Cash transfers reduce homelessness, raise savings, Canada study says

Efforts to alleviate the growing crisis of homelessness typically avoid putting money directly in the hands of the unhoused, reflecting the stigma that it will be misused. But new research challenges that perception, suggesting that when some homeless people are given cash, they are likely to put it toward essentials such as housing, furniture and transportation.

Researchers at the University of British Columbia, in collaboration with Vancouver-based charity Foundations for Social Change, provided a lump sum of 7,500 Canadian dollars in 2016 (about $5,540 today) to 50 people experiencing homelessness in Vancouver. They found that the recipients spent fewer days homeless, increased their savings and put more money toward essentials compared with a control group of 65 people who received no cash transfer.

The study, which was published in the peer-reviewed PNAS journal this week, followed individuals for one year after they received the lump sum and reported no increase in spending on what researchers call “temptation goods,” defined as alcohol, drugs and cigarettes. By decreasing time spent in shelters, the intervention led to a decrease in public spending of 777 Canadian dollars (about $574) per person, the paper said.

The authors of the Vancouver study write that traditional strategies to address the issue, such as focusing on health care or housing support, do not directly target a core cause of homelessness — the lack of money.

“Unconditional cash transfers provide recipients the freedom to make their own decisions about how to spend the money, which can enhance the recipients’ sense of empowerment and control,” they write, adding that the provision of money also reduces anxiety and impulsivity and helps recipients “make better decisions over the long run.”

“While cash transfers are not a panacea, they may speed the path to stability and can be integrated easily with existing social supports,” the authors write, cautioning that their sample focused specifically on people who did not have serious mental health or substance abuse problems. More evidence is needed to see how a cash transfer would affect other populations, they said.

Cities across the United States and Canada are struggling to deal with homelessness, amid rising costs of living, inflation and stagnant wages. There was a 12 percent increase in D.C.’s homeless population over the past year, while the United States has seen a 6 percent increase since 2017, according to the National Alliance to End Homelessness.

In Toronto, more than 80,000 people are on a wait list for affordable housing, while a June report from the Vancouver Sun said more than 100,000 residents of British Columbia were at risk of homelessness because of a “staggering increase” in the cost of rent.

Controversial approaches such as bulldozing homeless encampments and involuntarily hospitalizing the mentally ill have had little success, while many efforts to house the homeless have failed.

While a lack of money is one of the main causes of homelessness, there is a high barrier to making cash transfers a part of real-world efforts to combat homelessness, the authors write. The public has a tendency to think that homeless people will spend more on temptation goods, and this bias can lead to an emphasis on “the provision of paternalistic forms of aid,” they say.

“For decades, the public has harbored dangerous presumptions that people experiencing homelessness don’t need or deserve cash assistance,” Ann Oliva, CEO of the National Alliance to End Homelessness, said in a statement. “The study builds on a growing evidence base that refutes these narratives.”

Jiaying Zhao, a psychologist who studies homelessness at the University of British Columbia and an author on the paper, said in a phone interview that she was homeless after graduating from Princeton with a PhD because of immigration issues, and she hopes to challenge the stereotypes about homeless people.

“People have the wrong idea of who these homeless individuals are and how they became homeless,” she said. “The assumption that we have is, ‘If you’re homeless, you must have done something wrong. It’s your fault. And therefore, you cannot be trusted with money.’”

“I think that assumption is entirely inaccurate,” Zhao said.

In another study, the researchers found that when subjects were presented with information about how homeless people actually spend the money they are given, they are more likely to support cash transfers as a strategy to fight homelessness.

“Our study adds to growing global evidence demonstrating the benefits of cash transfers to low-income populations,” the researchers write, pointing to studies that reported positive impacts from cash transfers in Kenya, Zambia and Pakistan.

The prevailing approach to homelessness — providing services such as housing support and health care — is “paternalistic because we’re assuming this is what they need,” Zhao said.

“Cash allows personal agency, freedom and choice,” she said.