We need to be able to reliably identify which people are trying to better their situation and which are looking for handouts. This system needs to take into account someone looking for a handout today could be trying tomorrow. and vice-versa. People tend to start seeking more and more services well before they hit rock bottom. We need to focus efforts towards preventing homelessness. An ounce of prevention beats a pound of cure.
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I'm not suggesting we abandon people who have hit rock bottom and are trying to get back on their feet, I am all for all hand-up strategies at all levels. Focusing on people that are trying vs people that aren't will drastically improve the success rate and help more people.
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People who have a stake in their own success tend to do far better than those that leave their fate entirely in others' hands. We need to find ways for them to earn these services within their capabilities so they can get a taste of success and see some direction in their life.