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The goal is suffering
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Yes and no. A huge chunk of ex-Soviet people still live in Khruschev-era serial housing.
That'd be buildings that have cracks, leaks and draughts all over them, you can hear your neighbors fucking, and there are no elevators.
Yet when those were being built, most of the population was living in barracks (not the military kind, but flimsy wooden boxes with no conveniences, crammed together, something like construction workers for the duration of one project) or in communal apartments (imperial-era normal or even luxury apartments split into rooms, rooms split with additional walls into smaller rooms, a family crammed into each such room, and only one bathroom and kitchen and toilet for all of them in one communal apartment) , and this show of humanity and a few others (like releasing thousands of political prisoners) form together the particular spirit of 60s and the Thaw in the USSR, where, paradoxically, Soviet people started feeling that there might really be some bright future ahead. Late 40s and 50s after the war were so dark that they are almost absent from popular memory. It's not a coincidence that Soviet science fiction (a thing that between 20s and 50s became almost dead) had a rebirth.
The housing program was one of the main reasons for this optimism.
So, my point is - I don't think homeless people would complain about getting bad housing over no housing. And I don't think that prison is that much worse than Khruschev-era houses, modern materials and all that.
I don't disagree with you, but I feel a communal housing with lots of homeless people in close proximity would be deleterious to homeless rehabilitation as the worst examples would negatively effect the best examples in the same way that prison turns a normal person into a broken person that can manage existing outside of that system.
You couldn't even separate the degrees of maladaptions and have productive rehabilitation because there would a point at which you create a oroboros class that would never be capable of rehabilitation in proximity to similar cases that would fester and grow until you need a larger capacity that never really makes progress.
The same sort of thing happens on the streets now. The influence of the worse cases drag down others until you have a common population of bad cases that are decivilized until rehabilitation is almost impossible.
A more separate and isolated rehabilitation program would allow for a greater ability for improvement in a vacuum devoid from the detrimental influence of worse or more of the same influence. Obviously that would be more costly and have greater logistical needs, but that is the cost of meaningful homeless rehabilitation.