Researchers Gave Unhoused People $7,500. What Happened Next Is Incredible.

When looking at ways to alleviate homelessness, more researchers are suggesting that policymakers give people money, even lots of money, upfront. And a growing body of evidence backs this up. 

A study in Canada published August 29 in the journal Proceedings of the National Academy of Sciences (PNAS) found that lump sum payments of $7,500 reduced the number of days that recipients were unstably housed by 99 days, did not lead to an increase of spending on drugs or alcohol, and created net savings of $777 per person per year from reduced number of days in a homeless shelter. 

The study was conducted between 2018 and 2020 and tracked 115 people experiencing homelessness in Vancouver between the ages of 19-65 over a year. 50 people received the cash payments, and 65 people received no cash payments. The participants had over $1,000 saved on average at the end of the year. 

Researchers said the study “adds to growing global evidence demonstrating the benefits of cash transfers to low-income populations.”

There are some caveats: while cash recipients did not increase their spending on what researchers called “temptation” goods, like alcohol, cigarettes, and illicit drugs, the study filtered out participants who had severe levels of substance use and severe mental health issues. Researchers said this was to prevent the risk of overdose deaths or other “harm.” (An earlier report on the same experiment released by nonprofit partners in 2020 said that alcohol and cigarette purchases had actually decreased, but researchers told Motherboard this was an interim report with incomplete data and the figure turned out to not be correct.)

Researchers also filtered out people who were homeless for more than two years. Study co-author Jiaying Zhao told Motherboard that this was because nonprofit partners in the study believed this would filter out people with more serious issues.  

“We were told by community partners on the ground that it's their impression: the shorter time you were homeless, the more likely you're going to be higher functioning.” Zhao said.

Zhao said the researchers are working on a much larger study with broader screening criteria, but could not provide details because the study is ongoing. 

For now, Zhao says the takeaway from the study is, “For people who pass the screening criteria in our study, the policy implication is that government should increase the income assistance for these folks so they can get back into housing and get their life back.”

The researchers also offered workshops and coaching on long-term goals and money management to some members of both groups but found this overall had no impact on outcomes. 

74 percent of the time that recipients were stably housed was spent in an apartment rental, and 17 percent was in a single-room occupancy unit. Since Vancouver homeless shelters cost  about $93 per night per bed to operate, the study led to $8,277 less spent on shelters per participant, which means the cash infusions created net savings.

“Our results may not extend to people who are chronically homeless or experience higher severity of substance use, alcohol use, or psychiatric symptoms,” according to the report. “Regardless of these limitations, this study provides proof of concept for the provision of cash as a new tool to reduce homelessness.”

The researchers also tracked another group of participants to gauge if their perception of spending habits among homeless residents was out of sync with reality. People in this group predicted that someone described as homeless would spend 80.8 percent more on “temptation goods” than the actual outcome.

“This reveals a public mistrust of individuals experiencing homelessness in their ability to manage money,” according to the study. “This mistrust can be a barrier for establishing cash transfers as a homelessness reduction policy.”

But researchers also found that the same participants changed their views when presented with empirical evidence that people did not spend their money on alcohol or illicit drugs. 

Studies like this are hindered by the risk that participants could pass a “benefits cliff” that makes them ineligible for government services that are restricted to people of certain incomes. Indeed, reduced access to other benefits has been a criticism of basic income tests conducted in Canada, for example. The researchers got around this barrier by reaching an agreement with the provincial government of British Columbia that the participants wouldn’t lose any of their benefits as a result of the $7,500 lump sum.

There have been some experiments with providing basic incomes to unhoused people across Canada and the United States, though these are generally small payments. (The researchers estimate that $7,500 amounts to 60 percent of the average personal income of participants.) A nonprofit called Miracle Money gave 9 unhoused people in San Francisco $500 a month for 6 months, and by the end 6 of them were able to obtain permanent housing.