Abstract
Should housing assistance be conditioned on sobriety? A dynamic general-equilibrium model evaluates Housing First (HF) and Treatment First (TF) as approaches to reducing drug addiction and homelessness. HF critics argue that conditioning housing on sobriety reduces both by decreasing moral hazard; supporters counter that such requirements exacerbate these issues as recovery is more difficult while homeless. The model links homelessness, addiction, mortality, and labor-market outcomes, endogenously generating drug use concentrated among low-income individuals. Holding policy generosity fixed, TF reduces addiction but increases homelessness. However, compared to a rationed HF benchmark, universal TF reduces both, raises welfare, and is nearly self-financing.