Why Public-Private Partnerships Are
the Key to Better Public Programs
Public-private partnerships (PPPs) have been part of our lives for centuries – and with good reason. Partnerships between government bodies and private organizations deliver the best of both worlds: access to infrastructure and delivery mechanisms that only the government has, plus the kind of innovation and customer service the private sector excels at.
These partnerships are essential when governments want to incentivize the kind of innovation and experimentation that have the potential to seriously improve the lives of their citizens. Here’s a look at how three public-private partnerships have transformed (or have the potential to transform) daily life for the people affected.
Hidden in Plain Sight: The US Mortgage Market
Today, it’s easy to take the US mortgage market for granted – and even to forget that it functions so well thanks to a longstanding public-private partnership. In fact, the residential mortgage market we know today exists thanks to a PPP first introduced in 1938 with the goal of making homeownership more accessible and affordable.
Its success has been striking: in 1940, the US homeownership rate was just 43.7 percent; today, it’s 67.9 percent.
This growth was made possible by the introduction of the Federal National Mortgage Association (Fannie Mae) and later the Federal Home Loan Mortgage Corporation (Freddie Mac). Both were created by Congress with clearly stated goals:
- Increase liquidity for residential mortgages.
- Make mortgage credit more accessible.
- Keep the secondary residential mortgage market stable.
- Adjust to changes in capital markets appropriately.
These government-sponsored enterprises (GSEs) achieved those goals by introducing what was then an innovative product: the long-term, fixed-rate mortgage that could be refinanced at any time.
While the secondary mortgage market admittedly caused big financial problems in 2008, regulations have since stabilized things, making the country’s mortgage market again a dependable source of credit for Americans who want to own homes.
And the GSEs continue to innovate while enjoying the financial backstop the federal government partnership provides. Today, for example, Fannie Mae offers…
- Green building incentives.
- Alternative financing for manufactured homes.
- Data sharing with industry partners and academic institutions to power research about homeowners and homeownership.
All of these have the goal of making life better for the American people.
Thriving Across the Globe: Food Recycling in Seoul
Successful PPPs aren’t limited to the United States. One striking example comes from Seoul, South Korea, where the city government has worked with advocacy groups and private recycling companies to achieve a 95 percent recycling rate for food waste.
The program offers many benefits to Seoul’s residents:
- Cost savings: Getting rid of trash is expensive. Last year, for example, New York City spent $422 million sending trash to landfills. Recycling what can be recycled saves Seoul residents serious money.
- Health benefits: Landfills create noxious gases, which can sicken people who live nearby. Diverting waste from landfills means less gas production and potentially better health outcomes.
- Climate benefits: When food rots in landfills, it produces methane, a damaging greenhouse gas. Reducing food in landfills means reducing this big contributor to climate change, which means fewer bad storms (among other universal benefits).
- New resources: Recycled food in Seoul is turned into compost, animal feed, or biofuel. All three benefit Seoul residents – for example, urban farms have exploded in the city since the program started.
For this life-changing project, Seoul’s government plays the essential role of mandating food recycling and levying and collecting fines on those who don’t comply. To get the program going, it offered grants to private recycling companies so they could ramp up operations to accommodate the program’s demands.
In addition, activist groups helped get the residents of Seoul on board with the program, which amounted to a major lifestyle change. Those private organizations were better at communicating with individuals and delivering messages that inspired people to adopt the new way of doing things.
Poised to Change Everything: COVID-19 Vaccines
Maybe the most visible PPP these days is Operation Warp Speed (OWS), the federal government’s plan to fund treatments and vaccines for COVID-19. As of this summer, eight private drug companies had been selected to receive $11 billion in federal funds.
This funding model helps drive innovation in several key ways:
- It ensures funding for a project with significant public health benefits, whether or not it ends up being profitable.
- It frees private companies to research experimental therapeutics that might otherwise be considered too risky to invest in.
- It lets the government fund several projects at once, thus maximizing the odds of success.
- It sends funds where they can be most useful: to organizations with industry-leading talent and technology.
The potential benefits to the American people (and the global community) justify the outsized investment. This is true in part because the private companies receiving OWS funds tend to be better positioned than the federal government to engage in the kind of experimental research required, thanks to better talent, better tech, and more agile practices.
Case in point: Moderna, which received $483 million from OWS, has recently made headlines by announcing early vaccine success rates of nearly 95 percent. (Another vaccine, from Pfizer, is showing similar results, but was not part of OWS.)
A Model that Works for Making People’s Lives Better
Public-private partnerships are so effective because they combine what governments excel at (distribution, infrastructure, access, enforcement) and what private companies excel at (customer service, innovation, agility, technology development) to make lives better for large swaths of the population.
At NFS, we’re proud to participate in the tradition of public-private partnerships that transform people’s lives. As the NFIP’s Direct Service Provider, we’re excited to be part of the important work of reducing the socioeconomic impact of floods, which are currently the most common and costly natural disaster that affects Americans.
By delivering NFIP policies via our one-of-a-kind Trident tech platform and applying our decades of customer service experience to every person we help insure, we plan to close the gap that currently exists in flood insurance and be an integral part of delivering a product that operates the way flood insurance ought to.