Housing is increasingly being viewed as an important contributor to health outcomes. As a result, more and more health care systems and managed health care plans are getting into the housing business, but will this pay off for their bottom lines? Probably not right away.
The research evidence demonstrates that the best way to serve individuals experiencing homelessness may be to provide them with housing, often through a rental subsidy or voucher, coupled with case management services, also known as permanent supportive housing (PSH). More than two decades of research have shown that such approaches improve housing stability among those experiencing homelessness, and they are widely embraced as an approach to address chronic homelessness in the United States.
The reported costs of PSH programs vary depending on factors such as the intensity of case management supportive services and the way housing is provided. The costs are typically borne by different service systems, such as various federal, state, and local programs. Because these programs may offset the costs of the housing subsidy and/or case management services, it can be difficult to monitor the total program implementation costs.
This challenge in tracking program costs means that most studies only show part of the picture. A number of studies, for example, only begin to capture program and housing costs once an individual has been placed into PSH. This leaves out significant costs during the “transition period” into PSH, after identification and before PSH placement. These figures range dramatically from $13,400 to $48,000 per person per year (USD, 2025). When examining potential cost offsets to the health care system, the housing and service provision costs are typically compared to health care service utilization and associated costs prior to and following PSH placement among a treatment and, ideally, a control group. Reviews have found that studies using more rigorous research designs, such as randomized trials, report smaller health care cost offsets.
To better document the implementation costs of operating a PSH program from the perspective of a health care provider, we assisted a large managed care plan located in Southern California in assessing its program costs. We also assessed ongoing program costs and examined health care service utilization among members enrolled in their PSH program compared to an observational comparison group to explore potential cost offsets to the health care system.
We found that the period after an individual is enrolled in the program, but prior to placement in PSH, was a critical moment in terms of costs. During this period, participants required more intensive health care and housing services as they transitioned from acute care settings to community settings.
In prior PSH research studies, this period is typically ignored and therefore excluded from cost estimates, omitting a significant component of PSH program implementation spending. In our study, the transitional housing costs amounted to, on average, $4,147 per member per month (USD, 2025)—and most members spent approximately 3–4 months in this phase for total cost of almost $14,000. Health care spending during this transitional period was over $6,400 per member per month. These costs were reduced once members moved into PSH. Monthly PSH costs reduced to less than $3,500 per member per month, and health care costs decreased to approximately $3,400 per member per month.
The period after an individual is enrolled in a permanent supportive housing program, but prior to placement, is a critical moment in terms of costs.
When we examined overall program costs and health care service utilization over a 12-month period that included program entry, we observed a dramatic reduction in utilization and a $24,500 decline in the average associated costs annually. However, there was no difference in service utilization between the treatment and comparison groups, and it didn’t result in cost savings—primarily because enrollees in PSH generated program implementation costs.
Although the program did not result in dramatic reductions in overall spending, participants were more likely to engage in routine outpatient care once housed. While we were unable to track more general indicators like health functioning or quality of life, members appeared to spend less time receiving emergency or inpatient care after receipt of PSH. These patterns are similar to those observed in other studies (PDF) examining the health care service offsets after PSH placement.
It is important to note that PSH programs often target the most vulnerable. In our work, the average 12-month health care spending prior to housing was close to $82,000, and many of the members suffered from multiple chronic health conditions. As a result, health care spending is not likely to be reduced to zero after PSH receipt, as ongoing management of those chronic conditions is warranted. However, reductions in crisis care may be achievable.
To our knowledge, our study was the first to examine the upfront implementation costs of providing PSH in a managed health care setting. While getting people into PSH soon after identification is the goal of “Housing First” efforts, the reality is that many individuals experiencing homelessness may be placed in transitional housing for some period of time. Our study demonstrates that such programs are not cost-neutral. It is important to note, however, that the reduction in crisis care easily covers the housing and supportive services component of such programs.
If the goal is to prevent emergency room visits and long hospital stays while increasing housing stability, PSH programs are a worthwhile health care investment.
