Spring 2008 The Economics of Recovery: Cost Effective Solutions for The Homeless

Spring 2008 The Economics of Recovery: Cost Effective Solutions for The Homeless

Donald M. Fitch, MS

Donald M. Fitch, MS

By Donald M. Fitch, MS
Executive Director
Center for Career Freedom

In Westchester County, about half of all single adult homeless refuse to be mentally and/or physically screened or, to sign over their disability checks. The current policy is to then deny them access to the Shelters. They must remain in the Drop-Ins, without medical or psychiatric care. They are offered a chair in a “Warming Center” or “three hots and a cot, no questions asked.”

Drop-In residents are our highest risk and least served population. Threequarters ask for help staying off drugs or alcohol, half take psychiatric medications and over one-third receive Social Security Disability. The critical question is: What would it take to convert the “hard core” homeless to accept shelter services?


To answer this question, the Center interviewed thirty Drop-In residents this past winter to ascertain their interest in four hypothetical procedural and monetary incentives; 1) a waiver of their medical assessment i.e. drug testing, 2) a waiver of the mandated substance abuse program (if they tested positive) 3) increasing their personal needs allowance from $45/Mo to $100/Mo and, 4) allowing disabled residents to keep their Social Security checks ($700/Mo).

Lately, municipalities are using direct cash payments to promote positive behavior, an incentive that businesses have used successfully for centuries.

Under Mayor Michael Bloomberg. New York City instituted cash reward programs to motivate students to earn A’s, so they graduate high school, reduce new teacher attrition and to get parents to attend school nights.


Surprisingly, our study (Chart below) found almost nine out of ten Drop-In residents would accept the Shelters’ rules for as little as $100/Mo personal needs allowance. All of the disabled residents surveyed said they would leave the Drop-Ins and enter the Shelters if they were allowed to keep their SSA Disability checks.

Interestingly, hypothetical waivers of the mandated Shelters’ assessment and program rules were found to be ineffectual. Our study confirmed that a few extra dollars is a more powerful motivator than bending the rules.

Action Implications

This study identifies a practical, cost effective solution for converting Drop-In residents to Shelter residency in order to access vital psychiatric and medical services. Next steps are to pilot test and refine a financial incentive program. Shelter “gives backs” of about $700/year per resident drawn from the fifty-thousand dollars they receive, provides a sustainable funding source.

Privacy Wall: Creating New Housing

While the obvious solution for homelessness is a home, accessing permanent supported housing can take years and, the growth in the available housing stock and funds never seem to keep up with the numbers of consumers in need;
“Stable access to good housing is a fundamental problem for many people with mental illness because of their poverty, the limited supply of very-low-income housing, the rising cost of rental market housing and discrimination.” (NYS Office of Mental Health 2007).

The average rent for a one-bedroom apartment in Westchester County today is about $1,270/Mo. At 30%, the consumers’ share of supported housing (Section 8/Shelter Plus) is $381/Mo. This is about half of the average consumers’ Social Security Disability check ($800).

Food, utilities, clothing, personals, copays, transportation, debt service, etc. easily exceeds the remaining balance of $419. for most consumers.

The ideal solution to the lack of affordable housing would be to 1) rapidly increase the housing stock, 2) reduce the consumers’ rent and, at the same time, 3) increase the landlords’ rental income and, 4) reduce HUD’s cost for supported housing.

The simple “win-win” solution the Center developed to meet these criteria is to divide the living room of a typical onebedroom apartment using a “Privacy Wall” to create a second bedroom. (Plan below)

After considerable research, we found the New York Wall Company (www.thewallpeople.com) will install a fire retardant laminated particle board sound proof wall with a specially engineered aluminum frame, door, knob and lock in about four hours, without nails, glue or requiring a building permit (it’s considered “temporary”) for about $1500 (a portion of the proceeds is donated to the Centers’ programs).

Interviews with the Departments of County Planning, Section 8, fire, and building officials found no barriers to implementing this solution. Further consultation with attorneys, accountants, directors of supported housing programs and Section 8 landlords confirmed the feasibility and interest.

The only remaining question was; “how would the homeless and current renters respond to the idea”?

Our survey found one-hundred percent of the homeless persons would “definitely be interested” in the concept, (anything to get out of the shelters). However, only onethird of the current renters felt the same way; “I value my privacy, a roommate would take my food, make a mess, party, I would want to meet them first, there would have to be a trial period, etc.” Even a financial incentive of a rent reduction of $150/ Mo. did not change their minds.

Return on Investment

The financials are impressive; in addition to reducing the consumers’ rent by $150/ Mo., Section 8 landlords would receive an extra $221/Mo. per unit, a 20% increase in the buildings’ cash flow and net worth.

An investment in the “Privacy Wall” of $1500. pays for itself in less than seven months. The annual increase in rental income for twenty units would be over fiftythousand dollars!

The United States Housing and Urban Development Department (HUD) would save over $9,000 annually for each converted apartment because HUD would not have to pay for two, one bedroom apartments. If HUD invested in 10,000 new apartment units throughout New York State, they would save over 73 Million dollars a year! In turn, this money could be used for over twelve-thousand additional new units.

© 2008 Center of Career Freedom - 914-288-9763 - One East Post Road, White Plains, NY 10601 - www.freecenter.org


Info Graphics The Economics of Recovery: Cost Effective Solutions for The Homeless