Abstract Objectives: The present study aims to describe the functioning of the Cottage, to describe the demographics of the patients using the Cottage, to examine benefits conveyed to patients relating to improvements in health and accommodation circumstances and to examine cost benefits of the Cottage. Setting: The Cottage is a six-bed, low-dependency residential facility adjacent to St Vincent’s Hospital Melbourne, a 450-bed inner city adult tertiary teaching hospital. Methods: Retrospective chart analysis of 50 consecutive admissions from 1 June to 1 September 1996. Results: Seventy-eight per cent of patients were discharged in improved health. Eight per cent gained no health improvement. Four per cent required hospital admission and 2% required Cottage readmission. Forty-four per cent of patients were discharged to improved accommodation circumstances and 56% were discharged to the same circumstances. The cost of a Cottage bed was $82 /day. Conclusions: The Cottage fulfils an important, cost-effective role in caring for the unwell homeless person. [ABSTRACT FROM AUTHOR]