Public Service Reductions Associated with Placement of Homeless Persons with Severe Mental Illness in Supportive Housing Dennis P. Culhane, Stephen Metraux, and Trevor Hadley University of Pennsylvania Abstract This article assesses the impact of public investment in supportive housing for home- less persons with severe mental disabilities. Data on 4,679 people placed in such hous- ing in New York City between 1989 and 1997 were merged with data on the utilization of public shelters, public and private hospitals, and correctional facilities. A series of matched controls who were homeless but not placed in housing were similarly tracked. Regression results reveal that persons placed in supportive housing experience marked reductions in shelter use, hospitalizations, length of stay per hospitalization, and time incarcerated. Before placement, homeless people with severe mental illness used about $40,449 per person per year in services (1999 dollars). Placement was associated with a reduction in services use of $16,282 per housing unit per year. Annual unit costs are estimated at $17,277, for a net cost of $995 per unit per year over the first two years. Keywords: Homelessness; Housing Introduction Placing homeless persons with severe mental illness (SMI) into subsi- dized permanent housing with social service support promises to sub- stantially reduce the demand for shelter among those placed. This housing provides a more humane alternative to living on the streets and in shelters, and providers report retention rates in such housing to be upwards of 70 percent in the first year after placement. However, little empirical evidence has been gathered to quantify the degree to which supportive housing supplants shelter use among the formerly homeless with SMI. Furthermore, it can similarly be assumed that homeless persons with SMI, once placed in supportive housing, reduce their use of acute psychiatric and medical services, and are arrested and incarcerated less often. However, such assumptions are somewhat more tenuous, and a similar dearth of empirical evidence exists both on the demand for these services among homeless persons with SMI and on the impact of supportive housing on this level of demand. The study reported here examines service use by formerly homeless persons with SMI before and after being placed into New York/New York (NY/NY) housing, a large housing program in New York City (NYC). Administrative data from public health, psychiatric, criminal justice, and shelter service providers are used to assess the aggregate level of service demand, pre- and postintervention, for the study group and for a matched set of controls. The extent to which reductions in services are present and attributable to NY/NY housing placement is assessed, and the degree to which service reductions offset supportive housing costs is measured. Background In 1990, New York State (NYS) and NYC agreed to jointly fund and develop 3,600 community-based permanent housing units for homeless persons with SMI under what became known as the New York/New York Agreement to House the Homeless Mentally Ill (Hevesi 1999; Kennedy 1995, 1997).1 This initiative was in response to problems with homelessness and community mental health services that were per- ceived to have reached crisis proportions in NYC. The NY/NY agree- ment was designed to target those who were among the most chronic and difficult to serve among the homeless population and to ease demands on public shelter and psychiatric treatment services. The agreement provided housing and psychosocial services in a variety of configurations collectively known as NY/NY housing. There are two general models: The first, supportive housing, includes scattered-site housing with community-based service support and single-room occu- pancy (SRO) housing (independent housing linked to either community- based or site-based service support). The second, community residence facilities, includes community residences, long-term treatment facilities, and adult homes (Center for Urban Community Services 1995; Lipton et al. 2000). In general, supportive housing emphasizes “normality” in housing in terms of separating services from housing arrangements and giving tenants a choice in their housing arrangements and mental health service regimens. By contrast, community residences take a more clinical approach that integrates housing and services delivery by hav- ing services available on site and participation mandated by the resi- dence agreement. Supportive housing maintains that such housing is appropriate for persons with mental illness regardless of the severity of impairment, while the community residence model places people in increasingly less restrictive living arrangements as they progress through their treatment regimens (Bebout and Harris 1992; Carling 1993). To be eligible for this housing, tenants must have a diagnosis of SMI and have been recently homeless in shelters or on the streets. After going through an application and assessment with the NYC Human Resources Administration (HRA) to determine NY/NY housing eligibil- ity, the prospective tenant then applies through one of the nonprofit agencies that administer the actual units funded under the agreement. Thus, NY/NY eligibility, housing availability, agency eligibility guide- lines, and tenant preference all factor into the placements provided under the agreement.