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What is the “wrong pocket” problem and why is it important?

Often during discussions about the connection between housing and health, education and employment, housers will reference the “wrong pocket” problem, the concept that investments in affordable housing development and preservation have benefits that yield savings in sectors outside of housing. This makes it difficult to create a measure for the return on investment in affordable housing, which can help make a strong business case for public investment in affordable housing. Yet return on investment is something that influences policymakers’ decisions on how to spend public funds in efficient ways.

In the current political climate, affordable housing developers and providers will have to do more to serve low-income households with fewer resources. This makes it even more important that they understand what kinds of affordable housing investments may yield the greatest benefits for the people they serve. It also means that they will have to create effective arguments for allocating public resources to affordable housing because of its many benefits.

The good news is that in the area of health, in particular, there is evidence of a return on investment for affordable housing. There has been significant research into how permanent supportive housing, which serves some of the most vulnerable Americans, can lead to better health outcomes and healthcare savings. The research, summarized in NHC’s report “How Investing in Housing Can Save on Health Care,” makes a strong case that increasing the number of permanent supportive homes can lead to improvements in the health and well-being of individuals who were formerly homeless and reduce health care spending for this population. In addition, recent research from the Center for Outcomes Research and Education has demonstrated that providing affordable housing of various kinds to low-income Medicaid enrollees leads to better health outcomes and lower health care costs.

There is not an equivalent body of evidence to measure the return on investment in other sectors such as educationor economic opportunity. However, there is research to demonstrate many of the benefits.

It is important for housers to educate policymakers and the public about the full return on investment for affordable housing. Affordable housing for low-income Americans not only puts a roof over their head, but also helps them be healthier, perform better in school and be more productive because living in a stable and affordable home provides an opportunity to focus on pursuing financial and employment goals. This all can contribute to significant economic gains.

As affordable housing advocates, we must continue to add to our understanding of how affordable housing creates benefits and savings in health, education and economic opportunity. We must also share this information with the public to help improve understanding of affordable housing as a key platform for American’s success.

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