For over 50 years, Centrepoint has supported homeless young people to access stable housing, gain skills and employment and achieve their goals. In doing this, Centrepoint has witnessed the human cost of homelessness, and seen how it affects young people who, through no fault of their own, have limited or no access to safe and secure accommodation.
Through Centrepoint’s direct work with young people, we recognize their incredible potential. However, too often the barriers created by homelessness make it harder for them to achieve their goals. In this way, homeless young people regularly have few options but to access costly public services and support from third sector organisations as a means of promoting their independence.
For this reason, Centrepoint commissioned the Centre for Economics and Business Research to estimate the true cost of the crisis affecting thousands of young people. This report includes an analysis of the costs associated with homeless young people incurred by the government and our society as a whole.
To achieve this, the report adopts a counterfactual comparison approach, by comparing the population of homeless young people with the general population aged 16-24. Through this, we identify the additional costs that can be attributed solely to homelessness.
Key findings and recommendations
Given the widespread impact that homelessness has on a young person’s life, these costs are multi-layered. As such, these costs can be divided among the following factors:
- Approximately 70 per cent is due to short-term loss from being unemployed and not contributing to societal economic output; lost productivity in the long-term (estimated at £5.4 - 6.0bn annually) — this represents the opportunity cost of what young people could have achieved had they not been facing the challenges of homelessness;
- Among the direct costs for government services, the increased criminality rate and cost of criminal justice represents the biggest burden for taxpayers amounting to £846 million annually (ten per cent of the total);
- Homelessness services account for more than five per cent of the total cost or £493 million a year;
- Additional costs for social security (e.g. Universal Credit, housing benefits and other claims) and the NHS both represent around five per cent of the total cost, respectively £473 million a year and £456 million a year;
- Additional costs for mental health services and substance misuse services account for slightly more than one per cent each, corresponding to £141 million annually and £125 million a year.
As highlighted above, direct costs for the government in supporting homeless young people only represent 30 per cent of the total amount, with the remaining 70 per cent caused by the fact that young people facing homelessness are less able to meaningfully contribute to national economic output.
Currently each pound spent on additional government services for homeless young people has a multiplier effect: this means that government spending can create benefits more than double the expenditure on average, showing also that the government can increase its support to homeless young people, as the generated benefits would exceed the increased costs.
These findings deliver a clear message for government and policy-makers: increase the support for homeless young people to enable them to successfully transition to adulthood and contribute to national economic output. Moreover, these findings show that supporting vulnerable young people is not only a moral duty, but also a huge economic opportunity to reduce government spending and increase national economic output.
Provide under 25s living independently with the same Universal Credit rate received by over 25s. The Universal Credit standard allowance for under 25s is over £16 less a week than that for over-25s. However, young people under 25 living independently experience the same issues and face the exact same living costs as someone over the age of 25.
Make work pay in supported housing equalising the taper rate for people in supported accommodation by decreasing the 65 per cent taper rate for Housing Benefit to 55 per cent, as well as increasing the applicable amount that young people can earn before losing their full Universal Credit allowance. We estimated the total benefits generated by this policy change to be over £12 million, with savings for the Treasury, as well as increased employment for thousands of young people living in supported accommodation.
Provide grants to apprentices and those on traineeships aged 16 to 25 who cannot live at home to help cover the costs of travel, other work-related expenses as well as their living costs. The low minimum wage for apprenticeships is insufficient to cover the costs of independent living, and traineeships are completely unpaid. Additional financial support is required to ensure that apprenticeship and traineeship programmes, which can have positive, long-term labour market returns, are accessible to these groups.
Invest in further promoting and making traineeships more accessible, as a vital stepping stone for those young people who are ready to enter the workplace but need to build skills and experience. Supporting young people to complete qualifications would provide them with an earnings premium in later life and increase their chances of finding better paid, stable employment.
Increase resources for underfunded services. Some services, e.g. mental health support, have been historically underfunded and it is not surprising they represent only a small fraction of the total costs associated with youth homelessness as many young people are not even able to access them.
Make sure age-disaggregated data for the expenditure of every government service is available and accessible to all. Accessible and good quality data on young people is very challenging and no review and control on public services can be successful without this crucial information.