NCPA - National Center for Policy Analysis


April 10, 2006

Roughly 200,000 Americans will sleep rough tonight. Many have done so for years.Yet there is a new way of thinking about homelessness, one that applies business logic, says Fortune.

For example:

  • Social scientists in the 1990s began to document the fact that the hard-core homeless are not like you and me; they are not even typical of homeless people. They are a distinct market segment.
  • Life on the streets is not cheap. That guy you've been passing in the box under the scaffolding costs the city of New York at least $40,000 a year in jail time, shelter costs, emergency room visits and hospital stays. In Dallas, researchers put the figure at $50,000; in San Diego, as much as $150,000.

The new paradigm is that by focusing on the chronic homeless, cities can get people off the streets and spend no more and maybe less than they do by letting them stay there, says Fortune. It seems to work.

  • Pathways to Housing, a nonprofit, has placed some 400 chronically homeless, mentally ill New Yorkers in rentals and reports a success rate of 88 percent (defined as not returning to the streets for five years), at a cost of about $22,000 a year per person.
  • ValueOptions, a managed-care provider, reports a 92 percent success rate with a similar population in Phoenix, also using private housing.
  • Having a real address boosts medical compliance, reducing costs down the line, which matters to ValueOptions, a for-profit company. Using the same strategy, San Francisco has seen a 40 percent drop in street homelessness

Source: Cait Murphy, "The Toughest Customers," Fortune, April 3, 2006.


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