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Context: Chronically homeless individuals with severe alcohol problems often have multiple medical and psychiatric problems and use costly health and criminal justice services at high rates., Objective: To evaluate association of a "Housing First" intervention for chronically homeless individuals with severe alcohol problems with health care use and costs., Design, Setting, and Participants: Quasi-experimental design comparing 95 housed participants (with drinking permitted) with 39 wait-list control participants enrolled between November 2005 and March 2007 in Seattle, Washington., Main Outcome Measures: Use and cost of services (jail bookings, days incarcerated, shelter and sobering center use, hospital-based medical services, publicly funded alcohol and drug detoxification and treatment, emergency medical services, and Medicaid-funded services) for Housing First participants relative to wait-list controls., Results: Housing First participants had total costs of $8,175,922 in the year prior to the study, or median costs of $4066 per person per month (interquartile range [IQR], $2067-$8264). Median monthly costs decreased to $1492 (IQR, $337-$5709) and $958 (IQR, $98-$3200) after 6 and 12 months in housing, respectively. Poisson generalized estimating equation regressions using propensity score adjustments showed total cost rate reduction of 53% for housed participants relative to wait-list controls (rate ratio, 0.47; 95% confidence interval, 0.25-0.88) over the first 6 months. Total cost offsets for Housing First participants relative to controls averaged $2449 per person per month after accounting for housing program costs., Conclusions: In this population of chronically homeless individuals with high service use and costs, a Housing First program was associated with a relative decrease in costs after 6 months. These benefits increased to the extent that participants were retained in housing longer.