLOSUREREPORT.PDF
³ The United States Conference of Mayors. (2008, August 6). 2008 Economic Downturn and Federal Inaction Impact on Crime. Retrieved on April 3, 2009, from https://www.usmayors.org/maf/documents/CrimeReport_0808.pdf
4 Apgar, W.C., & Duda, M. (2005, May 11). Collateral Damage: The Municipal Impact of Today’s Mortgage Foreclosure Boom. Homeownership Preservation Foundation. Retrieved April 1, 2009, from https://www.995hope.org/content/pdf/Apgar_Duda_Study_Short_Version.pdf
5 Rowland, D. (2009). Health Care and Medicaid – Weathering the Recession. New England Journal of Medicine, 360(13), 1273-1276.
6 Feeding America. (2009, March 6). Unemployment Reaches Record Levels, Food Banks Struggle to Feed Hungry Americans. Retrieved April 2, 2009, from https://feedingamerica.org/newsroom/press-release-archive/unemployment-rate.aspx
7 Feeding America. (2008, December 18). New Survey: Nation’s Food Banks Report Dramatic Increase In Demand For Emergency Food Assistance As Unemployment Rises and Economy Worsens. Retrieved April 2, 2009, from https://feedingamerica.org/newsroom/press-release-archive/local-impact-survey-2008.aspx
8 Shin, P., Finnegan, B., & Rosenbaum, S. (2008, February). How Does Investment in Community Health Centers Affect the Economy? Geiger Gibson/RCHN Community Health Foundation Research Collaborative. Research Brief #1. Retrieved April 2, 2009, from https://www.gwumc.edu/sphhs/departments/healthpolicy/CHSRP/downloads/DHP_RCHN_HealthCenterInvestmentReport.pdf
9 Tedford, D. (2009, February 18). Obama Sets $75 Billion Plan To Stem Foreclosures. NPR. Retrieved March 31, 2009, from https://www.npr.org/templates/story/story.php?storyId=100807505
10 Freddie Mac. (2005, December). Foreclosure Avoidance Research. Retrieved April 1, 2009, from www.freddiemac.com/service/msp/pdf/foreclosure_avoidance_dec2005.pdf
11 Single Stop USA. What are the results? Retrieved April 2, 2009, from https://www.singlestopusa.org/roi.html