Cost-benefit analysis - Homeless Link

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Cost-benefit analysis - Homeless Link Powered By Docstoc
					Homelessness and economic
       Homeless Link, London
            June 2010

           Roger Bowles
       University of York, UK
• To develop a framework for applying economic
  evaluation methodology in the context of

• To provide examples from recent studies

• To look out how these methods can be used
  more widely and to consider some of the
        Objectives of economic
• Effective resource allocation within a sector and as
  between sectors requires comparison of the costs and
  benefits of projects, programmes and practices

• Methods for estimating benefits have been pioneered in
  areas such as health, transport & the environment, but
  are less well developed in the context of homelessness

• Cost estimation methodology is also much less
  advanced in the homelessness sector than comparable
  areas such as health: the emphasis has been more on
  the effectiveness of interventions than on their costs or
  cost effectiveness
• Both general and project-specific issues to be
  considered in applying methods of economic
  evaluation to social policy interventions
• General issues include
  – Characterising the project life-cycle
  – Evolution of appraisal and evaluation requirements
    over the project life-cycle
  – Implementation variation where multiple sites are
     Project-specific issues
– Identifying project objectives and beneficiaries
– Choice of outcome measures
– Identifying an appropriate baseline
– Identifying the costs to be included and excluded
   • For example:
      – Neglected/hard to value inputs
      – Overspills between projects (especially where partnership working is

– Stakeholder reactions
– Agency learning
  Appraisal and Evaluation over the Project Cycle

Policy ideas go through various stages before emerging as fully-fledged
   programmes. The process varies, but is broadly:
• Conjecture about the effects of an intervention
• Identify practical steps
• Review what is known about:
    – Impact of similar measures applied elsewhere
    – Current situation
• Design intervention: specify expected effectiveness, benefits & costs
   (project appraisal)
• Secure funding and agency commitment
• Articulate theory of change
• Design and conduct experiment, pilot or research
• Review findings in relation to earlier assumptions and conjectures
   (project evaluation or re-appraisal)
• Decide whether to extend the programme to other sites
  The notion of ‘homelessness’
Covers a wide range of circumstances:
  – Released offender who may not even have a
    fixed abode
  – Runaway young people living on the street
  – Adult rough sleepers with mental health,
    substance misuse & other issues
  – Families seeking re-housing because of
    abuse, partner violence etc.
      Costs of homelessness
Varies widely with costs and counterfactuals
• For rough sleepers/runaways (versus
  hostel) might include additional demands
  on health services, offending/ASB,
  reduced quality of life, negative
• For families (versus staying put) might
  include: costs to family of relocating
  (school disruption, changing GP..); costs
  to local authority of changes in tenancy
          Homelessness projects
• My experience has primarily been of projects where homelessness
  has been one strand in a wider picture:
   – Sanctuary Schemes to reduce violence by former partners
       • A reduction in homelessness applications was one outcome
         measure (other was number of assaults)
   – Prisoner resettlement programmes
       • Measures to facilitate offenders find accommodation may
         reduce reconviction risk (if provided in conjunction with other
         measures such as substance misuse programmes)
   – Runaway children
       • Children living on the streets are likely to be at risk of
         offending, poor health status etc.
                         Sanctuary schemes
Provision of sanctuaries is intended to make women at risk feel (and be) safer
   from attacks by former partners
     – Potential benefits:
         • fewer homelessness applications and less re-housing (housing department,
           victims & families)
         • fewer attacks (victims, CJS)
    – Costs:
         • Provision of security facilities
         • (Possibly) Additional support for victims and potential victims
    – Complications:
         • How to estimate the number of households who would have sought
           homelessness status in the absence of the programme
              – Need a counterfactual either from same area prior to SS or from an area where
                SS has not been implemented
         • How to estimate savings from reduced homelessness applications
              – There are estimates of the cost of having a property empty plus preparing for a
                new tenant but not much on the costs to the family of relocation
         • How to estimate savings from reduced incidence of assaults
              – There are estimates of the costs of violent attacks
              – Would need to estimate the reduction in the number of assaults
                          Prisoner resettlement
•   Rationale and content
     –   Homelessness is a risk factor for reconviction
     –   Intensive resettlement programmes typically involve provision of some kind of halfway house
         (along with support to get a job, possibly drug testing etc.)
     –   Prior to release support may include a housing worker to liaise with landlords, arrange
         meetings with housing providers post-release
•   Potential benefits:
     – A higher proportion in settled accommodation sometime later (e.g. 3 months)
     –   A smaller proportion reconvicted (or less serious offence types)
     –   A higher proportion in jobs
     –   A smaller proportion are problem drug users
           (Of these outcomes the increase in the % housed is an intermediate measure, expected to
           contribute to other outcomes such as a reduction in offending & an increase in %
•   Costs:
     –   Provision of advice or support that would not otherwise be provided
•   Complications:
     –   Selection bias may arise because those offered and/or receiving accommodation support
         may not be typical of prisoners being released
     –   Difficult to keep track of this group
     –   Accommodation measures are rather arbitrary (e.g. definition of ‘fixed address for first night’)
     –   Costs of accommodation support may be difficult to isolate from other package elements
         Resettlement example
• No project: (comparable area/offenders)
   – 100 offenders: 60 re-offend over next 24 months, av
     of 3 offences costing £5k each: cost of crime =
     60*3*£5k = £0.9m
• Project: additional costs £200k
   – Capacity 50 offenders of whom 20 commit av of 2
     offences, costing £5k each: cost of crime = 20*2*£5k
     = £0.2m (equivalent to £.4m)
• Benefits: value of crime reduction (£.5m)
• Costs: project costs £.2k:
• Net benefit = £.3m
• Return on investment = .3/.2 =1.5 or 150%
         Children not living at home
•   Rationale and content
     – Emilie Smeaton’s study “Off the radar” highlights the ‘thousands’ of children living
       on the streets in the UK: many are offending routinely, enjoy poor health and
•   Potential Benefits
     –   If the young people lived in stable accommodation there might be a reduction in their
         offending (with benefits to victims and the CJS)
     –   There might also be benefits to their health (which could in principle be identified via the use
         of QALYs) and to their education/training status
•   Costs
     –   There are (measurable) costs attaching to the provision of foster homes and care
•   Complications
     –   In the absence of intervention(s) to mitigate the number of young people not living at home
         there is not really anything to evaluate
     –   The young people typically want to remain off the radar, for example because of bad
         experiences at home, in care etc.
  Cost effectiveness analysis and cost-benefit analysis

• Cost Benefit Analysis
  – compares costs and benefits, usually
    implement vs. not implement
  – Comes in many guises e.g.
     • business case,
     • Green Book calculations of potential returns
     • Before or after the event
  – Requires a listing of the monetised costs and
    benefits of intervention vs doing nothing
    Cost-effectiveness analysis
• Effectiveness studies focus on outcomes
• CEA compares different methods of
  achieving one unit of an outcome
• It is useful where:
  • There is a single, measurable outcome
  • There are competing methods of achieving the
  • The contribution of each method can be isolated
  • It may be difficult to monetise the outcome e.g. ‘better
    outcomes for families’
               Policy discussion
• Reducing homelessness is often part of some wider
  policy objective: e.g.
   – Reducing domestic violence,
   – reducing offending by released prisoners
   – Reducing the negative externalities associated with street
• This complicates the choice of outcome measure and
  may mean that CEA cannot be applied
• The project may be part of a wider bundle of measures
  where outcomes depend on interaction between them
  (e.g. The reduction in offending may depend on how
  offenders are supervised in a hostel, not just whether
  they have a roof)
Implications for research design
• Theory of change needs to articulate the benefits
• Need to specify an outcome measure that captures
• Need outcome measures that are:
   – Based on regularly-produced indicators
   – Produced for the counterfactual as well as the
• May not need measures that are:
   – Expressed in financial terms
   – Explicitly designed for the intervention
      Practical suggestions 1
• The economic part needs to be designed
  as a central part of an evaluation: it cannot
  usually be tacked on successfully
• The measurement of outcomes requires
  some specialist expertise but not
  necessarily a great deal
• The measurement of project costs (and
  benefits) should focus on differences (in C
  & B) rather than levels
      Practical suggestions 2
• Economic evaluations can generally be
  done provided that:
  – Project objectives are clear and simple
  – A convincing counterfactual is available
    • Proper control for differences in client groups, by
      means of RCT, difference in differences design
  – Project costs can be identified (generally use
    budget as starting point but probe)
  – May need to make some conjectures about
    costs and impact: if so, make transparent and
    run sensitivity checks

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