How to Save Money: Give People Money
In response to rising rates of homelessness, city and state governments have introduced many different programs aimed at providing various forms of shelter and permanent housing to the unhoused. In a new study, a team of researchers in British Columbia, Canada explore a straightforward yet promising approach: just give people cash.
Cash transfers have been shown to be effective at reducing poverty in lower-income countries around the world, but there are less studies evaluating the impacts of targeted cash transfers in North America. In a first-of-its-kind randomized controlled trial, Dwyer et al. seek to measure the impact of unconditional cash transfers to individuals experiencing homelessness in Vancouver.
The research team randomly assigned 50 unhoused people in Vancouver to receive a one-time, unconditional cash transfer of $7,500 Canadian dollars (equal to about $5,700 USD). Another 65 unhoused people served as the control group and did not receive the cash transfer (but received other benefits, including smartphones and free checking accounts). The research team also made sure that no participant would lose eligibility for social services as a result of increased income.
- Unhoused individuals who received the cash transfer of $7,500 CAD spent, on average, 99 fewer days homeless over the next year than people in the control group who did not receive the payment.
- As beneficiaries gained stability and secured housing, their use of shelters and social services decreased significantly, which produced cost savings for society that exceeded the value of the transfer.
- The experiment provides some evidence that unconditional cash transfers can reduce the length of bouts of homelessness while increasing personal savings and spending on essential goods.
Individuals who received the cash transfers spent significantly less time homeless than those who did not receive the transfers. Seventy-four percent of recipients found stable housing in a rental apartment. Cash transfer recipients also saved more money ($1,160) and spent more money on food, rent, transit, and durable goods, like furniture, as compared to the group that did not receive the cash transfer.
Additionally, there was no observed difference in spending on “temptation goods,” such as drugs and alcohol, between the two treatment groups. This defies the expectations of survey respondents who predicted that homeless individuals would spend much more money on temptation goods each month than what was observed.
In a follow-on, narrative-testing study, the research team finds that members of the public were more supportive of the cash transfer program when they learned that recipients did not increase spending on temptation goods.
The program also led to net cost savings. Providing services and shelter to individuals experiencing homelessness is very costly. The researchers estimate that the savings generated from people spending fewer nights in shelters exceed the value of the cash transfer by $777 CAD. In the narrative-testing experiment, members of the public were more supportive of the cash transfer program when they learned that it produced net cost savings for society.
The randomized controlled trial provides promising evidence that unconditional cash transfers to unhoused individuals reduce time spent homeless while increasing spending on food and durable goods. The findings also suggest that cash transfers could mitigate homelessness by helping people pay rent and avoid eviction. Finally, it is valuable to know that members of the public are more supportive of a cash transfer program when they learn about the results of this study, which might defy their expectations.