Research on the cost and cost-effectiveness of homeless assistance programs indicates that costly interventions are not likely to be cost-effective, except for the most costly clients. Generally positive housing and homelessness outcomes frequently found in studies of people with severe mental illness, irrespective of their being in the intervention or control groups of various demonstration projects, further suggest the importance and value of targeting costly programs to people experiencing (or likely to experience) chronic homelessness, or to people who are heavy service users of non-homeless assistance programs. While some people who are chronically homeless may not be heavy users of non-homelessness services, it is likely that inclusion of heavy and modest service users together can still achieve average outcomes that demonstrate substantial cost offsets, if not cost neutrality for the more costly programs. This area deserves more careful study. Unfortunately, it must also be noted that establishing “cost offsets” doesn’t actually mean that savings that accrue in one agency are then transferred to another agency for this purpose. Inter-agency transfers are the exception, and some communities that have sought to use the “cost offset” arguments to advance new program development have learned that demonstrating cost offsets doesn’t mean that anticipated savings will be advanced for this purpose, particularly across agency boundaries.
Unfortunately, much of the published literature is limited almost exclusively to people who have severe mental illness. The absence of research on other important populations is striking. People with severe mental illness are a minority of the homeless, including a minority of the people who are chronically homeless, among whom they comprise approximately 30 percent (Kuhn & Culhane, 1998; Maguire et al., 2005). Because they may also be among the more expensive service users, given their high rates of hospitalization, studies of people with mental illness are likely to overstate the costs of homelessness for this population relative to people without mental illness. People with primary substance abuse problems, who account for a majority of the chronic homeless population, may use fewer services because they have less access to insurance (low-income people with substance abuse issues must have a co-occurring disabling condition in order to qualify for Supplemental Security Income (SSI), hence Medicaid eligibility), and because managed care has severely limited inpatient and residential treatment for substance abuse. This only highlights the importance of including emergency room use, police and jail records, and emergency medical transport data in cost and cost-effectiveness studies, as people with substance use disorders are more likely to use these services than the inpatient services typically tracked in mental health research.
Even after including these data, it may be the case that some of the people who are homeless and who do not have a severe mental illness (and even some who do have a severe mental illness) may not reach the level of costliness that would inspire major investments in new housing and service interventions. On the other hand, it is also likely to be the case that many of the people who are not severely mentally ill or who are not heavy service users are also likely to need less costly interventions. This is particularly noteworthy given that supportive services costs are typically the largest cost component in most supportive housing projects. Future research (including research demonstration projects) could focus on people who are homeless without a mental illness, including people who have substance use disorders and people who are not chronically homeless, as there has been so little research on the service histories of these very important subpopulations. Moreover, most of the interventions which have been tested, and whose costs are known, are based on people with severe mental illness and have examined only fairly costly interventions. Future research could test interventions that are more modest in cost as well, and which address the issue of identifying the least costly interventions that are necessary to achieve positive housing outcomes.
As Rosenheck (2000) and Dickey (2000) both caution, one should not assume that cost-effectiveness can or should be demonstrated in all interventions intended to reduce or end homelessness, or for all people the programs may serve. Being able to demonstrate cost-effectiveness or offsetting cost reductions can certainly help make the case to policymakers and the public that effective interventions can and should be expanded. However, cost-offset and cost effectiveness studies can also be tricky, particularly with regard to determining how to allocate costs that precede the intervention or which may be part of the intervention. For example, is case management associated with street outreach a cost of homelessness, or part of the intervention that gets someone out of homelessness? Where to allocate such costs will significantly impact any results as to the “cost offsets” associated with the intervention. Aside from this and other methodological concerns, reducing homelessness has other less easily quantifiable benefits as well. Rosenheck and Dickey suggest that other methods be explored to assess both the less tangible benefits of reduced homelessness and the value that the public places on achievement of such an outcome. As Rosenheck also notes, arguments can be made that housing is a social necessity in an advanced society such as ours, and that we have a collective responsibility for making sure that resources are distributed in such a way as to assure everyone has access to housing. Such arguments deserve further consideration, irrespective of the cost-effectiveness of particular homeless assistance programs.