The Business of Recovery: Understanding Operational Costs and Funding Sources in Recovery Housing in the United States

Introduction

In 2024, approximately 17% of the United States population ages 12 or older met the criteria for having a substance use disorder (SUD). ¹ Recovery housing (RH) is defined as sober, supportive housing that incorporates peer support and addresses health-related social needs to help individuals sustain long-term recovery. ² Research examining the impact of RH models has found the model to be effective at improving recovery outcomes related to employment, criminal justice involvement, housing, and substance use. ² Despite these documented outcomes, the supply of RH, estimated between 10 000 to 18 000 residences in the United States, is unlikely to meet demand.^3,4 Regulations pertaining to RH organizations vary substantially across states with some states requiring licensing and/or certification and others having few RH specific regulations.

Many unknowns still exist regarding the business operations of the RH industry. ⁴ One study looking at the revenue sources of both Oxford house (solely peer run RH model with no staffing) and other RH models found that RH organizations were primarily funded by resident fees with a small portion of revenue coming from government funding. ⁵ Understanding an industry’s financial characteristics can help inform sustainable replication and expansion as well as provide a benchmark of service costs to inform reimbursement programs and cost-effectiveness research. The purpose of this study was to assess the financial landscape of a national sample of RH organizations, including their annual operation costs, cost categories, and revenue sources.

Methods

A cross-sectional survey was employed with a convenience sample of recovery houses in states with state affiliates of the National Alliance for Recovery Residences (NARR), a national certifying agency for recovery residences. ⁶ NARR affiliates are organizations that certify RH in their state and ensure compliance with safety, accountability, and support criteria. Affiliates also ensure that RH organizations offer services and staffing according to their certified NARR level. NARR certification levels 1 to 4 depict increasing levels of staffing and service intensity (full description of NARR levels provided in Supplemental Material). ⁷ The survey and study protocol was approved by the University of Kentucky Institutional Review Board (Protocol #53931).

Data Collection and Sample

The study focused data collection in states with NARR affiliates (see Figure 1 for sampling strategy and attrition). Nineteen of the thirty (approximately 63%) NARR affiliates that existed at the time of the study participated. Participating states included Washington, Montana, Colorado, Minnesota, Missouri, Wisconsin, Michigan, Ohio, Kentucky, Tennessee, Alabama, South Carolina, North Carolina, West Virginia, Pennsylvania, New York, Massachusetts, Maine, and New Hampshire. There are approximately 3188 recovery residences estimated to operate within the 19 states that participated in the study. ⁴

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Figure 1.

Sampling strategy and exclusion criteria.

All NARR affiliates sent at least 3 email invitations to RH organizations who were certified or in the process of being certified with their state affiliate. Affiliates who had contact information for noncertified houses also sent email invitations to those noncertified organizations. When possible, affiliates also utilized in-person meetings and virtual calls with operators and conferences to discuss the survey and invite operators to participate. Survey participants were given access to the Fletcher Group Economic Calculator tool as an incentive to participate in the survey. ⁸ All surveys were conducted at the organization level, rather than the individual residence level to account for the shared overhead costs of organizations that operate multiple residences.

Data were collected between January 3, 2024, and February 21, 2025. A total of 612 organizations responded to the survey. Organizations that responded to less than 50% of the questions or did not consent to taking the survey (N = 192), and who indicated they operated one or more Level 4 residences (N = 12) were dropped from the analysis. Level 4 residences were dropped on the basis that they are more clinical and service intensive than residences of lower levels and may distort estimated operating costs. The final sample consisted of 408 RH organizations operating 1458 residences serving 12 119 residents. The study yielded approximately a 46% response rate given the number of residences estimated to be operating in the participating states (N = 3188). ⁴

Results

Characteristics of Recovery Housing Organizations

Approximately 60% of organizations indicated they operated more than one residence. Of organizations that operated more than one residence, the median number of residences operated was 3 (average of 5), with a range of 2 to 40 residences. Most residences in the sample were NARR certified as Level 2 (63%), with a small share certified as Level 3 (15%) or not NARR certified (13%). Few residences were certified as Level 1 (5%). Approximately half of the residences were owned by the organization (51%), and 45% were rented (Table 1).

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Table 1.

Characteristics of Recovery Residences Surveyed, United States, 2024 (N = 1458 Residences).

Characteristic	Count (%)
NARR certification level a
Level 1	75 (5)
Level 2	914 (63)
Level 3	219 (15)
Not NARR certified	189 (13)
Missing	50 (4)
Facility ownership
Rent	658 (45)
Own	746 (51)
Missing	43 (4)

Abbreviation: NARR, National Alliance for Recovery Residences.

a

Level 1: Peer Run, Level 2: Monitored, Level 3: Supervised. ⁷

Operating Costs of Recovery Housing Organizations

Of the 408 organizations surveyed, over half (N = 265) provided an estimate of their annual operating costs. Organizational characteristics did not differ significantly between those who provided an estimate of their operating costs and those who did not (see Supplemental Material). The median annual operating cost was $155 000 (average of $420 716), with operating costs ranging from $1500 to $20.5 million annually.

Organizations that operated a single residence had a median operating cost of $90 000 (average of $212 068) while organizations that operated multiple residences had a median operating cost of $237 208 (average of $539 238). Of organizations that operated multiple residences, the median annual operating cost per residence was $67 083 (average of $101 419).

Overall, the median cost per resident served annually was $6464 (average of $12 172). Organizations that operated a single residence had a median cost per resident served of $7819 (average of $14 831) while organizations that operated multiple residences had a median cost per resident served of $5815 (average of $10 738).

Components of Operating Costs

Operational costs consisting of rent/mortgage, operational and clinical staffing, and utilities accounted for 71% of the overall annual operating costs and service costs consisting of programming, resident and staff supplies, and meals accounted for 23% of annual operating costs (Figure 2).

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Figure 2.

Percent spent on different categories per resident served annually, United States (N = 343 organizations operating 1197 residences).

Revenue Sources of Recovery Housing Organizations

The largest share of revenue comes from resident fees (41%). Of those who disclosed the amount they charge in resident fees (N = 358), the median amount charged was $600 (average is $692) per month, with resident fees ranging from $20 per month to $7000 per month. Organizations indicated they received about 68% of the resident fees they charge, while 40% of organizations indicated they dismissed residents who were unable to pay resident fees.

Local and state grants accounted for the second largest source of revenue (15%). Unique state programs (eg, NARR affiliate voucher programs or state-specific funding) accounted for 11% of revenue, while donations accounted for 8% of revenue. Federal grants accounted for 6% of revenue, state contracts and foundations/corporations accounted for 4% of revenue, and Medicaid accounted for 3% of revenue. Contracts with the Department of Corrections accounted for 2% of revenue; however, funding related to community corrections could be captured in other sources such as state and local grants, state contracts, and federal re-entry grants (Figure 3).

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Figure 3.

Percent of revenue from different sources (N = 386 organizations operating 1371 residences).

Discussion

RH is an important resource in addressing the recovery and health-related social needs of individuals with SUD. Findings from the survey indicate that RH organizations are diverse in terms of the costs at which they operate. While organizations that operated multiple residences had higher total operating costs, the median cost per residence ($67 803) and cost per resident served ($5815) for organizations with multiple residences was lower than the median cost per residence ($90 000) and cost per resident served ($7819) for organizations operating a single residence. This implies the existence of economies of scale for RH organizations in which administration costs and other fixed costs, as well as staffing to oversee operations across multiple residences, have greater cost efficiency. While organizations that operate more than one residence may be more cost efficient in terms of cost per resident served, the data presented here cannot speak to the cost-effectiveness of different organizations’ structures for RH.

RH programs in this study also had significantly more fixed costs compared to variable operational costs. Research has found that high fixed cost ratios reduce an organization’s flexibility and resiliency in economic downturns, as well as increase the need for consistent and reliable funding sources. ⁹ While resident fees were the largest source of funding for RH organizations, this revenue source is not especially reliable as most RH residents are unemployed and may not be able to work during their initial months in the residence. ¹⁰ As such, future research examining funding strategies to increase reliability of funding sources for RH organizations is recommended.

Analysis of the cost per resident served highlights the opportunity state reimbursements may offer in sustainable revenue, as the median annual cost per resident served was $6464, equating to approximately $18 per day per person served. While not a replacement for more formal residential treatment models, RH costs are substantially lower that residential treatment centers, which offer 30 to 90 days of treatment programs with average costs of $57 193. ¹¹ Kentucky’s 1115 Reentry Waiver will allow RH programs to be reimbursed at approximately $47 to $62 (depending on NARR certification level) per day for providing 5 to 10 hours of bundled recovery, life skills, case management services. ¹⁰ Washington also has a state program that allows for billable employment support services within RH at a daily rate of approximately $27. ¹² Funding through Medicaid or other state agencies is likely to be related to higher cost service models that require formal staffing to administer, document, and bill. While integration of reimbursement models like those in Kentucky and Washington may increase the operating costs of RH organizations, they may also offer a potential sustainable and consistent funding source.

The study has a few limitations to note. Due to the data collection strategy, the survey was only disseminated in states with a NARR state affiliate, and the sample consisted mostly of NARR affiliated residences. Of the 30 states that had NARR affiliates at the time of the study, only 19 participated. Additionally, many of the largest and most populous states with the greatest numbers of recovery residences, like California and Florida, did not participate in the study. Due to the differences in dissemination methodologies and connectedness of affiliates and their certified organizations, states had very different response rates ranging from 25% to 89%. This may further limit the external validity of the findings. Additionally, organizations that completed less than half of the survey (N = 192) were excluded from analysis as none of these organizations provided information related to operating costs, cost components, or revenue sources. Those who answered less than 50% of the survey were similar in organization characteristics as those retained in the sample for analysis. Of the 3188 recovery residences estimated to be in participating states, our final sample consisted of 408 organizations operating 1458 recovery residences yielding a response rate of 46%. Finally, just over half of the survey participants provided an estimate of their operating costs, potentially limiting the reliability of the operating cost estimate. However, residence characteristics did not differ significantly between those who provided operating costs and those who did not.

Conclusion

This national study is one of the largest reporting on the costs of RH to date and provides insights into the financial makeup of a critical recovery support service with growing evidence for its positive impacts on recovery outcomes of individuals experiencing SUD. Recovery houses are an effective recovery support service that operate at relatively low per resident costs. Further research to continue the characterization of funding mechanisms of this evolving resource is recommended.

Supplemental Material