Economical effects of the reduction of homelessness

The report published by the Ministry of the Environment in Finland, Tampere University of Technology and an urban study research company Kaupunkitutkimus TA deals mainly with the positive effects of the housing counselling, but the housing first principle in the context of the reduction of long-term homelessness is also present in the publication.

The purpose of the project behind the report was to increase knowledge about the economical effects of the housing counselling and homelessness reduction measures. The report presents a frame for measuring and evaluating the cost effects of the prevention and the reduction of homelessness. It also shows some early results of these effects. In Finland many homelessness related reports have been published, but the systematic research about the homelessness interventions is still lacking. This deficiency is serious as the State and the municipalities are investing substantial amounts of money on the implementation of homelessness politics.

Measuring the cost effects of the reduction of homelessness

The report introduces a model developed to measure the cost effects of the Finnish homelessness reduction interventions. The frame is based on the different international cost-benefit and cost-effectiveness analyses. According to these studies at least the following parts of the homelessness reduction measures or interventions should be evaluated:

service usage during the time of homelessness
service usage during the time of supported housing and the expenses
the expenses of the supported housing unit
non-economical, qualitative factors, such as the quality of life

The picture below presents a tentative frame for the evaluation of the expenses of the interventions targeted to homelessness reduction. In the model the services used during homelessness and the expenses accrued are compared to the expenses accrued during the supported housing. Also the non-economical effects and advantages related to different phases of housing as a part of cost-effectiveness are outlined. In this study the emphasis is on the phases of the model “homelessness” and “living in supported housing unit”. The third phase of the model is “independent housing”, which means living in a normal rented apartment. The phase of independent housing is limited outside this study.

Graph.1 A frame for analyzing the expenses and advantages of interventions.

Prevention and reduction of homelessness can be realized through a variety of interventions. There are presumably differences in costs and effects between different means of solving the problem of homelessness. One case-example of the intensified support in the report is an independent housing unit situated in an already existing block of flats in Tampere. The housing unit is maintained by the NGO A-guild and this is where the City of Tampere buys part of their housing services. The unit of 22 inhabitants is called Härmälä. In the report the service usage of the formerly homeless Härmälä dwellers during their homelessness (before moving into Härmälä) was compared to the service usage during their time in Härmälä. The intervention on 15 people seemed to incur cost savings 93 647 € per five months, which makes 224 753 € annually. Annual savings per person were 14 980 €. The greatest savings were obtained from the housing and the substance abuse service usage. These expenses were cut down by 53%.

Conclusions

According to the report the housing first principle has positive effects on both fighting homelessness and the expenses deriving from homelessness. Intensified supported housing in already existing housing stock seems to be substantially cheaper to society than taking care of the homeless in hospitals, substance abuse units or in prisons. Housing counselling reduces effectively evictions and hence saves the expenses of social services and real estate and legal acts. The Härmälä example can be criticized as the report shows that it did not reach all the Härmälä inhabitants and the loss of seven dwellers in the study was rather high. This is important to note as these difficult to reach people are often those who have the greatest needs of services and support. They being part of the study would undoubtedly have altered the results.

Still the conclusions of the report can be to some extent adapted to the previous international research, which suggests that the housing first principle, especially compared to the staircase model, has a positive effect on the reduction of homelessness and the expenses. The essential advantages of the housing first principle seem to be the institutional and hospital cost reductions attained through housing counselling and support. Also some other non-housing related services such as police or the ambulance expenses were brought down with the help of the housing first model.

Download the report (in Finnish)

Ympäristöministeriö 2011 - Asunnottomuuden vähentämisen taloudelliset vaikutukset (pdf) (1.5 MB)