The Cost-Effectiveness of Independent Housing for the Chronically Mentally Ill: Do Housing and Neighborhood Features Matter?

To determine the effects of housing and neighborhood features on residential instability and the costs of mental health services for individuals with chronic mental illness (CMI).Medicaid and service provider data on the mental health service utilization of 670 individuals with CMI between 1988 and 1993 were combined with primary data on housing attributes and costs, as well as census data on neighborhood characteristics. Study participants were living in independent housing units developed under the Robert Wood Johnson Foundation Program on Chronic Mental Illness in four of nine demonstration cities between 1988 and 1993.Participants were assigned on a first-come, first-served basis to housing units as they became available for occupancy after renovation by the housing providers. Multivariate statistical models are used to examine the relationship between features of the residential environment and three outcomes that were measured during the participant's occupancy in a study property: residential instability, community-based service costs, and hospital-based service costs. To assess cost-effectiveness, the mental health care cost savings associated with some residential features are compared with the cost of providing housing with these features.Health service utilization data were obtained from Medicaid and from state and local departments of mental health. Non-mental-health services, substance abuse services, and pharmaceuticals were screened out.Study participants living in newer and properly maintained buildings had lower mental health care costs and residential instability. Buildings with a richer set of amenity features, neighborhoods with no outward signs of physical deterioration, and neighborhoods with newer housing stock were also associated with reduced mental health care costs. Study participants were more residentially stable in buildings with fewer units and where a greater proportion of tenants were other individuals with CMI. Mental health care costs and residential instability tend to be reduced in neighborhoods with many nonresidential land uses and a higher proportion of renters. Mixed-race neighborhoods are associated with reduced probability of mental health hospitalization, but they also are associated with much higher hospitalization costs if hospitalized. The degree of income mixing in the neighborhood has no effect.Several of the key findings are consistent with theoretical expectations that higher-quality housing and neighborhoods lead to better mental health outcomes among individuals with CMI. The mental health care cost savings associated with these favorable features far outweigh the costs of developing and operating properties with them. Support for the hypothesis that "diverse-disorganized" neighborhoods are more accepting of individuals with CMI and, hence, associated with better mental health outcomes, is mixed.