Interest-Free Micro Loans: Philanthropists’ New Tool to Prevent Homelessness

LOS ANGELES—An apartment in Inglewood has never been this expensive. So when Courtney Bailey got her three-day notice, she already had better places lined up with more space and cheaper rent for her kids.

But she was scared. She didn’t have cash to pay the moving expenses.

The new landlord then found a solution. She obtained interest-free loans to cover her fees and was able to repay them if possible.

It sounded like a joke, but it wasn’t.her landlord took her Short-Term Eviction Prevention Fundis a charity founded by West Los Angeles software entrepreneur Adam Miller to test his theory that nonpunitive microloans can reduce homelessness.

Miller created a $1 million fund to provide interest-free loans to people facing imminent eviction. The term of repayment is three years for him, and those who fail to repay will be pardoned.

After conducting a small pilot, the fund is now aiming to make 1,000 loans of up to $2,500. Reflecting Miller’s background in cloud computing, data collected from the application and payment history is sent directly to poverty researchers at the University of Notre Dame who are assessing loan eligibility.

The early results are encouraging enough that Miller, who has invested tens of millions of dollars in charity funds, said he was open to expanding to 10,000 loans.

“If this can really help people become homeless, it’s a lot more cost-effective than trying to fix someone who’s lost their home,” Miller said.

built mirror cornerstone on demand He has become a global training and development company and founded the 1P Foundation (short for One Planet) with his wife Stacey to apply business and research acumen to philanthropy.

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

Miller will sell Cornerstone for $5.2 billion in 2021. While pursuing new business interests, he also spends more time: 1P.org — A company that includes foundations and separate entities for research, advocacy and social impact investing — A company led by Stacey Miller as CEO.

Most of our work so far has focused on gun safety nationally, supporting research that seeks common ground between gun owners and gun control advocates.

The micro-loan fund is, of course, his local initiative focused on the homelessness conundrum in Los Angeles.

After researching the status of existing homeless initiatives, Millers concluded that helping people stay home would have the greatest impact.

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

Still, city and county efforts to prevent homelessness are limited. Less than 4% of sales tax revenues from Measure H will be spent on prevention programs. The puzzling question is who to target. Hundreds of thousands of Angelenos live under extreme rent pressure, but only a small percentage become homeless.

Various strategies have been tested as solutions. From the pilot program of the Los Angeles County Board of Supervisors, supplement the income of the poor For a UCLA research project analyzing data from county social service agencies predict who is most likelylose one’s home.

The Millers decided to narrowly focus their interventions on those who face imminent eviction because of the crisis but who have the means to pay their rent in the future.

Initially, they put $1 million into a revolving loan fund and assembled a bare minimum staff to manage it. Stacey Miller, who has a research background in entertainment companies and nonprofits, is an unpaid executive director.

One of their employees was Rickey Robinson, an outreach worker at Venice-based Safe Place for Youth. In June 2021, Robinson launched a pilot in South Los Angeles to let homeless and housing agencies know that loans are available.

his first client sora impact, A South Los Angeles real estate investment and development company with approximately 200 buildings and thousands of affordable homes under construction.

In it, Bailey was pregnant and taking unpaid leave from her new job at the post office. Bailey said she received an eviction notice after being late in paying her COVID-19 rent relief. She had a new apartment alongside SoLa. However, she did not have the cash for her move-in costs and her apartment ended up being given to someone else.

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

Stacey Charles took out a $2,500 loan in October to pay the rent for her South Los Angeles apartment. A series of events, including a car breakdown, her daughter’s high school graduation, and the birth of her granddaughter, added to the cost of inflation.

“Everything was going wrong,” she said. “Food is expensive. Gas is expensive. Electricity is expensive. It’s hard to keep up with it all.”

Her landlord understood, but it became impatient.

“I’ve been trying to negotiate with her and do everything I can,” Charles said.

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

In total, about 43 loans were made in the pilot.

The program is now open to all Los Angeles County residents who meet three basic criteria. You must have an income below 50% of the regional median, have recently experienced an economic shock, and are facing imminent eviction as a result.

The application is STEP Fund websiteIf applications exceed the fund’s capacity, preference will be given to those whose income is less than 30% of the median and who were previously homeless or in foster care.

However, currently no one who qualifies will be turned away, Staci Miller said. Despite the obvious need, the program has slowly taken off. Eviction Moratorium and Government Relief During Pandemic.

“The complexities surrounding the rental market and COVID are complicating things,” Miller said. “We’ve seen peaks and valleys as a lot of things have changed. We expect demand to increase towards the end of the year.”

One of the main stumbling blocks is that applicants must demonstrate income in excess of their monthly expenses, making many applicants ineligible, Robinson said. There are no penalties for defaulting, but the goal of this program is to get your money back so you can lend it again. Those who find it difficult to return are not eligible.

“The number one 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.”

Repayment is flexible for those who qualify. No payment is required for 60 days, after which he spreads his balance over 36 months. However, the software is designed to accept any payment.

Stacey Miller said, “If someone pays you $20, we are happy to take $20 because your intention to develop a habit of paying it back is important.

Millers originally planned a repayment rate of about 70%, much lower than traditional loan programs.

In practice, it hasn’t been much higher, but Staci Miller said he doesn’t consider the rate to date to be representative, as the rate has improved as he’s learned from experience.

The Millers hope their experiment will help governments and large nonprofits design prevention programs, but said they would wait for the University of Notre Dame study to make recommendations. Rob Collinson, Assistant Professor at Notre Dame Cathedral Wilson Sheehan Institute for Economic Opportunity A sample size of about 500 loans would be needed to draw broader conclusions, he said.

“While the results may indicate that these small loans are effective in preventing homelessness, they also indicate that the repayment rate is so low that they are meaningless as loans. “They might make sense as a grant.”

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