No-interest micro loans: Philanthropist’s new tool in preventing homelessness

Inglewood housing has never been so affordable. So by the time Courtney Bailey was given three days’ notice, she had already found a better apartment with more space for her children and a lower rent.

But she was afraid. She had no money for move-in fees — and worried she was heading for another bout of homelessness.

Then the new landlord found a solution. She could get an interest-free loan to cover the fees and pay it back if she could, or not at all if she couldn’t.

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

Toddler on screen door

Brandon Morris, 11 months, whose mother Courtney Bailey was facing eviction from her four bedroom, two bath apartment in Los Angeles when she received a $500 loan.

(Gary Coronado/Los Angeles Times)

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

After conducting a small pilot project, the fund now intends to make 1,000 loans of up to US$2,500. The data collected from applications and payment histories reflects Miller’s background in cloud computing and is sent directly to a poverty researcher at Notre Dame University, who assesses the effectiveness of the loans.

So encouraging were the initial results that Miller, who has poured tens of millions of dollars into his philanthropic foundation, said he was open to expanding to 10,000 loans.

“If this could really help people become homeless, it’s a lot more cost-effective than trying to rehabilitate someone who’s left without a place to live,” Miller said.

Miller, who built Cornstone OnDemand into a global training and development company, founded 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 things,” he said in an interview. “We focused on persistent problems.”

Software developer Adam Miller

Adam Miller, a software developer, is experimenting with a new way to prevent homelessness by providing interest-free microloans to people at risk of eviction through his 1P Foundation.

(Gary Coronado/Los Angeles Times)

Miller sold Cornerstone in 2021 for $5.2 billion. As he pursues new business interests, he also devotes more time to 1P.org—a company that includes the foundation and separate units dedicated to research, advocacy, and social impact investing—of which Staci Miller leads as executive director.

Most of his previous work has focused on gun safety at the national level, supporting research to find common ground between gun owners and gun control advocates.

The Microcredit Fund is his local initiative, which naturally focuses on Los Angeles’ persistent problem – homelessness.

After examining the landscape of existing homeless initiatives, the Millers concluded that they could make the greatest impact by helping people stay in their homes.

The need could not be clearer. Even as city and county work managed to move tens of thousands of people off the streets into homes over the past five years, the number of people on the streets 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 the sales tax revenue from Measure H goes to prevention programs. A confusing question is who to attack: hundreds of thousands of Angelenos live under extreme rent pressure, but only a tiny percentage become homeless.

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

The Millers decided to narrowly focus their intervention on people facing evictions due to a crisis but who have the means to pay their rent going forward.

Initially, they put $1 million in a revolving credit fund and set up a simple staff to manage it. Staci Miller, who had a research background at entertainment companies and nonprofit organizations, 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, formerly a social worker at Safe Place for Youth in Venice. In June 2021, Robinson started a pilot in South Los Angeles to notify homeless and housing agencies that loans were available.

His first clients were four tenants recommended to him by SoLa Impact, a south Los Angeles real estate investment and development company that owns approximately 200 buildings and is building thousands of affordable housing units.

Among them, Bailey was pregnant and on unpaid leave from a new job at the Post Office. Bailey received an eviction notice after her COVID rental help was delayed. She had set up a new apartment with SoLa. But she had no money for moving in, and the apartment would go to someone else.

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

Stacie Charles took out a $2,500 loan this month to pay off rent arrears on her South Los Angeles apartment. A series of events—her car breaks down, a daughter graduating from high school, a granddaughter giving birth—piled up the cost of inflation.

“Everything just went crazy,” she said. “Food is high. Gasoline is high. The utility bills. It’s just hard to keep up with all of this.”

Her landlord was understanding but lost patience.

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

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

A total of around 43 loans were granted in the pilot project.

The program is now open to all Los Angeles County residents who meet three basic criteria: have an income less than 50% of the area median, have recently suffered a financial shock and are imminent to eviction as a result.

Applications can be made on the STEP Fund website. Should applications ever exceed the fund’s capacity, preference will be given to those who have incomes less than 30% of the median, have a history of homelessness, or have been in the foster care system.

Currently, however, no one who qualifies will be turned away, Staci Miller said. Despite the obvious need, the program has been slow to get off the ground, due in part to eviction moratoriums and government relief during the pandemic.

“The complexity surrounding the rental market and COVID has complicated things,” Miller said. “We’ve seen peaks and valleys as different things have changed. I expect demand to pick up towards the end of the year.”

Courtney Bailey, mother of five, at her Los Angeles apartment.

Courtney Bailey, mother of five, Noelle Morris, 7, left, Aullie Morris, 5, Brandon Morris, 11 months, and Wynter Morris, 24 months, at their Los Angeles home.

(Gary Coronado/Los Angeles Times)

One of the main obstacles is that applicants must show proof of income in excess of monthly expenses, leaving many ineligible, Robinson said. Although there is no penalty for those who default, the aim of the program is to recover the money so it can be re-lent. Applicants who cannot possibly repay the money are not eligible.

“The main reason is that her net income is negative,” Robinson said. “We don’t want to blame anyone. That was kind of a fight.”

For those who qualify, the payback is flexible. No payments are required for 60 days and then the balance is spread over 36 months. However, the software is designed to accept any payment.

“If someone pays $20, we’ll happily take the $20 because the intention to develop that habit of paying back is important,” Staci Miller said.

Initially, the Millers planned on a payback rate of about 70%, well below that of a traditional loan program.

In practice, it hasn’t turned out to be that high, but Staci Miller said she doesn’t think the percentage is representative so far because the rate has improved because they’ve learned from experience.

The Millers said they hope their experiment will help government and large nonprofits develop prevention programs, but they will await the results of the Notre Dame study to make recommendations. Rob Collinson, assistant professor at Notre Dame’s Wilson Sheehan Lab for Economic Opportunity said he needed a sample size of about 500 loans to draw any broader conclusions.

“The results may show that these small loans are effective in keeping people from losing their homes, but they may show that the payback rate is so low that they don’t make sense as loans,” Staci Miller said. “They can be useful as scholarships.”

https://www.latimes.com/california/story/2022-10-22/no-interest-micro-loans-philanthropists-new-tool-in-preventing-homelessness No-interest micro loans: Philanthropist’s new tool in preventing homelessness

Alley Einstein

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