A critical issue in New York City’s housing affordability crisis is the allocation of funds between different agencies responsible for housing development and homeless services. New York City spends billions annually on housing, but the distribution of these funds reveals a significant imbalance between what is spent on creating and maintaining affordable housing and what is spent on homeless services. This disparity in funding highlights a problematic cycle: the lack of affordable housing drives people into homelessness, which in turn leads to increasing costs for shelters and their associated services. From this perspective, investing in permanent housing solutions would be far more cost-effective than relying on temporary shelters.

Spending on Housing Development: HPD and NYCHA

The two primary agencies responsible for affordable housing in NYC are the Department of Housing Preservation and Development (HPD) and the New York City Housing Authority (NYCHA). HPD is responsible for creating and preserving affordable housing, while NYCHA manages the city’s public housing stock, which includes over 300,000 residents across more than 177,000 apartments.

Despite the critical roles these agencies play in addressing housing insecurity, they receive only a small fraction of the city’s budget. In FY2023, HPD was allocated around $1.3 billion, with approximately $800 million going toward capital investments to develop and preserve affordable housing. NYCHA received approximately $1 billion for operating and capital needs. These amounts might sound substantial, but they fall well short of the actual need for affordable housing in the city. Decades of underfunding have left NYCHA buildings in a state of disrepair, with billions in deferred maintenance. It is estimated that NYCHA requires $40 billion in capital funding to fully repair and modernize its housing stock.

Because of this chronic underfunding, HPD and NYCHA are unable to meet the growing demand for affordable housing, forcing thousands of New Yorkers into homelessness or precarious housing situations. The lack of proper investment in both affordable housing production and its maintenance leaves vulnerable populations with few options, exacerbating the homelessness crisis in the city.

The Cost of Homeless Services: DHS

The Department of Homeless Services (DHS) is responsible for providing shelter and services to the city’s homeless population, which has surged in recent years. In FY2023, DHS was allocated over $3 billion, more than double the combined budgets of HPD and NYCHA. This highlights a stark imbalance: more is spent on temporary shelter services than on the agencies that could help prevent homelessness in the first place by providing stable, affordable housing.

A significant portion of DHS’s budget is spent on running shelters, which are incredibly expensive to operate. In New York City, it costs an average of $124 per day to house an individual in a homeless shelter, and the cost rises to $201 per day for a family. These costs add up quickly, particularly as the average length of stay in a shelter has increased. Families in New York City’s shelter system spend an average of over 500 days in shelters before finding permanent housing, far longer than in other major U.S. cities.

The reliance on shelters is both costly and ineffective in addressing the root causes of homelessness. Shelters provide temporary relief but do not offer a long-term solution to the housing crisis. Moreover, the longer individuals or families remain in shelters, the more expensive it becomes for the city. The result is a vicious cycle: the lack of affordable housing drives people into homelessness, and the longer they remain unhoused, the more the city spends on shelters rather than on permanent housing solutions.

The Economic Argument for Permanent Housing

From an economic perspective, it is clear that the current approach of relying on shelters is unsustainable. Numerous studies have shown that it is more cost-effective to provide permanent housing to homeless individuals than to maintain them in shelters. One such study, conducted by the National Alliance to End Homelessness, found that permanent supportive housing—where tenants receive long-term rental assistance and supportive services—costs significantly less than emergency shelters. On average, supportive housing costs $35 per day per individual, compared to the $124 per day cost of shelter services in NYC.

Permanent housing solutions not only save money but also provide better outcomes for individuals and families. Studies have shown that once people are housed, they are better able to address the underlying issues that may have contributed to their homelessness, such as unemployment, mental health issues, or substance abuse. By providing stable housing, the city could reduce the overall demand for shelter services, leading to long-term cost savings.

Investing in Housing Over Homeless Services

Given the stark contrast in costs between shelters and permanent housing, it is clear that the city should prioritize investment in affordable housing development rather than continuing to pour billions into temporary homeless services. If more funding were allocated to HPD and NYCHA, the city could create and preserve more affordable units, thus preventing many individuals and families from becoming homeless in the first place. This would relieve the burden on DHS and reduce the overall costs of the homelessness crisis.

Additionally, by investing in supportive housing and rent subsidies, the city could help move people out of shelters more quickly, freeing up resources to be used more efficiently. For example, expanding programs like Section 8 vouchers or the NYC Family Homelessness & Eviction Prevention Supplement (FHEPS) could help low-income households access stable housing in the private market, reducing the need for shelters.

A More Effective and Just Approach

The city’s current spending priorities reflect a reactive approach to housing and homelessness; focusing more on temporary fixes than long-term solutions. By significantly increasing funding for HPD and NYCHA, New York City could reduce the need for costly services for the unhoused. Investing in affordable housing is not just the morally right thing to do—it is also the most cost-effective strategy for addressing the city’s housing crisis in the long term. By shifting resources away from shelters and toward permanent housing solutions, the city can create a more stable and just housing system for all New Yorkers.

April, 2023

RESEARCH TEAM

Galia Solomonoff, Director

Eddie Palka, Adjunct Associate Research Scholar, ‘18 M.Arch

Kavyaa Rizal, Graduate Research Assistant, ‘23 MSUP

Jamon Mok, Graduate Research Assistant, ‘23 MArch

Lula Chou, Graduate Research Assistant, '24 MSRED, MArch