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The True Cost of Homelessness

Homelessness is one of the greatest debts we all bear as a society. It persists, despite us supposedly living in an era of unprecedented wealth and prosperity. It feels hard to imagine a life without a reliable stream of income, a roof over our heads and all the things that those things allow.

In an increasingly materialistic culture, those without a home, never mind access to credit, are seemingly invisible people.

Housing charity Shelter estimated that there were as many as 320,000 people living in a state of homelessness in late 2018; an increase of 4%, or 13,000 additional people, over the course of that year.

Homelessness places an immense weight on the thousands of individuals directly affected. But it also adds a burden to society as a whole due to the sheer numbers of vulnerable individuals that homelessness leaves in need of support.

Using statistics and insights from a number of charities, as well as support teams on the ground, we’re going to delve into what homelessness actually means, and how it is more common than you think, and ultimately look at the fact that, whether you like it or not, it’s a problem that everyone pays for.

There is no single silver bullet to end homelessness overnight, but by looking at the deep-rooted causes, we can at least start to explore possible routes to prevent the human cost from rising yet higher.

Stagnant wages and rising debt

Despite our country’s great wealth, our economy is failing to produce the kind of jobs that ensure everyone can afford to live in a home of their own. This forces many to seek some form of financial assistance, but not everyone has the adequate level of support they need.

Even for the average worker, nominal wages appear to be failing to keep pace with the cost of living, let alone the cost of housing. Is it a simple case of people living beyond their means, overspending and going into debt, or is the problem deeper than that?

Here are some key numbers on two important trends that have been observed in recent years:

  1. The number of rough sleepers across England
  2. The overall level of household debt

As you can see, the figures are moving in a clear upward trajectory, save from a small dip in the 2018 figure for the number of rough sleepers.

2013 2014 2015 2016 2017 2018
Number of Rough Sleepers 2,414 2,744 3,569 4,134 4,751 4,677
Total Household Debt £1,502bn £1,541bn £1,594bn £1,671bn £1,735bn £1,785bn

Correlation is not causation as they say. But homelessness is the result of myriad societal factors and finances have an undeniable role to play in someone’s capacity to keep a roof over their heads.

Is there something to be learned from what people are struggling with when it comes to household debt? Why are people in debt to begin with?

For the more vulnerable in society, the benefits system is one factor to consider. The Department of Work and Pensions (DWP) overhauled the benefits system from 2010 onwards, with existing benefits rolled into a single service called Universal Credit.

Universal Credit was intended to simplify the process of seeking financial support for those who needed it most. But it has faced great criticism in recent years. Rollout was more expensive and took longer than intended; waiting periods of up to five weeks have been commonplace. Those seeking Universal Credit might have to acquire finance from elsewhere, if the waiting periods make it impossible to meet financial obligations consistently.

The switchover to the new Universal Credit benefits scheme left some people with significant gaps in their income, with not much to support them otherwise; the knock-on effect of which could leave them without funds for housing – a big risk factor for homelessness.

But what about people who are in work?

Due to a decade-long stagnation in wages, based on data from the Office for National Statistics, the average worker’s pay packet has not kept up with the cost of living. Many have found themselves financing themselves either through incurring debt, or seeking benefits as additional support.

However, as we’ve seen, the lack of sufficient income and the need for support has caused people to experience even more setbacks as they seek Universal Credit. Flaws in Universal Credit mean that intended recipients can’t be sure they’ll get the help at the right time, making them financially vulnerable, with little else to help them.

It's easy to see how someone struggling to make ends meet might find themselves in a low-paid job, struggling to navigate the choppy nature of the state benefits system. Being forced to then take on some kind of debt to make ends meet can seem like an understandable course of action, but the risk of losing so much more becomes a serious possibility.

This makes it so important to remember that taking debt on without a reliable source of finance is never advisable.

Not so safe as houses

Housing is often spoken about as something secure, or something that protects you – safe as houses, or so the saying goes. But what happens when housing isn’t safe or secure? Those who face the risk of being made homeless often find themselves living in temporary accommodation.

A Freedom of Information (FOI) request by InsideHousing last year revealed that local authorities in England spent £937 million on temporary accommodation in the 2017-18 financial year, and overall spending on temporary accommodation has increased by 56% in five years.

But we’re not just talking about lone individuals – the people behind these figures include some of the most vulnerable groups in society, including low-income families and those with disabilities.

Temporary accommodation can be a great indignity for these people who potentially find themselves miles away from what they would consider to be their true homes, having to live in B&Bs or hostels. Providing some form of temporary accommodation comes at a cost, and local government usually ends up paying, spending the taxes it collects from the general population, which might have been spent on other things.

Below are some examples of the levels of spending on temporary accommodation from a range of local authorities, as revealed by InsideHousing’s FOI request, to give you a snapshot of the sheer costs associated with giving people a temporary roof over their heads.

Council 2013-14 2014-15 2015-16 2016-17 2017-18
Newham £35.11m £39.52m £49.52m £61.06m £61.1m
Westminster £42.27m £39.18m £45.61m £46.45m £48.02m
Hillingdon £7.3m £5.94m £5.96m £6.16m £5.37m

Newham stands out as one of the highest-spending local authorities when it comes to temporary accommodation. Running into the tens of millions, at an increasing rate, its temporary accommodation spending puts considerable strain on the local authority.

This is just one example – all over England, councils are forced to make difficult decisions, allocating large chunks of their budgets, just to make sure people have a roof over their head, on top of all the usual responsibilities they are expected to perform on a daily basis.

Even Westminster’s local authority – effectively the heart of British political life, where our elected representatives work in the ornate Houses of Parliament – faces a significant cost for providing temporary accommodation. The Westminster local authority finds itself facing a mounting temporary accommodation budget of £48 million, at the latest estimates.

Prime Minister Boris Johnson’s constituency of Uxbridge is included in the Hillingdon local authority, which has consistently spent between £5-7 million each financial year, to provide temporary accommodation for those in need.

Temporary accommodation is unfortunately a very expensive sticking plaster placed on an issue which requires more concrete solutions that tackle the root cause rather than the more obvious symptoms. People in temporary accommodation might not fit what some would term ‘homeless’, making thousands of people almost invisible, despite their plight.

An unhealthy burden

One of the ways we feel the damaging effects of homelessness is through the way it impacts the National Health Service (NHS). Those who are without a home or who find themselves in insecure living arrangements are known to have a higher level of mortality than the general population. Many of these people died prematurely as a result of poor mental and physical health.

Being without a proper home reduces the ability for many of these hundreds of people to access a general practitioner (GP) in their local area, which might ensure that they had follow-up care and an adequate course of treatment for any health problems they may have been suffering from.

Mental illness plays a large part in the story of homelessness in the UK at the moment. Research by the charity St Mungo’s estimated that 40% of all rough sleepers have some kind of mental health problem.

When it comes to the raw cost of homelessness on the health service, a Department of Health study found that people experiencing homelessness are 3.2 times more likely to be inpatient admissions to hospital. The gross cost of this over the typical year was estimated to be as high as £85.6 million, if you include outpatient usage and emergency attendance on top of other medical bills that mount when patients without a home are admitted to hospitals.

Poor mental health can often result in a downward spiral. Those experiencing homelessness may turn to drugs or alcohol, as a form of escape from it all. Addiction doesn’t always lead to homelessness, and neither does homelessness always necessarily lead to addiction, but homelessness charity Crisis has found that those who use drugs are seven times more likely to be homeless than the rest of the population.

Crisis also adds that 27% of the people it works with who are experiencing homelessness tend to have what they deem problematic alcohol or drug use. Drugs and alcohol seem like a way of escaping this downward spiral, but they only make matters worse for someone who finds themselves without a home.

Unfortunately, many of those experiencing homelessness are adolescents who left their homes, possibly due to conflict in the household or being on the receiving end of abuse. At such a sensitive age, it’s important for people to have a sense of belonging, especially if a child is living in the care system.

Adolescents experiencing homelessness are especially vulnerable, as they will lack the essential life skills they would need, without a proper home to go back to, or people to support them.

A hit to the government's coffers

A document published by the coalition government in 2012 revealed that the government was already spending up to £1 billion a year on homelessness. It is likely this number will have risen over the last seven years, purely due to inflation.

Bearing this initial cost in mind, it equates to between £24,000 - £30,000 per person experiencing homelessness, not far off the average annual income for the average UK worker.

A cost equivalent to your whole annual salary is one thing, but just the tip of the iceberg, in terms of the overall hit to public coffers. Imagine a cost equal to your salary, multiplied several tens of thousands of times, to account for the UK’s homeless population, and you start to see just how costly homelessness actually is.

The three steps towards homelessness

Imagine starting a person’s story from scratch, to see how they ended up without a home. Here’s a fictional story, just to see how someone can go from a seemingly ordinary life to one in which they are homeless and have fallen through the cracks.

Step One: In the mind

Fred is in his thirties, living in a flat. But he has had pre-existing mental health problems for a number of years and has no close friends or family he can turn to. Now things at work haven’t been going so well. His annual salary is barely making ends meet, and so he’s started getting into debt to pay the bills.

Earlier this year, we carried out a survey, which revealed the fact that 51% of people with some kind of debt didn’t feel like they had adequate support, in the event that their debts started having a negative impact on their mental health. This only goes to show how vulnerable people can be when they find themselves in debt. All it takes is that initial nudge at the wrong time, and the spiral begins.

Step Two: The downward spiral

Things have unfortunately taken a turn for the worse – Fred has been unable to afford to pay rent and found himself without a home. He doesn’t have a friend or family member to turn to. An ill-advised financial decision, to take on what is called ‘problem debt’, combined with poor mental health, served as a dangerous mix for Fred, and led him into a downward debt spiral that lost him his home.

Step Three: On the streets

Fred is now sleeping rough, and his mental health continues to worsen, and he’s starting to suffer from other health problems too. It’s winter, and he lacks the things he needs to stay warm while sleeping rough. This puts him at greater risk of ill health and even premature death, as the temperature plunges and he struggles to find somewhere to stay warm for the next few months. He is at rock bottom and in need of serious help, before it’s too late.

With this fictionalised example in mind, it’s easy to see how homelessness is more than just people losing their homes because they took on an unsustainable level of debt at the wrong time. It can often happen due to multiple, smaller things all happening at once. Every person experiencing homelessness has some kind of story which explains the spiral they found themselves in, that led them to the place they are in today.

The cost of a life

The reality of homelessness is that it costs the ultimate price for some: their lives. The Office for National Statistics reported in October 2019 that 726 people experiencing homelessness died in 2018, with a total of 3,300 dying in the years 2013-18. The most unfortunate thing about these statistics is that they only represent the available data since records began in 2013.

2013 2014 2015 2016 2017 2018
Number of deaths among people experiencing homelessness 482 475 508 565 597 726

Homelessness is likely to have cost many more lives in the past few decades, but as records only extend back in time so far, there are many lives that have been taken by homelessness that we might never know about.

Credit Suisse ranks the UK as the fifth-richest nation on the planet, with total wealth of $14.3 trillion (£11.1 trillion). With such immense wealth, it’s difficult to understand how there are still an unacceptable number of people with no roof over their heads. Becoming homeless is an unfortunate circumstance for anyone to find themselves in, disconnected from the lives of others, denied a chance to make a decent living.

Those without a home are, in a sense, out of the loop. Homelessness de-anchors people from their lives, as we often rely on having a fixed address to ensure that we are eligible for a number of things, whether that’s state-provisioned benefits, or even things like looking for jobs or trying to apply for bank cards or loans. No home means missing out on the flow of letters than are often associated with financial matters.

Falling through the cracks, people experiencing homelessness find themselves without the means to turn their lives around, and very often, we remain unaware of them until their problems force them to return back into society, in times of great need.

Crime doesn’t pay

Homelessness has costs that are both financial and social. In a financial sense, the costs are beginning to stack up into the hundreds of millions of pounds, but the societal cost is even greater. Criminality is another cost of homelessness, and its causes are often financial in nature, but its impact is equally social.

Findings from a Surveying Prisoner Crime Reduction survey found that 60% of people in prison believed having a home of some sort would be a major factor in stopping them from re-offending again.

In the first year of release, the survey found that 79% of prisoners who admitted to being homeless ended up being reconvicted. This is particularly striking, as it suggests that people experiencing homelessness with some criminal record are likely to experience a life regularly in and out of prison, which only adds to the dysfunction that affects their lives.

These findings highlight the fact that people experiencing homelessness not only need a good roof over their heads, but they need the right assistance to ensure they are financially secure. This security ensures that, upon leaving prison, people have the tools they need to live properly, without fear of losing their way.

If you’re unable to maintain steady employment, or unable to afford to meet rent or mortgage payments, as well as other kinds of loans or obligations, you can find yourself without a home and with a need to find ways to make money quickly.

Homelessness has been criminalised over many generations, whether we like it or not, purely because our laws no longer reflect the kind of country we live in. The Vagrancy Act of 1824, which is still in force today, was passed by Parliament back in an era of widespread poverty across the nation, when there was no welfare state to support the poor and the vulnerable.

Far from being a law in nothing but paperwork, this Vagrancy Act was actually enforced in 2018, when the leader of Windsor council ordered the police to clear out a group of rough sleepers in the local area, in the run-up to the last Royal wedding, between Prince Harry and Meghan Markle. There have also been a number of cases in which local authorities have used public space protection orders to prosecute or fine those caught loitering, begging or sleeping rough in certain areas.

The tragedy of this is that even those with nothing left to lose find themselves criminalised, further persecuted by the society from which they have already been ostracised. This is all simply because they found themselves in the wrong places at the wrong times, without a penny to their names, with charges to contend with, and fines they can never dream of paying back.

Where do we go from here?

In order to understand and try to address the problem of homelessness in the UK, we need to acknowledge the root causes and think more about what we can all do individually and collectively. What can we do to help those who are on the edge of slipping into temporary accommodation? How can we help people avoid going down the path towards homelessness, poverty, potential criminality and even premature death?

Anyone can fall into that spiral but those who are already vulnerable in our society are most at risk, and if someone is predisposed to have problems with drugs and alcohol, the descent can prove to be even worse.

Poor mental health, insecure housing arrangements, weak wage growth and a lack of a support network are all factors that contribute to this social issue. Taking on an unsustainable level of problem debt is just another thing that can tip some people over the edge.

All it takes is one bit of risky behaviour financially, and you might accidentally stumble and find your situation deteriorating quickly. Before making any potentially risky decisions regarding debt, always seek advice from independent sources and have a good idea of what you can afford, to help you prepare a budget.

We hope that this piece has shone a light on the importance of us all thinking about the responsibility we have as citizens to ensure that no fellow member of society falls through the cracks.

The financial sector bears a great responsibility to ensure that consumers are made fully aware of the repayments and costs involved whenever they seek to take out any form of finance. Homelessness is a great cost to society, and something that can only be overcome with understanding, sympathy and a determination to turn lives around.

Disclaimer: Third-party data provided is based on information that is publicly available at the time of writing. Know Your Money does not accept, for any reason, responsibility for the content on third-party sites.

Written by Peter Adams

    Published on 19-12-2019

Peter reports on a number of areas in the personal finance sector, with a particular interest in supporting businesses and individuals in the UK services industry.

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