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The Case for Investing in Last Resort Housing

Executive Summary

It’s cheaper to provide last resort housing to homeless people than to leave them sleeping rough, a new cost-benefit analysis has found.

The analysis found governments and society benefit more than they spend by providing last resort housing to homeless individuals. This is mainly through reduced healthcare costs, reduced crime, and helping people get back into employment or education.

This comprehensive cost-benefit analysis was commissioned by a team of experts from the University of Melbourne, NGOs, and architecture firms. The analysis was conducted by consulting firm SGS Economics and Planning.

Key points:

The number of people sleeping rough in Melbourne’s streets has increased by over 70% in the last two years. Homelessness is now at emergency levels. Key causes are the unaffordability of housing, people escaping domestic violence and a structural lack of social housing.

There has been a reduction in the supply of “last resort housing”. Last resort housing refers to legal rooming and boarding houses, and emergency accommodation.

On average, more than 40 requests for last resort housing are turned down across Victoria every day.

Our analysis shows that the government providing one last resort bed will generate a net benefit of $216,000 over 20 years. That averages to a net benefit of $10,800 per year.

The majority of those benefits (75%) flow to society and the remainder to the individual.

For every $1 invested in last resort beds to address the homelessness crisis, $2.70 worth of benefits are generated for the community (over 20 years).

In other words, the benefits of providing last resort housing outweigh the costs. There is much to gain in economic and social terms, both for government and society, by assisting the homeless.

This is because if homeless individuals find stable accommodation they require less healthcare and fewer emergency admissions, and they are less likely to be involved in crime (both as victims and perpetrators). They are more likely to reconnect with employment and education. Homelessness also incurs property blighting and nuisance costs. Importantly, last resort housing can greatly improve the quality of life of individuals.

Our analysis shows that the form of last resort housing which makes the most sense economically is the construction of new, permanent stock – especially medium to large-sized facilities. Converting existing buildings, and subsidising private rentals, are both worth considering as well especially in the short term.

The commissioning team calls on governments to build more new, permanent last resort housing to help the homeless, because the benefits outweigh the costs. Existing last resort housing should be protected and maintained. These are issues for local, state and federal governments.

The commissioning team hopes the research presented in this report will be used to develop stronger business cases for - and ultimately generate substantial investment in – last resort housing.

 

This Issues Paper was prepared by SGS Economics and Planning for the Melbourne Sustainable Society Institute at the University of Melbourne as part of the Transforming Housing Research Network.

 


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