The following are cost estimates to provide housing using two housing first strategies and a supportive housing strategy. All housing is assumed to require tenant contributions of 30% of income, as per HUD convention. Utilities are not included in any cost, as the $75-175/month is normally paid for by the tenant.
Housing first. The cost to provide housing for people experiencing homelessness can be either figured from development of property or the use of rent subsidies. The main cost difference between the two is that development requires more initial capital and credit while the rental likely costs more over the long term. Nashville housing and rent cost data are from a local non-profit housing developer who is familiar with the current Nashville market. Inflation and rent increase estimates are based on HUD (2008) figures.
The developed, non-profit owned costs are as follows: For an efficiency/one bedroom dwelling, the cost would be $35-45,000 for rehabbing or constructing a new unit and would cost a total of $7080 a year to own and operate the unit. For a 2 bedroom home suitable for couples or small families, the cost would be $45-85,000 for rehabbing or constructing a new unit and would cost a total of $7,500 a year to own and operate the unit. For a 3 bedroom home suitable for larger families, the estimated cost would be $85-100,000 for rehabbing or constructing a new unit and would cost a total of $8,436.
Using HUD (2008) guidelines for occupancy (1.5 persons average per bedroom) and local estimates of likely occupancy for individuals experiencing homelessness, the following figures display a total estimate for developed housing first: 1 bedroom: 60% use * ($340 mortgage + $250 operating costs) = $354 weighted total; 2 bedroom: 20% use * ($375 mortgage + $250 operating costs) / 3 occupancy modifier = $41.67 weighted total; 3 bedroom: 20% use * ($453 mortgage + $250 operating costs) / 4.5 occupancy modifier = $31.24 weighted total; Total: $354 + $41.67 + $31.24 = $426.91 Monthly and $5,122.93 Yearly.
Current market rate in Nashville to rent similar dwellings is about $500 a month and $6,000 a year for an efficiency/one bedroom dwelling, about $600 a month and $7,200 a year for a 2 bedroom dwelling, and about $725 a month and $8,700 a year for a 3 bedroom dwelling. Weighting these costs (as with the developed units using a percentage of use and an occupancy modifier for multi-bedroom homes) yields a single cost: 1 bedroom: 60% use * $500 rent = $300 weighted total; 2 bedroom: 20% use * $600 rent / 3 occupancy modifier = $40 weighted total; 3 bedroom: 20% use * $725 rent / 4.5 occupancy modifier = $32.22 weighted total; Total: $300 + $40 + $32.22 = $372.22 Monthly and $4,466.64 yearly.It should be noted that although the immediate monthly cost of rent is lower than developing property, by calculating rent increase over 20 years (HUD, 2008) versus a stable mortgage with cost inflation for management and maintenance over 20 years yields an average cost for developed, non-profit owned units of $6,057.84 per year and $7,384.69 for rented units – saving $1,326.85 per year on average.
Assuming subsidies pay all of the rent but 30% of the tenant's income, subsidies would cover cost, minus an average of $840 per year (median yearly income from survey, $2,800 * 30%). This would yield yearly costs of $4282.93 for non-profit owned/developed housing and $3,626.64 for rentals.