Journalist turned philanthropy expert Daniel Heimpel wants to end the foster-care-to-homeless pipeline in Los Angeles County, and he has a plan to get philanthropy to pay for it — using its endowment dollars.
I met Heimpel in the historic West Adams neighborhood on the edge of South L.A. I passed three people living in tents under the 405 Freeway on my way to meet him. Were they former foster youth? Quite possibly. Some 20% to 40% of kids in the foster care system in L.A. end up homeless as young adults, or face housing insecurity. Some 70,000 people are experiencing homelessness in L.A. County right now.
“It’s unbelievable that we accept this level of human suffering,” Heimpel told me. “When I look out at a crisis like homelessness, I say, ‘Well, what is a resource that hasn’t been tapped?’ And I would argue that philanthropy has not been fully tapped. And so they should be.”
What’s mightier than the pen? Wealth.
Heimpel has a gripe with a system that lets charitable foundations invest 95% of their money however they want to, even if that means putting it behind companies that contradict their mission. In L.A. County, foundation endowments total more than $111 billion dollars — and that was in 2019, according to Candid. Meanwhile, about 1,100 kids age out of the foster care system each year in L.A. without having been adopted or reunified with family. These young people lack the support structures many of us enjoy, like families to put down security deposits on apartments, or a fallback position, like their parents’ basement, if they run into unexpected financial hardships. While a lot of services do exist to help them make the transition to adulthood, what’s available is often not enough — or not easy to access.
Heimpel first got involved with the foster care system when he mentored a couple boys in it. He went on to spend more than a decade writing about child welfare, and founded the journalism nonprofit Fostering Media Connections to share stories more broadly. In recent years, he began to suspect that while the pen might be mightier than the sword, perhaps money has even more power, at least when it comes to the housing crisis. He began cogitating on ways to direct some of that 95% invested by foundations toward fighting the housing crisis.
Specifically, he wanted to find a real-estate-focused fund for former foster youth that would attract foundations to invest from their endowments toward the cause. “The barrier is rate of return. [Foundations] want 8% annually, in general,” he said. Some privately financed affordable housing vehicles do exist. But failing to find a vehicle specifically tailored for foster youth and taking into account philanthropy’s unique position, he decided to create one. “I finally just said, ‘Fuck it. I’m going to go do it.’”
Enticing foundations to invest in affordable housing
Heimpel’s vision was to create a real estate investment fund that could develop enough housing to significantly stave off or eliminate the foster-care-to-homelessness pipeline. Heimpel worked with local leaders and foundations to commission Genesis LA Economic Growth Corporation to conduct a study about creating such a fund. The Ralph M. Parsons Foundation was the lead funder for the study, helping generate interest among other foundations. Six other foundations chipped in, among them several of the many California foundations that have long seen it as their mission to tackle the state’s devastating homeless situation — with mixed success so far. The Conrad N. Hilton Foundation gave the next-largest grant at $65,000, followed by Cedars-Sinai Community Benefit Giving Office, the Reissa Foundation, the Specialty Family Foundation, WHH Foundation and the Weingart Foundation.
For Joe Womac, president of the Specialty Family Foundation, the need is clear. “There is a lot of data showing that if these young people experience homelessness in the transition from childhood to adulthood, they are more likely to experience chronic homelessness. You want to prevent them from ever being homeless, even for a day,” he said.
Womac said Specialty Family Foundation put in $25,000 because they have knowledge of the problem and a lot of excitement about Heimpel. The foundation’s mission is to address the conditions that lead to persistent poverty. It practices what Womac calls “a kind of a venture philanthropy,” trying innovative, high-risk solutions to intractable problems. “We’re trying to find those heroes with new ideas.”
The foundation sees Heimpel as one such hero. “Daniel comes in. He’s very entrepreneurial. He’s very dissatisfied with the status quo. He’s very urgent. He carries with him all the characteristics we look for in partners. It didn’t surprise us when he started to ask, ‘Can we access that 95% and not have you lose your investment objectives?’”
The Genesis study is long and pretty dense, and goes into some depth outlining various financial scenarios. But the upshot is that it can be done. In one model included in the study, investing in affordable housing yields just over a 5% return. That sounds promising, but it’s not big enough, perhaps, to entice many foundations to dip into their endowments. Add in a little grant money however, and the equation changes. “If, in that equity position, 10% of that is grant, it takes the rate of return up to 8%, which now puts you in striking distance of what the foundation’s preferred average rate of return is,” Heimpel said. “So every dollar, in that context, opens up $9 of private financing.”
I’m not usually a fan of recreational math, but these numbers show how catalytic a little bit of grant money could be. If philanthropic funders give grants to subsidize projects, then they — and others — can invest in them at enhanced, and competitive, rates of return.
Heimpel has founded a private benefit corporation, Good River Partners, and is now working with a fund manager to develop a fund intended to garner commitments from philanthropy and private investors.
Beyond impact investing
Impact investing has been a hot topic in foundation circles for a while, but as Womac at the Specialty Family Foundation said, it can be a cryptic, opaque space. “It’s not clear exactly where your investment is going.” Heimpel’s vision is very clear, Womac said. “A fund to build housing for former foster youth? You’re telling me I can make an investment, and drive up and see the thing that gets built? That’s a very different proposition. I’ve never seen a fund like what he’s trying to build. It’s much more compelling.”
If all goes well with Heimpel’s new investment fund, nearly 1,500 former foster youth could move into homes of their own in the next few years. Heimpel is optimistic about its potential, and about foster youth in general. “A distressingly significant portion will experience homelessness. But they are very resilient young people, too,” he said of foster youth. “A lot of them go on to do great things. If we can get this philanthropic gyroscope spinning, I imagine that it’s just the beginning.”
Heimpel puts his charge to philanthropy like this: “We need to change the energy of money away from degradation to regeneration. Charitable foundations have a unique moral obligation to pursue such a goal, to invest in things that heal, and a unique set of financial instruments that allow them to make investments that have impact.”
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