Table of Contents
What is the Cost of Homelessness?
While the key reason behind supporting and funding services for people experiencing homelessness is to alleviate suffering and improve the lives of people in need, there are also economic benefits to ending homelessness.
Furthermore, cost efficiency is an important measurement of the effectiveness of homeless services. Service providers and agencies must work to spend the least amount of public and private dollars possible to make the greatest impact, while also saving money through decreasing the use of emergency and justice services.
For these reasons, we should all be asking the question: What is the real cost of homelessness in our communities?
It’s important to note that the “cost” of homelessness being discussed here is purely economic or financial. However, there are social, physical, medical, behavioral, and personal costs of homelessness that may or may not have a financial equivalent but are still inherently important and valuable.
As Angela Ly and Dr. Eric Latimer wrote in their article, Housing First Impact on Costs and Associated Cost Offsets: A Review of the Literature, it is simplistic “to believe that spending on programs… can only be justified if they at least pay for themselves.
Such an approach can hardly be justified, as few health care innovations that governments agree to fund do so (for example, new cancer drugs); often, they generate no cost offset at all. Rather, they are judged to yield sufficient benefit to merit their cost.”
Whether or not the cost of homeless services perfectly offsets or surpasses the cost of homelessness on the system, the benefit of helping others regain self-sufficiency is worthy of investment.
*This article uses phrases that Father Joe’s Villages typically elects not to use such as “homeless person” instead of “people experiencing homelessness”. We included this language in the questions to reflect the casual language that people typically use when searching for information, to make it easier for people to find what they need. Read more about Why We Don’t Use the Terms “the Homeless” or “Homeless People” here.
How expensive is homelessness?
Calculating the total economic and individual costs of homelessness is a complicated process. For example, you can’t put a number to return on investment on the feeling of safety, relief, and comfort of a person spending their first night in their new apartment after a long period of homelessness.
However, you can contrast the cost of their new apartment, the subsidies they are receiving to pay the rent, and the ongoing support services that will help them maintain their housing, with the emergency, health care, and justice system costs that often go hand-in-hand with chronic homelessness.
This is typically how social scientists calculate the cost of homelessness.
According to the National Alliance to End Homelessness, a person experiencing chronic homelessness costs the taxpayer an average of $35,000 a year (2016). In another study of 5,000 people experiencing Severe Mental Illness (SMI) and homelessness in New York City, the average annual cost of service use was calculated to be around $40,500 per person.
Father Joe’s Villages piloted a program called Project 25 that provided housing and intensive services to San Diego’s top 25-40 most frequent users of public services.We found that before individuals started the program, the average annual cost of public services per person was nearly $111,000.
However, the precise amount depends on the individual. In a case made famous by an article by Malcolm Gladwell, “Million Dollar Murray”, one man experiencing homelessness and alcohol use disorder in Reno, Nevado, racked up an approximate million dollars in service use costs over his 10 years of homelessness ($100,000/year!).
The 2019 Regional Taskforce on the Homeless Point-in-Time Count found that 1,664 individuals in San Diego were experiencing chronic homelessness, around 21% of the total homeless population.
Even if you took half that number—presumably the top 10% of service users–and multiplied that number with the more modest amount of $35,000 in service costs per individual, you would be looking at a total annual cost of nearly $30 million dollars.
Why is homelessness expensive?
The term chronic homelessness refers to individuals who have experienced homelessness for a year or longer, or who have experienced at least four episodes of homelessness in the last three years and also have a diagnosed disability that prevents them from maintaining work or housing (Department of Housing and Urban Development).
Whether a person is chronically homeless or not, studies consistently show that people experiencing homelessness are associated with greater emergency room use, greater inpatient admissions, and longer hospital stays than their housed counterparts.
However, due to the toll of ongoing homelessness on their bodies, minds, and spirits, people experiencing chronic homelessness are often considered “super-users” of emergency departments, inpatient hospital stays, psychiatric centers, detoxification programs, and jails. Without stable housing or the funds to pay for emergency services, tickets, or other costs, these costs often fall to the City and, by extension, taxpayers.
Typically, people experiencing chronic homelessness need a higher level of care because they have histories of severe mental illness, substance use, or physical disability. Studies have found that these “super-users” typically make up around 10% of the population of those experiencing homelessness and are the most expensive of all.
Because of the harsh nature of homelessness—exposure to weather and the elements, the influence of instability on mental health, the health impacts of less nutrition and comfort, the regular use of substances (by some)—our neighbors living without shelter for long periods of time will more often need emergency medical care and psychiatric assistance.
Additionally, “Homeless people are often arrested for crimes associated with survival strategies, such as entering private property or sleeping on a park bench” which results in tickets, fines, penalties, and jail costs that the person cannot afford to pay.
How much does homelessness cost the economy?
As detailed above, there are high taxpayer costs for the use of public services, especially for people experiencing chronic homelessness. In the U.S., on a single night, there are more than 110,000 individuals experiencing chronic homelessness.
This means that there are potential costs of billions of dollars through the use of hospitals, social services, and jails.
How does homelessness affect the economy?
Homelessness is more of a reflection of the impact of the economy and housing market on people than it is an influence on the economy. People become homeless because of the unaffordability of housing, lack of job opportunities, and the lack of availability of social safety nets.
The term chronic homelessness, after all, is applied to people living with mental illness, substance abuse disorder, or physical disability, and these individuals often have not received the adequate care needed to keep them from falling into homelessness.
Using data from the 2008 Great Recession, the Economic Roundtable found that ten percent of unemployment caused by the recession was connected to subsequent homelessness.
In the Economic Journal of European Policy, John M. Quigley and Steven Raphael argue that “simple economic principles governing the availability and pricing of housing and the growth in demand for the lowest quality housing explain a large portion of the variation in homelessness among US metropolitan housing markets.
Furthermore, rather modest improvements in the affordability of rental housing or its availability can substantially reduce the incidence of homelessness in the US.”
In other words, the lack of available affordable housing and higher unemployment rates are linked to greater rates of homelessness, and in turn, greater costs to the economy.
Investing in preventative solutions, such as building more affordable housing, and compassionate care, such as supportive housing for chronically homeless people with disabilities accompanied by comprehensive services, can improve the lives of neighbors in need and the entire community.
How much does the U.S. spend on homelessness?
Considering the many public, nonprofit, and private entities working across the U.S. to end homelessness, it can be difficult to calculate the total of how much the U.S. spends on homelessness services.
The National Alliance to End Homelessness calculated that, in 2021, the U.S. federal government enacted over $51 billion in funding for selected homelessness and housing programs. This, of course, does not include city, county, or private dollars invested in homelessness and affordable housing as well.
In a 2015 study, researchers estimated that the total revenues for nonprofits providing shelter to people experiencing homelessness were approximately $8.5 billion, some of which likely includes some Federal funding.
However, that number doesn’t take into consideration additional support services, supportive housing programs, or health services for people who are homeless.
According to Giving USA 2021: The Annual Report on Philanthropy for the Year 2020, giving to human services totaled $65.14 billion. While not all of these funds went to homeless services specifically, we know that a portion of these funds includes philanthropy benefiting homeless services.
Altogether, with this information, we can assume that total spending on preventing and ending homelessness in the U.S., is a multi-billion dollar investment each year.
How much does San Diego spend on homelessness?
In the 2020-2021 San Diego budget, the city spent $64 million through its Homelessness Strategies Department, which oversees and develops homelessness-related programs and services. Most of this was spent on outside contracts, which likely include programs offered by homelessness service providers.
However, there is additional spending across the County through Housing and Health Services and other government entities. Right now, there is no one entity that calculates total spending.
In 2017, NBC and Voice of San Diego joined together for an investigation of total spending on homelessness in San Diego across the 2015 and 2016 fiscal years. They found that San Diego spent more than $630 million, with funding from the County of San Diego, San Diego Housing Commission, the City of San Diego, and the individual cities across the county. Construction of new housing made up 85% of the total spending, with support services representing the remaining funds.
Of course, with housing unaffordability going up in San Diego, inflation, and the effects of the COVID-19 pandemic, we can assume that spending has gone up considerably since 2015/16.
How much does California spend on homelessness?
$10.7 billion has been earmarked in the 2021-22 budget to fund 50 housing and homelessness-related programs across California. A large portion of funds earmarked for homelessness, $1.5 billion, would go to housing to get people off the streets and into treatment over the next two years.
This would include the building of “tiny homes” and other temporary shelter options. The other $500 million would be for cities and counties to find housing for people now living alongside highways and medians.
This does not include the spending of non-state money in individual counties and cities across California and the private dollars invested in nonprofits that fill the gaps left by publicly-funded services.
Would ending homelessness save money?
In Denver, offering supportive housing to individuals experiencing chronic homelessness saved $15,733 per year, per person in public costs. In this specific case, the savings were enough to offset the cost of the program and save thousands of taxpayer dollars per person.
“Most studies have observed decreases in justice costs… By providing housing to homeless people and support to stabilize mental health symptoms, a decrease in police contacts, arrests, detentions, and court appearances can be expected,” writes Angela Ly and Dr. Eric Latimer in their review of studies on the costs of homelessness.
Another study prepared for The California Endowment and the California HealthCare Foundation found that providing a home to people experiencing homelessness who are frequent users of public services reduced their number of emergency department visits by close to 61% after two years of housing. Healthcare costs were reduced by 59% and hospitalizations decreased by 77%.
Father Joe’s Villages’ Village Health Center triage visits resulted in over $4.1 million in savings to the City of San Diego due to decreased use of hospital emergency rooms and ambulances.
Additionally, Father Joe’s Villages’ Project 25 program, the program that provided housing and support services to San Diego’s top 25-40 most frequent users of public services, saved $3.5 million of taxpayer and other social service dollars over the course of a 24 month period.
As a result of Project 25, the median expense per user decreased from nearly $111,000 in 2010 to less than $12,000 in 2013. A study focused on the first 28 people to move into permanent housing indicated the net return on every dollar spent on the program averaged 235%.
All of this points to the answer that ending homelessness would save the public a significant amount of money.
How much would it cost to house every homeless person in the U.S.? How much would it cost to fix homelessness?
It would be easy to multiply the cost of constructing the average affordable housing unit with the number of homeless individuals in the U.S. to calculate the cost of housing for every person experiencing homelessness. According to researchers at the University of California, Berkeley, the cost of building a 100-unit affordable project in California in 2016 was $425,000 per unit. Multiply that by 160,000 and you’re looking at a cost of $68 billion in California alone.
However, ending homelessness entails more than just simply constructing housing.
A large part of the cost would be in “capacity-building”, which, as the United Nations defines it, is “the process of developing and strengthening the skills, instincts, abilities, processes, and resources that organizations and communities need to survive, adapt, and thrive.”
Building high-density affordable housing in California, and most of the U.S., for example, includes complicated funding and permitting processes that can make a simple project take years to complete. Passing legislation to streamline efforts to build housing across the U.S. would speed up the building process and reduce overall expenses.
Secondly, people experiencing chronic homelessness may need ongoing supportive services to stay safely housed for good, which means communities would need to build programs and employ case managers to assist people with serious disabilities. Investments such as this dramatically increase the retention rate in permanent housing.
If our leaders, government, and communities decided to invest the resources necessary to ensure affordable housing was available and affordable for every American, it is possible to end homelessness in the U.S. We know what solutions work. As a country, we just need to make the commitment for this brighter future.
Bottom Line on the Costs of Homelessness
Ending homelessness takes a substantial investment from a variety of resources with both public and private dollars. However, the return on investment means tax savings from public services, safer communities, and, of course, the moral and social benefits of improving the lives of those most in need.
Finally, let’s put these investments into perspective, Americans spend…
- $69 billion to $87 billion on hair care products a year
- $21.38 billion dollars on Starbucks per year
- $29.1 billion on lawn care per year
While many people shy away from the costs of ending homelessness in fear that the expenditures are unnecessary or prohibitive, investing in ending homelessness means a more secure and brighter future for everyone. The money is being spent – Let’s do it wisely.
