Researchers and others have been interested in documenting the costs of homelessness because it is believed that demonstrating high costs will inspire investments in alternative housing and services. Indeed, as will be discussed in the next section, several investments in alternative housing and service models have included evaluations to examine the degree to which the costs of such interventions are offset by reducing the excess costs associated with homelessness. But is homelessness costly? Before reviewing the literature on interventions, we examine the assumption that notintervening carries some significant costs. Although the identification of such costs may not reflect on the accountability or effectiveness of homeless assistance programs per se, they may shed light on those social welfare systems that should be more accountable, or whose collective costs for accommodating homelessness might compel society to be more accountable.
Studies have found high rates of emergency room use and high rates of hospitalization for mental health and substance abuse problems among adults who are homeless, particularly in comparison to other low-income, but housed populations. Kushel et al. (2002) found that unstable housing and homelessness were associated with more emergency room use than was marginal housing. Kuno et al. (2000) also found that homelessness among a sample of people with severe mental illness was associated with greater inpatient admissions and longer hospital stays, as compared to a non-homeless comparison group. Salit et al. (1998) found that homeless adults in public hospitals in New York City stayed on average 36 percent longer than other patients, controlling for differences in demographics and diagnoses. While this study did not distinguish types of homeless persons or degrees of services use, it did highlight the nature of the health problems of persons who are homeless and hospitalized, with 80 percent of the primary or secondary diagnoses including substance abuse or mental illness.
In his review of the cost-effectiveness literature on homeless assistance programs, Rosenheck (2000) observes that, while service use may be greater among adults who are homeless than those who are not, heavy service use is relatively uncommon, even among people with severe mental illness. A lack of health insurance and a lack of access to primary care are typical for people who are homeless, so it is quite possible that many people either go untreated or avoid care altogether. Rosenheck cites data from two programs, the Homeless Chronically Mentally Ill Program (HCMIP) and the Access to Community Care and Effective Supportive Services Program (ACCESS), in which average annual inpatient costs for participants were $7,905 and $8,346 respectively (1996 dollars). However, at the 90th percentile, average costs reached $32,605 and $25,010, respectively, leading him to conclude that only the most costly 10 percent of the people who are homeless and have mental illness are likely to have such excess costs as to be able to demonstrate a sufficient offset for the costs of the interventions under study. It is worth noting that enrollees in these programs had to have a serious mental illness, which occurs in about 20–25 percent of the adult homeless population (Lehman & Cordray, 1993).
Other research has supported the conclusion that a costly subpopulation of homeless people does exist and appears to be quite distinct from the single adult homeless population in general. Cluster analyses based on shelter utilization data in New York City and Philadelphia has identified a “chronic homeless” population that stays in shelter for long periods of time but represents only 10 percent of adult shelter users overall (Kuhn & Culhane, 1998). Because of their heavy utilization, they account for 50 percent of the total number of shelter nights or of the total annual public expenditures for shelter. Nearly all of the chronic shelter users have a treatment history of severe mental illness or substance abuse, or a physical disability. The average shelter cost for the chronic shelter user population was $6,600 in Philadelphia and $20,400 in New York City (2006 dollars). In neither city was it possible at the time of the study to track episodes of street homelessness, nor street outreach contacts, so costs and total days and episodes of homelessness are underestimated. For the chronic shelter users, even ignoring their use of other service systems, annual shelter costs may equal or exceed the costs of providing rental assistance in many housing markets.
Part of the challenge in identifying costs associated with people who are homeless is obtaining sufficient data to document those costs. Consumer self-report poses reliability issues, so often researchers have relied on administrative data to measure service utilization and costs. As will be discussed later, administrative data come with their own challenges, especially limited accessibility. But when available, administrative data can provide detailed information on diagnoses or charges (in the case of criminal justice) and on admission and discharge dates, all of which can be used to infer costs. However, every study is limited by the administrative data it can include (or does not include). For example, a study that includes only VA hospitalization data or Medicaid data will miss state psychiatric facility inpatient days, shelter days, jail and prison stays, or uncompensated care provided in public or private hospitals. The inclusion or exclusion of particular systems can have significant impacts on the assessment of overall costs.
A multi-system study of approximately 5,000 people with severe mental illness who were homeless in New York City found that the average annual service utilization costs were $40,500 per person (1999 dollars) (Culhane, Metraux & Hadley, 2002). This per person average is much higher than those reported from the HCMIP and ACCESS programs discussed above, which were closer to $8,000. Part of the difference may be attributable to the inclusion of data from more systems of care in the New York study. For example, had the authors added only Medicaid inpatient days, the cost would have been $11,500.
Even considering the inclusion of multiple systems, the inpatient mental health costs for the group studied in New York are still markedly higher than for the national sample, and are more in line with the heaviest service users (90th percentile) identified by Rosenheck (2000). Because this study did not involve random selection but was based on enrollees in a housing program, it is possible that the sample was biased to include more costly service users or people who were engaged in intensive services prior to enrollment. Part of the difference may also reflect regional variations in access to care, in that New York has relatively generous public health and mental health systems compared to other regions in the US, as well as the nation’s only court-enforced “right to shelter.”
The possibility of regional factors is further suggested by results from a multi-system utilization study in Houston (Sullivan et al., n.d.). The Houston study found that homeless people with severe mental illness used an average of $3,700 per year (1996 dollars) in health, mental health and criminal justice services (police and courts, not jail/prison), and that people who were homeless and without SMI used an average of approximately $2,700. Neither estimate includes shelter or outreach costs. In stark contrast to the New York results, these utilization costs for people with SMI are less than half of the national average from the VA and ACCESS programs. Because of its sample design, the Houston sample is likely to be broadly representative of a cross-section of adults who are homeless, as in the VA and ACCESS programs, rather than of intensive service users as may have been the case in the New York study.
Moreover, regional factors in access to care also likely play a role, particularly limited access to mental health services for people who have a severe mental illness. Texas state mental health agency expenditures equaled $37 per capita in 1997, as compared to $116 per capita in New York State, a threefold difference (Lutterman & Hogan, 2000). Access to mental health services may be even more constrained for people who are homeless, as the study results show that the comparison sample of people with SMI who were housed used five times as many mental health services as the people with SMI who were homeless. Regardless, the results indicate that in some regions of the U.S., limited access to services for people who are homeless may result in underutilization of services, and therefore lower costs than for other low-income persons. (This would inherently limit the potential for demonstrating cost offsets associated with alternative program placement, as there are relatively few costs to reduce in the first place.)
Although research on the costs and cost-effectiveness of homeless assistance programs (and homelessness in general) appears to have slowed since the 1998 symposium, there has been a recent resurgence in interest in identifying the costs associated with homelessness, and, in particular, chronic homelessness. Since 2000, Congress has required that 30 percent of McKinney-Vento spending be reserved for permanent housing, and HUD has further required that one third of this set-aside be used for projects that serve a population that includes at least 70 percent persons who are chronically homeless. The U.S. Interagency Council on Homelessness (ICH) has similarly focused local and state officials and planners on identifying people who are chronically homeless through local and state 10-year plans to end (chronic) homelessness. Many of these 10-year plans require communities to identify the resources to pay for alternative housing interventions, and this has led a number of them to conduct or sponsor “cost studies” as the basis for garnering political will for their cause.
The U.S. Interagency Council on Homelessness has recently identified 14 such unpublished “cost studies,” including 11 that are complete and 3 that are ongoing. As shown in the ICH summary of these cost offset studies (see Appendix exhibit), the studies have taken a variety of forms, with some conducted by academic researchers and others by planners. Some were inspired by an article in the New Yorker by Malcolm Gladwell (2006) entitled “Million Dollar Murray,” which summarized the results of the Reno study. Because most of these studies have not been published, many details about the sources of data and about the exact nature of the samples are not precisely known. Nearly all have involved tracking individuals through various administrative data sources, and a handful have involved only aggregations of costs attributed to homeless people by various systems of care.
A general observation about these projects is that they are mostly based on convenience samples, with a few exceptions: one study includes a data match between all HMIS records from Richmond, VA, and a statewide psychiatric inpatient database for the entire state of Virginia; another from Durham, NC, of “verified chronically homeless individuals” required that people be identified as chronically homeless by at least two independent service providers, and appears to include the universe of such persons served by the participating providers. Other projects that used convenience samples, especially those specifically intended to identify the high costs of certain people who are chronically homeless, cannot be generalized to the adult homeless or the chronic homeless population overall. Given a distribution of costs, some subset of persons will have very high costs.
The studies also have varying data sources and time frames for measuring costs, which limits their comparability. Consequently, the results are highly variable and include a broad range of costs per person, from $5,360 per person per year (incarcerated homeless only, and their jail costs only, in Louisville, KY) to $133,333 per person per year (public inebriates only from San Diego, based on EMS, hospitalizations, and police charges). The studies with aggregate results (not based on client-level tracking) indicate that homeless persons have a significant impact on hospitals and other emergency services in total, although we do not know the proportion of total expenditures in these institutions that they represent, nor the number of unique individuals to which these costs can be attributed.
While these studies have limitations and their findings may be regarded as primarily illustrative from a social science standard, they are playing an instrumental role in local policy discussions. In many cities, documentation of such high costs associated with a subset of homeless people, however unrepresentative, is a powerful means of demonstrating the impact of chronic homelessness on society and garnering political momentum around local plans to address it. On that measure, these studies may be even more effective than more polished academic research, having a local basis, involving the participation of local institutions, demonstrating the impact on those local institutions, and often involving known homeless persons in the community. The U.S. Interagency Council on Homelessness has also encouraged communities to identify the most expensive persons, because, regardless of their representativeness, they are real people who can be housed, and likely with significant reductions in costs because they are such high service users. From this perspective, the issue of representativeness is moot until the pool from which to draw people who are likely high-cost service users dwindles appreciably. At that point, modeling costs and cost offsets for the larger population of persons would require a different sample definition.
Finally, it is worth noting that, while some of these projects include academic researchers, further participation by academic partners could bring more value to these efforts. This is an area where federal resources could help to bring some formalization and standards to the research, and, in so doing, could greatly expand the knowledge base.