The Economic Benefits of Ending Homelessness

  • 18.8.2023
  • Vieraskynä
  • Cost-effectiveness, Ending homelessness, Homelessness, Housing First, Housing first in Finland

Ending homelessness is a cost-effective and profitable use of public finances. In her blog, Elisabetta Leni, a researcher investigating the cost-effectiveness of the Housing First model at Y-Säätiö, explains how ending homelessness saves resources and fiscal assets elsewhere.

Finland is the only country in the European Union where homelessness has decreased in recent decades. The national programs to end homelessness and the adoption of the Housing First approach to combat long-term homelessness have created a framework in which even the most vulnerable have been able to become stably housed.  

From an economic perspective, the Finnish strategy has involved investing in affordable housing and spending on support and prevention services, while relying on mainstream social, health and welfare services. Several studies have highlighted the economic benefits of this strategy. In fact, the cost of providing housing and support services to homeless people seems more than justified when considering the economic benefits that reducing homelessness can generate in various government functions. Below, I consider the benefits for three types of government spending (healthcare, public order and safety, and social protection), and suggest that some gains become apparent only in times of crisis. 

Better Access to Services Saves Resources 

Long-term homelessness is often associated with chronic health conditions, substance abuse, and mental health problems. Yet long-term homeless people have difficulty accessing social and health services. They may face administrative problems because they are not registered where they need a service. In addition, the complexity of the system and the lack of necessary skills can hinder access to services. Moreover, the system may not be adequately prepared to meet their complex needs. As a result, the long-term homeless are more likely to use social and health services when the need is acute enough to require an emergency response.  

Once housing is secured, the administrative barriers become easy to handle and support workers help clients to access the services they need on a regular basis. In turn, the healthcare system saves resources because emergency services are more expensive than regular services. 

Safer Society Pays Off 

Housing instability and homelessness are associated with recidivism among ex-offenders. For other vulnerable groups, homelessness increases the likelihood of interactions with the police and involvement with the justice system. Being convicted of a crime carries high costs for law enforcement, court appearances, incarceration, or community sanctions. Housing, even with support services, costs less per night than staying in prison. Preventing homelessness among ex-offenders and other vulnerable groups is not only a way to reduce the costs of the criminal justice system, but also a way to build a safer society for everyone.  

Minimizing the Negative Effects of Homelessness 

 Homelessness affects people’s physical and mental health, their relationships, and their role in society. The longer a person is homeless, the more difficult it is to make positive progress in life, to work, and to be an active member of society. Preventing homelessness or providing a rapid pathway to housing stability means minimizing the disruptive effects of homelessness and giving people the opportunity to rebuild their lives, study, work and pay taxes. With homelessness affecting people at younger ages than in the past, now more than ever, spending on homelessness is an investment with high social and economic returns.   

Eliminating Homelessness Strengthens Resilience in Times of Crises 

During the pandemic, everybody was encouraged to stay at home to prevent the spread of infection. In many countries, homelessness became a matter of public health emergency and large sums of money were spent on hotels and private rental accommodation to shelter the homeless. In addition, many countries enacted moratoria on evictions, and there is still a backlog of people facing eviction in a market with rising interest rates and housing costs. Finland has been in a much better position than most, if not all, EU countries and the UK, thanks to the homelessness strategy pursued in recent decades. Working to ensure that everyone has a home has meant providing long-term solutions to homelessness, facilitating the management of the crisis, and avoiding emergency spending. 

By investing in affordable housing, support and prevention services, the Finnish homelessness strategy has been effective in reducing homelessness. When each government function is considered in isolation, the economic gains may seem limited. Only by taking a broader view of public finances can the economic importance of supporting the housing stability of the most vulnerable be fully appreciated, and ending homelessness becomes a profitable expenditure for the state. Ending homelessness is not only a social priority, but also a cost-effective public intervention.