A Businesslike Approach to Helping the Homeless

With mix of charity and their own profits, businesses give real jobs to the homeless.

When society's safety net for the disadvantaged fails completely and finally, the result is evident on the hard, dirty sidewalks of places like San Francisco's Mission District.

Here, a wandering subculture of homeless people cling to the lowest rung of existence, most of them seemingly beyond the reach of even the most generous social services.

For Margie, the failure came early. At age 14, she was already a homeless prostitute, sleeping on park benches and roaming the streets with a gang.

Yet today, as winter approaches and the plight of the still-growing homeless population becomes more acute, Margie offers a glimmer of hope. Working in a thrift store and living in a residential hotel, she's made the long journey from homeless to hopeful in a relatively short time. Behind her progress is an innovative mix of private philanthropy, bighearted social activism, and hardheaded business practices, a formula being deployed against social ills in a number of communities around the United States and achieving rare success with the homeless here.

"Financially, it's humbling," Margie says of her minimum-wage job. "But here at least what I'm doing doesn't tear down my spirit. At least now what I do is honest."

The store where Margie works is part of a string of businesses employing the homeless in San Francisco, generally regarded as having the largest homeless population of any city of its size in the country.

A range of institutions has for years helped the homeless with services like shelters, food, and emergency medical care. But the new approach being tried here and gaining attention nationally builds businesses that employ and train the homeless while earning enough of a profit to sustain and even expand their operations.

It all starts here with a private, family foundation set up by George Roberts, a partner in the Kohlberg Kravis Roberts investment firm. After years of experimentation, the Roberts Foundation has zeroed in on a formula that seems to be working. It funds 10 nonprofits in the city, but does so more as a partner than as a charitable donor. The enterprises it funds, to the tune of several million dollars a year, are modeled after private-sector start-ups, though dedicated to alleviating social problems.

"We're trying to harness a free-enterprise approach to addressing social issues," says Jed Emerson, executive director of the foundation's fund for the homeless enterprises. In the past year, the businesses have put more than 300 homeless people to work.

In these businesses, though, the profit margins are razor thin at best and intended primarily to generate additional capital for the businesses, as opposed to any return for the investor. Indeed, for the foundation, the only return is knowing the seed money improved the health of the community.

THIS approach to dealing with social problems, often called social entrepreneurship, is rapidly expanding. While not entirely new, its track record is spotty. But its resurgence is drawing on a new class of practitioners that experts believe are better equipped to succeed.

"You're getting folks with more raw business skills," such as graduates from elite business schools, says Chris Denniston of Community Wealth Ventures Inc.

Yet few nonprofits have attempted to build businesses around the homeless. As such, the Roberts Foundation "is definitely a bright light," says Denniston, whose Washington-based firm assists nonprofits entering business ventures.

For all in this business, it's a hard slog. Community Family Life Services in Washington, for instance, has been employing homeless people in its restaurant and catering business for eight years. After seven straight years of losses, it finally turned a small profit last year.

The store where Margie works is run by Youth Industry, a nonprofit that also runs a bicycle shop and a restaurant. All together, Youth Industry's businesses earned $75,000 above and beyond expenses this past year on revenues of nearly $2 million. Those earnings don't yet offset expenses from other services the group provides, but director Laura McLatchy boasts, "We're 85 percent self-sufficient."

A key component in helping the homeless help themselves is drawing from those who have already taken the first step. Youth Industry screens those who have been referred by other agencies.

"We tried taking people right out of Golden Gate Park, but that didn't work," says Randy Newcomb of Golden Gate Community Inc., another enterprise turning a small profit. Mr. Newcomb now screens more carefully, often taking homeless graduates from other foundation businesses.

But there is no guarantee that work experience and some baseline skills will take people permanently off the street. Tammy, a runaway from Maine, has been working at Youth Industry's Pedal Revolution bike shop for several weeks but is making plans to hit the road again. "I want to try some new things," she says.

San Francisco's big heart and crushing economy are the apparent causes for this city's large homeless population. While city general assistance to the poor is relatively high at $345 per month, and for some homeless a magnet, the local housing costs are the highest in the nation, thus making any move off the street difficult.

According to the National Law Center on Homelessness and Poverty, on any given night in the US some 700,000 people are homeless; about 16,000 of them are in San Francisco.

Ms. McLatchy sees a higher success rate in putting homeless youths to work in real businesses, as opposed to more traditional job-training programs. "There is a real transformative value for kids working in businesses that really, truly depend on them to be successful," she says.

As hard-nosed as these businesses must be to stay afloat, there is always a soft center. When people who have drifted back to the street return, McLatchy says, "We always give them a second chance."