For mayors, city councils and even homeless providers it often seems that placing homeless people in shelters, while not the most desirable course, is at least the most inexpensive way of meeting basic needs. This is deceptive. The cost of homelessness can be quite high, particularly for those with chronic illnesses. Because they have no regular place to stay, people who are homeless use a variety of public systems in an inefficient and costly way. Preventing a homeless episode, or ensuring a speedy transition into stable permanent housing can result in a significant cost savings.

• In Minnesota, there was a $9,600 per person reduction in costs to the state once formerly homeless people were housed in supportive housing (comparing the annualized cost of supportive housing with that of mental health, detoxification, corrections, and health systems costs over two years). Further, such housing resulted in a 26% increase in employment.¹

Following are some of the ways in which homelessness can be costly.

Hospitalization and Medical Treatment

People who are homeless are more likely to access costly health care services.

• According to a report in the New England Journal of Medicine, homeless people spent an average of four days longer per hospital visit than did comparable non-homeless people. This extra cost, approximately $2,414 per hospitalization, is attributable to homelessness.²
• A study of hospital admissions of homeless people in Hawaii revealed that 1,751 adults were responsible for 564 hospitalizations and $4 million in admission cost. Their rate of psychiatric hospitalization was over 100 times their non-homeless cohort. The researchers conducting the study estimate that the excess cost for treating these homeless individuals was $3.5 million or about $2,000 per person.³

Homelessness both causes and results from serious health care issues, including addictive disorders⁴. Treating homeless people for drug and alcohol related illnesses in less than optimal conditions is expensive. Substance abuse increases the risk of incarceration and HIV exposure, and it is itself a substantial cost to our medical system.

• Physician and health care expert Michael Siegel found that the average cost to cure an alcohol related illness is approximately $10,660. Another study found that the average cost to California Hospitals of treating a substance abuser is about $8,360 for those in treatment, and $14,740 for those who are not.⁵

Prisons and Jails

People who are homeless spend more time in jail or prison -- sometimes for crimes such as loitering -- which is tremendously costly.

• According to a University of Texas two-year survey of homeless individuals, each person cost the taxpayers $14,480 per year, primarily for overnight jail.⁶
• A typical cost of a prison bed in a state or federal prison is $20,000 per year⁷

Emergency Shelter

Emergency shelter is a costly alternative to permanent housing. While it is sometimes necessary for short-term crises, it too often serves as long-term housing. The cost of an emergency shelter bed funded by HUD's Emergency Shelter Grants program is approximately $8,067,⁸ more than the average annual cost of a federal housing subsidy (Section 8 Housing Certificate).

Lost Opportunity

Perhaps the most difficult cost to quantify is the loss of future productivity. Decreased health and more time spent in jails or prisons, means that homeless people have more obstacles to contributing to society through their work and creativity. Homeless children also face barriers to education.

Dr. Yvonne Rafferty, of Pace University, wrote an article which compiled earlier research on the education of homeless children, including the following findings:

• Fox, Barnett, Davies, and Bird 1990: 79% of 49 homeless children in NYC scored at or below the 10th percentile for children of the same age in the general population.
• 1993: 13% of 157 students in the sixth grade scored at or above grade level in reading ability, compared with 37% of all fifth graders taking the same test.
• Maza and Hall 1990: 43% of children of 163 families were not attending school.
• Rafferty 1991: attendance rate for homeless students is 51%, vs. 84% for general population.
• NYC Public Schools 1991: 15% of 368 homeless students were long-term absentee vs. 3.5% general population.⁹

Because many homeless children have such poor education experiences, their future productivity and career prospects may suffer. This makes the effects of homelessness much longer lasting than just the time spent in shelters.

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¹T. Tilson, Minnesota Supportive Housing Demonstration Program: One Year Evaluation Report. New York City, New York, Corporation for Supportive Housing, 1998.
²Salit S.A., Kuhn E.M., Hartz A.J., Vu J.M., Mosso A.L. Hospitalization costs associated with homelessness in New York City. New England Journal of Medicine 1998; 338: 1734-1740.
³Martell J.V., Seitz R.S., Harada J.K., Kobayashi J., Sasaki V.K., Wong C. Hospitalization in an urban homeless population: the Honolulu Urban Homeless Project. Annals of Internal Medicine 1992; 116:299-303.
⁴Rosenheck, R., Bassuk, E., Salomon, A., Special Populations of Homeless Americans, Practical Lessons: The 1998 National Symposium on Homelessness Research, US Department of Housing and Urban Development, US Department of Health and Human Services, August, 1999.
⁵From the website of the National Law Center on Homelessness and Poverty, May 8, 2000.
⁶Diamond, Pamela and Steven B. Schneed, Lives in the Shadows: Some of the Costs and Consequences of a "Non-System" of Care. Hogg Foundation for Mental Health, University of Texas, Austin, TX, 1991.
⁷Slevin, Peter, Life After Prison: Lack of Services Has High Price. The Washington Post, April 24, 2000.
⁸Office of Policy Development and Research, U.S. Department of Housing and Urban Development, Evaluation of the Emergency Shelter Grants Program, Volume 1: Findings September 1994. p 91.
⁹Rafferty, Yvonne The Legal Rights and Educational Problems of Homeless Children and Youth pp 42-45. As reported on the website of the National Law Center on Homelessness and Poverty, May 8, 2000.