Explained: The real cost of homelessness

The cost of homelessness is enormous – every year millions of pounds of taxpayers’ money is spent trying to tackle the issue.

The Westminster government is spending £750million in tackling homelessness and rough sleeping this year. In Scotland, Nicola Sturgeon has vowed to spend £12m to do the same thing, including £8m to help local authorities scale up Housing First – giving rough sleepers a home alongside support to help them keep it. Wales has set aside £5m to deal with the issue. 

But each figure represents an outlay that shouldn’t exist. Preventing people from falling into homelessness in the first place is not only the moral thing to do, it makes financial sense too. 

That’s why Big Issue founder Lord John Bird is calling for a Wellbeing of Future Generations Bill to bring prevention into politics in the long term. But in the short term, a homelessness crisis is on the horizon, which is why The Big Issue has launched its Stop Mass Homelessness campaign.

While cutting £20 off universal credit might slash the government’s benefits bill and ending the furlough scheme reduces the wage costs in place throughout the pandemic, if the steps lead to rising homelessness, the costs could be steeper.

“The important thing is that we also recognise that anyone who falls into homelessness can double or treble the cost to the Treasury,” said Lord Bird. “If you add children and the damage done to a broken family the cost becomes immense. And the damage will often take generations to repair.”

What are the costs of homelessness?

There are many direct and indirect costs of homelessness – it is not simply a case of covering food, shelter and health. People who are homeless often have an impact on other services and that carries an inherent cost. 

For example, street homelessness can have a disastrous effect on health and many people on the streets do not have access to a GP. As a result, they are more likely to use hospital A&E departments for treatment, which can be more expensive than undergoing treatment at an earlier stage to prevent the issue. 

It’s a similar story with policing and the criminal justice system. People who experience street homelessness are more likely to interact with the police, for example, whether they are moved on from a doorway, involved in criminality or the victims of crime themselves. This carries a cost, as does failing to rehabilitate prisoners released back into homelessness. 

There is an economic cost to homelessness too. Adults who are homeless and unable to work are not able to contribute to society through taxes. This costs the taxpayer money, too, as it means taxes are higher because there are fewer people paying into the system and there are more costs to cover. 

The list of costs goes on. 

How much does homelessness cost?

A lot.

Besides the outlays that governments spend on trying to tackle homelessness, the inherent costs are massive. 

Crisis’ 2015 report At What Cost? estimated that a single person sleeping rough in the UK costs £20,128. 

To give an example of the overall financial impact, if the 2,688 people spotted sleeping rough across England in autumn 2020 each cost that amount, the rough sleeping bill would be more than £54m per year. 

The rough sleeping figures are often considered an underestimate while interventions to protect rough sleepers during Covid also had an impact in 2020. 

Rough sleeping peaked over the last decade in 2017 with 4,751 people counted on the streets in one night. If each person cost £20,128, as Crisis estimated, the bill would be more than £95m. 

Providing people with temporary accommodation is also extremely costly. Between April 2018 and March 2019, Shelter found that local authorities were spending £1.1bn on providing temporary housing for homeless households to prevent them from living on the streets.

That is an enormous bill to cash-strapped local authorities. Polly Neate, chief executive of Shelter, said: “If consecutive governments had built the genuinely affordable social homes that are needed, fewer people would be homeless, and we would not be wasting vast sums on unsuitable temporary accommodation.” 

But local authorities have less money to spend on homelessness support services, even as the problem has grown over the last decade. Councils spend £0.7bn on homelessness in England every year, Homeless Link and St Mungo’s found last year, significantly down from £2.9bn in 2008/09. 

Covid-19 has changed the landscape entirely. Both central government and local authorities spent vast sums implementing the Everyone In scheme to house 37,000 rough sleepers during the pandemic. 

Councils were initially given £3.2m in the first lockdown to house homeless people while the UK government said some of the £3.2bn given to councils was also used to support rough sleepers. Meanwhile, money from the £750m pot to tackle homelessness and rough sleeping has been used to find permanent housing while councils continue to cover rising costs for temporary accommodation. 

How does housing the homeless save money?

The majority of the eye-watering sums listed above are emergency measures, spending to fix a problem rather than prevent one happening in the first place. 

While Crisis may have estimated someone sleeping rough costs the public purse around £20,000 a year, it also found taking preventative action costs just £1,426. 

The Kerslake Commission – a review into how the UK government tackled homelessness during the pandemic – concluded recently that an extra £82m a year would be needed to end rough sleeping in the long term. Writing in the report, Lord Bob Kerslake laid out why the approach would make sense. 

“Addressing rough sleeping is vital, not just for the human toll – which is vast – but also the financial cost,” he said. “Rough sleeping has a huge cost on healthcare systems, including mental health services and emergency services at hospitals; on criminal justice systems; and on social care services, to name but a few.

“As a whole systems problem, it has a whole systems cost, with the ripple effect felt throughout public expenditure. The cost of intervening early on to prevent people from sleeping rough in the first place saves far more expensive interventions further along the line.” 

Some responses can also save cash, however. Housing First is regarded as a method to drastically reduce street homelessness by giving rough sleepers their own home, and that model can save money when compared to leaving people on the street. 

In Finland – where the model has been so successful it has practically eradicated street homelessness – it was reported that Housing First can save around £8,500 a year. Similar results have been reported in Scotland recently – people housed in the country’s Housing First Pathfinder project cost £10,981 each in direct costs, saving around £10,000 on Crisis’s estimates.