To Reduce Government Costs, Spend Wisely on Housing

by Maya Brennan

Although home’s central role in our lives has long been an accepted truth, how housing matters—and to what—has only recently been the subject of extensive research. The growing evidence base shows connections between various dimensions of housing and a person’s health, educational attainment, economic security, and asset growth. Studies have also documented the broader benefits of permanent supportive housing models, including net cost savings compared with usual care for chronically homeless people and reduced recidivism among people released from prison. While some key questions need further analysis, there is already sufficient evidence to support continued and expanded investment in housing to improve life outcomes, support the national economy, and prevent even higher costs to other government entities. The case for health and housing partnerships is strong, though policy and program experts still have work to do to ensure the evidence is actionable.

For high-need populations, such as homeless people with mental health issues or substance use disorders, cost studies have documented that permanent supportive housing can prevent costly hospitalizations and emergency room visits, generating net savings. For homeless families, a long-term housing subsidy improved outcomes for parents and children at an average three-year cost modestly higher than allowing families to continue in the emergency shelter system. The strength of the evidence has led to national initiatives to end chronic, veteran, and family homelessness. Yet funding these approaches at a scale that suits the size of the problem remains a challenge.

For low-income older adults, federally subsidized senior housing with on-site services reduces hospital admissions and, when health education was in the picture, lower Medicare Part D payments. Average Medicaid payments, however, went up, perhaps because of participants connecting with medically necessary programs for the first time.

A housing-plus-service model—whether targeted to those at risk of homelessness or to low-income seniors—has documented benefits for its residents, with real or potential benefits to the public. The next step would be expanding models that are proven to generate a win-win, while continuing program work and analysis to ensure that programs that are effective for residents can also deliver on costs.

The research on housing-related health problems, such as lead exposure, asthma, injury, depression, hostility, and even cardiovascular disease, suggests that improvements in housing affordability, quality, stability, and neighborhood safety can also reduce costs for health payers. Yet achieving widespread housing and health partnerships has not been easy.

At the How Housing Matters 2016 conference, Jane Graf, CEO of Mercy Housing, described sympathetic conversations with health care organizations that end with a simple nodding of heads among like-minded people rather meaningful partnerships. Why? Each system operates with different structures and incentives. Until our work is more aligned, partnerships will struggle.

Managed-care organizations, such as UnitedHealthcare Community and State, have identified that they can achieve bottom-line benefits by making investments in affordable housing developments that serve a substantial share of their members. And a joint investment in housing by six health care organizations in Portland, Oregon, will deliver a mix of workforce housing and supportive housing for those with physical or mental health needs.

These examples are striking because they are both drawn from the evidence, yet are relatively rare. Housing providers do not typically know what insurers their residents use, and insurers are unlikely to make a direct dollar investment in prevention without knowing that the return on investment will accrue to them rather than to a competitor. And the return-on-investment question is just a slice of the challenge.

Affordable housing is a complex system, as is health care. Simply navigating the systems to find a potential partner and understand how to work together can be its own challenge. The federal government, states, and philanthropy can all help unlock the answer to systems alignment to prevent avoidable costs for Medicaid, Medicare, and private payers while improving well-being.

Beyond Health

Understanding the spillover benefits of better housing conditions for other systems’ budgets (e.g., health, schools, criminal justice) is important when under pressure to tighten the belt. If housing program budgets are investments that reaps rewards in reduced costs to other systems, it would be foolish to cut them.

Struggles with the cost of housing affect people in rural communities, suburbs, and cities in every state. With housing-related needs spanning the nation, net savings to be gained to government budgets and improved well-being for vulnerable populations, investments in housing and in the research and policy development to further explore what works and how are needed during times of austerity. When every dollar counts, invest in solutions like housing that offer a double win.