In recent years, a number of research studies have provided evidence on the costs of homelessness. Most studies indicate that homelessness is more expensive to society than the costs of solving the problem and there is an economic case for spending money to tackle homelessness. Homeless people use a variety of public services in an inefficient and costly way. Preventing a homeless episode or ensuring speedy transition into stable permanent housing can result in significant cost savings, as well as dramatic improvement to the lives of homeless people.
Research has tried to identify the financial and social costs of homelessness to individuals and society generally, and the economic cost of providing services to help homeless people. Some studies have tried to assess the costs and benefits of investment in services designed to tackle homelessness.
Studies have used different measurement approaches and are of varying quality and robustness. Estimates of the cost to government of homelessness vary widely according to assumptions made about the needs of the particular homeless people concerned (e.g. whether they are street homeless or ready to move into work, whether they are single or have children) and about the cost of the support services required (e.g. around alcohol, drug, mental health or physical health problems).
In partnership with Pro Bono Economics, and building on our Critical Mass research, we have published What’s It Worth? – a guide to financial savings analysis and how it can be used by homelessness services in a robust way.
As well as the often severe social, psychological and physical toll that homelessness has on people, a range of financial costs include:
Expenditure in response to homelessness is located across a range of government budgets. It can include, for example, the costs of:
A National Audit Office report in 2005 estimated that the nation spends around £1 billion a year to prevent and deal with homelessness. This includes central and local government spending on administration, accommodation and support to homeless people, but excludes indirect costs to government (e.g. arising from health or benefits).
A 2009 CLG report on the financial benefits of the Supporting People (SP) programme looked at the cost effectiveness of spending on accommodation-related support services for a range of client groups (including homeless people). This estimated that the net financial benefits from the SP programme is £3.41 billion per annum against an overall investment of £1.61 billion. The associated report shows net benefits by cost category, including accommodation, health and social services, crime costs, etc.
The estimated total annual cost of supporting single homeless people in nearly 13,000 units of temporary accommodation was around £107 million. Providing SP services gave an estimated financial benefit of £97 million annually.
The estimated total annual cost of supporting single homeless people in around 26,000 units of permanent accommodation was around £130 million. Providing SP services gave an estimated financial benefit of £31 million annually.
In 2008, Crisis published reports on the costs of providing private rented accommodation schemes for homeless people.
Whilst cost effectiveness studies are seen as the most straight forward type of economic measurement of cost of homelessness, cost estimation methodology is less advanced in the homelessness sector than comparable areas such as health. Studies assess the direct costs to budgets of government and non-government agencies that can be attributed to the additional services provided to homeless people. They are largely carried out by analysing agency accounts. The majority of studies into costs of homelessness fall into this category.
There are a number of reports which calculate the cost to the state of homeless individuals:
Cost benefit analyses place values on a range of indirect, often difficult to quantify effects and intangible costs and benefits, as well as making assumptions about longer run interactions in the broader economy. Cost benefit studies are therefore more data dependent and open to challenge, and their possible implications for policy more easily rejected than cost effectiveness studies. Methods for estimating benefits have been developed in areas such as health and transport, but are less well developed in the context of homelessness.
Research using cost benefit analysis includes:
Social Return on Investment (SROI) uses cost-benefit analysis and social auditing to capture social value by translating social objectives into financial and non-financial measures. SROI measures the value of the benefits relative to the costs of achieving those benefits with a ratio between net present value of benefits to the net present value of investment. For example, a ratio of 3:1 indicates that an investment of £1 delivers £3 in social value.
Research published in 2009 examines the cost effectivenss and benefits to local public agencies of choice based lettings and homelessness prevention.
The recent increased focus on the costs of homelessness is part of a wider concern across sectors providing services to support people in need. Examples of research published on costs of public services include:
What's it worth?