The True Cost of Homelessness

Homelessness is a debt that we all pay for as a society, but you don’t find it on a balance sheet – let’s explore some of the costs associated with homelessness.

Rhiannon Philps Last updated on 28 January 2021.
The True Cost of Homelessness

Despite us supposedly living in an era of unprecedented wealth and prosperity, the issue of homelessness continues to grow.

In figures released at the end of 2019, housing charity Shelter estimated that there were as many as 280,000 people in England that were homeless, an increase of 23,000 since 2016. And this figure is unlikely to include the undocumented ‘hidden homeless’ such as sofa surfers and rough sleepers, so the actual number of homeless people is expected to be even higher.

Homelessness undoubtedly has many costs, notably the human cost for those who find themselves in this situation. However, in this article we will be looking at another cost- the financial cost. There have been some attempts to quantify the cost of homelessness in financial terms, with one calculation by Crisis claiming rough sleeping could cost over £20,000 per individual over a 12 month period. Other estimates from government reports have placed the estimate nearer to £30,000, but of course the exact figures will vary according to each individual’s particular situation and which services they use.

For example, costs will vary between the statutory homeless (those who are legally defined as homeless and who the local authorities are helping) and the “hidden homeless” who are not receiving any official assistance with housing. Costs can also depend on a homeless person’s age, background (including how they have ended up homeless), health, whether they are single or part of a household, and if they are a UK national or not.

Although homeless people are sometimes described as the ‘invisible population’, their impact is evident across many sectors of public spending. From temporary accommodation to NHS services to CPS and police services, there are many costs associated with homelessness, particularly when it is left to become a long-term, chronic issue rather than being dealt with promptly.

In 2016, Crisis conducted a study Better Than Cure? which estimated that public spending on their surveyed group came to £8,630 per person over a 90 day period. From these figures, they calculated that public spending per person over a one year period would be £34,518, and that preventing homelessness for one year would cut public expenditure by £9,266 per person.

Better Than Cure? Estimated costs of single homelessness over one year.

Cost Estimated average per person Estimated annual spending
Drug/alcohol services £1,320 £113,584
Mental health £2,099 £180,560
NHS £4,298 £369,660
Criminal justice £11,991 £1,031,272
Homeless services £14,808 £1,273,488
Total £34,518 £2,968,564

They concluded that, for 65% of the surveyed group, public spending was likely to have been less if their homelessness was prevented- an argument that is supported by other findings we discuss in this article.

Using statistics and insights from a number of charities and official sources, we’re going to delve into some of the financial costs of homelessness and see how these costs only worsen the longer a person remains homeless.

A hit to the government’s coffers

A document published by the coalition government in 2012 revealed that the government was already spending up to £1 billion a year on homelessness. It is likely this number will have risen over the last seven years, purely due to inflation.

Bearing this initial cost in mind, it equates to £24,000 - £30,000 per person experiencing homelessness, not far off the average annual income for the average UK worker.

Government support

Despite our country’s wealth, our economy is failing to produce the kind of jobs that ensure everyone can afford to live in a home of their own. This forces many to seek some form of financial assistance, but not everyone has the adequate level of support they need.

Even for the average worker, nominal wages appear to be failing to keep pace with the cost of living, let alone the cost of housing.

Here are some key numbers on two important trends that have been observed in recent years:

  1. The number of rough sleepers across England
  2. The overall level of household debt

As you can see, the figures are moving in a clear upward trajectory, save from a small dip in the 2018 figure for the number of rough sleepers.

2013 2014 2015 2016 2017 2018
Number of Rough Sleepers 2,414 2,744 3,569 4,134 4,751 4,677
Total Household Debt £1,502bn £1,541bn £1,594bn £1,671bn £1,735bn £1,785bn

Homelessness is the result of myriad societal factors and finances have an undeniable role to play in someone’s capacity to keep a roof over their heads.

For the more vulnerable in society, the benefits system is one factor to consider. The Department of Work and Pensions (DWP) overhauled the benefits system from 2010 onwards, with existing benefits rolled into a single service called Universal Credit.

Universal Credit was intended to simplify the process of seeking financial support for those who needed it most. But it has faced great criticism in recent years. Rollout was more expensive and took longer than intended; waiting periods of up to five weeks have been commonplace. The switchover to the new Universal Credit benefits scheme left some people with significant gaps in their income, with not much to support them otherwise; the knock-on effect of which could leave them without funds for housing – a big risk factor for homelessness.

Even if someone is homeless and without an address, they can still apply for universal credit. For the address they can put a trusted friend or family member, a hostel (if they are staying in one), or potentially even their local job centre. Despite this, not every homeless person will be in receipt of any benefits. This could be for a number of reasons as, for example, they may be unaware of the services that are on offer to them, think they aren’t eligible for help, or want to avoid using official services. This has particularly been highlighted as an issue among women who are homeless, especially those who have experienced domestic violence.

It is hard to determine the cost a homeless person places on the authorities with regards to benefits, as it’s difficult to predict their situation if they did have a permanent roof over their heads. For example, even if they had a home, they might still need aspects of universal credit for unemployment support, housing benefit, and others. Although having a permanent home puts someone in a better position to successfully apply for a job and live without needing any added assistance, it is not guaranteed.

To further complicate matters, it is also possible for someone to lose their home and continue to keep a job, with figures from Shelter in 2018 showing over half of homeless families in temporary accommodation are in work.

Because of this, it is near-impossible to calculate the sums spent on benefits to the homeless and compare them to an alternative situation where they have a home. It is entirely possible that the initial costs on public services will in fact increase when a homeless person is housed, as they reconnect with different services and support channels, including universal credit. However, in many cases, this cost will only be a small proportion of the overall cost that the authorities have to pay if a situation of homelessness is allowed to continue, due to pressures on housing services in particular.

Not so safe as houses

The lack of a permanent home is something all homeless people have in common, but they may cope with this in different ways.

Some will rely on family and friends to put them up, while others will be forced to sleep on the streets or in other unregistered places. However, others will apply for shelter with a charity or in temporary, emergency accommodation, and this is an area that will impose a financial responsibility on the government and local councils.

It is these so-called statutory homeless that approach the authorities for help that make up the figures showing how much the government and local authorities spend on temporary housing. However, people that are not initially rehoused in temporary accommodation may in time apply to authorities and be eligible for further housing support if their situation escalates. This worsened situation could put a greater strain on other government resources, and highlights how an early helping hand could have prevented the situation spiralling and costing more.

The responsibility for determining how much help authorities give a homeless person is devolved to the government of each nation. Focusing on England, the Homeless Reduction Act 2017 came into force in April 2018, with the aim of preventing homelessness and giving greater help to those in need. However, despite making early intervention a priority, the effects are seemingly yet to be felt as authorities continue to pay a significant sum to house the increasing homeless population.

Between April 2018 and March 2019 councils spent £1.1 billion on temporary accommodation, an increase of 75% in the last five years. More than 30% of this total was spent on emergency B&Bs, a rise of 111% in the last five years, showing that supporting and accommodating the homeless population continues to put great strain on public finances.

Below are some examples of the levels of spending on temporary accommodation from a range of local authorities, as revealed by InsideHousing’s FOI request.

Council 2013-14 2014-15 2015-16 2016-17 2017-18
Newham £35.11m £39.52m £49.52m £61.06m £61.1m
Westminster £42.27m £39.18m £45.61m £46.45m £48.02m
Hillingdon £7.3m £5.94m £5.96m £6.16m £5.37m

Newham stands out as one of the highest-spending local authorities when it comes to temporary accommodation.

This is just one example – all over England, councils are forced to make difficult decisions, allocating large chunks of their budgets just to make sure people have a roof over their head. Even Westminster’s local authority faces a significant cost for providing temporary accommodation, with latest estimates setting it at £48 million, while Hillingdon, which includes Prime Minister Boris Johnson’s constituency of Uxbridge, has consistently spent £5-7 million each financial year.

Studies on specific local areas have reported that public-funded hostels and supported housing for homeless people have been used for longer periods than intended. Even though they are meant to be a temporary form of accommodation, a Housing First report highlighted that nearly two-thirds of a group of long-term homeless people had spent at least five years in temporary accommodation. Although the studies are several years old, it indicates that a key reason why housing support is such a strain on public expenditure is because homeless individuals are not successfully moving out of the homeless cycle. This further supports the view that tackling homelessness before it becomes a sustained problem can ultimately save the authorities money.

An unhealthy burden

“We are noticing a steep increase in the number of people coming to Glass Door's homeless shelters straight from the hospital. We should all be shocked and horrified by the growing number of people who rotate in and out of hospital back to the street.

"Glass Door runs the largest network of open-access emergency winter night shelters in the country, but the shelters offer only a mat on a church hall and aren’t suitable for people with serious health conditions. Our shelters are warm and safe, and while this is clearly better than sleeping on the street, they are far from ideal for post-hospital recovery.

"Earlier this winter, a shelter manager had to call an ambulance for a shelter guest who was having a seizure - this same man had been discharged from hospital earlier that day. Another guest of our shelters is undergoing chemotherapy treatment. A man with a serious health condition has been between our shelters and the hospital constantly since we opened our doors in November.

"Nobody whose health is suffering like this should have to sleep rough. Yet that is the reality. Far more is needed to stop the vicious ‘hospital to homelessness’ cycle.”

Lucy Abraham, COO of Glassdoor Homeless Charity

One of the ways we feel the effects of homelessness is through the way it impacts the National Health Service (NHS). Unsurprisingly, those who are without a home or who find themselves in insecure living arrangements often struggle with ill-health, both physical and mental, which can place a greater pressure on public health services.

The mortality rate of the homeless population has been increasing each year, underlining the prevalence of health problems they are suffering with.

2013 2014 2015 2016 2017 2018
Number of deaths among people experiencing homelessness 482 475 508 565 597 726

78% of homeless people were reported as having a physical health condition in the Health Needs Audit study, but their uncertain situation makes it difficult for them to get these health problems seen to. Rough sleepers and those without stable living arrangements find it harder to access services, such as their local general practitioner (GP). This means they lose a key point of contact that could have helped to prevent any health problems from worsening, and as a result they may make more use of A&E hospitals, and emergency services.

A Department of Health study found that people experiencing homelessness are 3.2 times more likely to be inpatient admissions to hospital. The gross cost of this over the typical year was estimated to be as high as £85.6 million, if you include outpatient usage, emergency attendance, and other services used when patients without a home are admitted to hospitals.

Drug and alcohol dependency are common problems among the homeless population, with Crisis finding that those who use drugs are seven times more likely to be homeless than the rest of the population. It also found that 27% of the homeless people it works with tend to have what they deem problematic alcohol or drug use, which will result in further costs for the healthcare services.

The cost of treatment and the support services involved in tending to these issues is often higher than the equivalent treatment for someone with these problems in stable accommodation receiving more comprehensive and coordinated support. One report looking into the matter highlighted two case studies where drug treatment, detox costs, and mental health support costs reduced from £16,000 to £2,700, and from £32,000 to £3,000 when the individuals moved from being homeless and receiving intermittent support to having more secure living and treatment arrangements.

Mental illness also plays a large part in the story of homelessness in the UK at the moment. Research by the charity St Mungo’s estimated that 40% of all rough sleepers have some kind of mental health problem, and many of them also show signs of poor physical health and substance abuse.

These three factors go some way in explaining why homeless people can cost the health services more to treat and support than an average person living in a home. Being homeless can make it more difficult for an individual to receive immediate care and adequate treatment before their health problem escalates, which can then cause the problem to become more long-term and recurrent and so more expensive to treat.

Having a home would not only help to improve the overall health of an individual, but it would also make it easier for a person to register with a GP for example, which would help to treat any problems before they become more serious.

Crime doesn’t pay

Homelessness has been criminalised for hundreds of years, with the Vagrancy Act of 1824 still in force today. This means that police resources and public funding have been used to prosecute, fine, and even imprison those found to be rough sleeping and begging. Putting aside the question of how morally right this is, these actions have undoubtedly cost the authorities money that could otherwise have been saved if these individuals were to have a home.

These are not the only costs we have to consider. As we have already seen, drug addiction is a common problem among the homeless population and this can become costly for the authorities to deal with. For example, total costs for a drug offence conviction are estimated to be around £16,000, costs which perhaps could have been avoided in the case of homeless offenders.

There are clear links between homelessness and offending, with a Surveying Prisoner Crime Reduction survey showing that nearly 40% of prisoners said they would need help finding somewhere to live after their release. It also found that 79% of prisoners who stated they were homeless before custody were reconvicted with a year of their release. This figure is particularly striking, as it suggests that people experiencing homelessness with some criminal record are likely to experience a life regularly in and out of prison, consequently accounting for multiple judicial costs.

Would having a home change these figures? It would appear so, as the same survey found that 60% of people in prison believed having a home of some sort would be a major factor in stopping them from re-offending again. Of course, it’s impossible to say for certain what would happen if a homeless re-offender had a home, but it seems likely that it would be one way to help them avoid prison.

Having a permanent home and the right assistance to ensure they are financially secure would help an individual leaving prison to get their life back on track. A homeless person would tend to lack this support network, and so could struggle to turn their life around, resulting in the authorities spending even more on prosecution and prison services, not to mention the other costs we have previously discussed in the article.

Where do we go from here?

“It is estimated that the average cost of homelessness for each individual can equate to tens of thousands of pounds per year in public spending, taking into account health services, preventative services and housing costs plus much more.

"There are many ways individuals and organisations can help reduce homelessness however, the first thing is to understand the problem. Far too many people act on impulse which does not help, and in fact makes things worse. The only real way to help is to find a charity or organisation that works frontline and supports them with money, items and your time. We need to let professionals do what they do, not think that the issue is simple and a sandwich will sort someone out.

"The provision of temporary accommodation for the homeless is expensive. However, it rarely addresses the underlying issues relating to mental health and drug addiction when it comes to rough sleeping - but this is the biggest cost for homeless families and is growing year by year. The only way to address this long-term problem is to invest in more affordable, long term housing and council houses.”

Nick Buckley, MBE and CEO of Mancunian Way

This article has shown the variety of costs that are associated with homelessness. While every individual will have their own reasons for being homeless and will use public services to different extents, it seems evident that authorities are having to spend more money on supporting the growing homeless population.

With the provision of emergency and temporary accommodation in particular, authorities are paying millions of pounds to support homeless households but seemingly without successfully tackling the root causes that would enable them to move out of the homeless cycle they have found themselves in. And, as Nick Buckley explained, it’s only by tackling the underlying issues associated with homelessness that real change can be made.

This is why numerous homeless charities and studies have highlighted the importance of early intervention, as prevention of homelessness, or at least addressing the situation early, will help to reduce potentially larger costs further down the line if the situation is allowed to worsen. Long-term homelessness where people are in a cycle of sleeping rough, moving between temporary accommodation, and potentially including substance abuse and prison, adds a considerable pressure and cost to public services.

Supporting individuals as soon as they are at risk of homelessness can minimise the risk of these costs escalating, but this is easier said than done. Recent measures, such as the 2017 law change have helped to alter the focus of how authorities support the homeless, but the figures are yet to show any major changes or reductions in expenditure. With a growing homeless population, public bodies are likely to be put under increasing financial pressure; costs which almost certainly could be avoided if more of these individuals were in homes of their own.

This shows that, not only is early prevention of homelessness better for the affected individuals and families, but it can also benefit the public authorities by minimising how much they need to spend on the various support services.

“Study after study shows the heavy burden of homelessness on the taxpayer.

"The difference between Glass Door and the majority of shelter provision is that we are open-access. We don’t have qualifying criteria or require proof of homelessness. We don’t ask for referrals or complicated application forms. We believe that a safe place to stay should be a human right. However, we need more than emergency shelters to solve this homelessness crisis.

"The cost-effective and humane solution is stable housing. It would prevent a great deal of suffering among the most vulnerable people in our society and would also ease the burden and the cost on the NHS"

Lucy Abraham, COO of Glassdoor Homeless Charity

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About the author:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

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