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Study: Housing the Homeless Can Drastically Cut the Government's Health Care Costs

It adds to the growing body of evidence that addressing homelessness saves money elsewhere.

Children on a bus look at homeless people in the Skid Row area of Los Angeles.
For years, homeless advocates have argued that if governments put up money to house people, they will reap cost savings down the line. A new study appears to validate that argument.

Housing for Health, a division of the Los Angeles County Department of Health Services, places chronically homeless people into housing and connects them to a case manager for support services, such as substance abuse treatment. For every $1 spent on the program, the county government saved $1.20 in health care and other social service costs, according to a report published on Tuesday by RAND Corporation, a research firm.

“The study provides more fuel to say that what we’re doing is effective,” says Marc Trotz, director of Housing for Health. “The implications are that we need to do more of this, faster.”

Homelessness is a pressing issue for Los Angeles County. Out of 43,854 homeless people, the percentage without shelter increased from 70 percent to 75 percent in the past year, which is one of the highest unsheltered rates of any metro area in the country. Overall homelessness in the county also grew by 7 percent.

Since launching in 2012, Housing for Health has found permanent placements for more than 4,000 people. The program uses a “housing first” approach, meaning that people don’t need to be sober or in mental health treatment before receiving help. Unlike most places, the county offers rent subsidies to people who don’t qualify for federal housing vouchers. The program is also unusual in the sense that a local health department is investing in housing services.  

Of the 890 individuals in the study, most had been chronically homeless with a combination of medical, mental health and substance abuse conditions. Over two and a half years, researchers looked at participants’ use of 10 different public services before and after entering the housing program.

Altogether, the program resulted in a nearly 60 percent reduction in those public service costs. People in the program made fewer visits to the emergency room, had shorter inpatient stays at public hospitals and visited outpatient clinics less often. The length of time that people received General Relief -- monthly cash subsidies provided by the county to low-income individuals -- decreased by an average of 1.38 months.

In the year before receiving housing and case management, the cost per person was $38,146; in the year after entering the program, the per-person cost was $15,358. Even after taking into account the cost of the housing program, the county saw a 20 percent net savings.

"It suggests that this is a cost-saving approach to addressing homelessness," says Sarah Hunter, one of the report's co-authors.

The study comes at a time when some state and local governments are testing the notion that investing in housing and case management would result in comparatively greater savings in other areas of government, such as health care, social services and criminal justice.

The RAND study did not, however, find that housing reduced criminal justice costs. Fewer of the participants were incarcerated after entering the program, but among those who did end up in jail, they stayed an average of 2.76 days longer than before they entered the program. (Hunter, the RAND researcher, says changes in state corrections laws may explain the extended jail stays.)

Hunter also notes that the criminal justice findings are based on a relatively small portion of the overall study population: Of the 890 participants, only 69, or 7.8 percent, spent time in jail the year before the study.

J.B. Wogan is a Governing staff writer.
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