TORONTO - The government's response to the Attawapiskat housing crisis may well have underscored Stephen Harper's reputation for his hard line rather than his heart, with his focus on the aboriginal reserve's financial problems, not its social ones.

But in other parts of the country, the prime minister's government is also quietly bankrolling one of the largest social pilot projects ever seen in Canada, paying generously for cutting-edge research that is changing the lives of hundreds of homeless people.

The project may scream out for a new, national social program -- the kind that has been anathema to Harper in the past.

But it is producing results that suggest federal involvement in funding homes for the homeless can be smart and save money.

The At Home/Chez Soi pilot project is now half way through its five-year life span, backed by $110 million of federal money channelled through the Mental Health Commission of Canada.

It's the most comprehensive research experiment with homelessness in Canada, if not the world, researchers say.

And it's working.

"We now have enough experience to know this can be done," says Paula Goering, lead researcher for the project.

The pilot project has its origins in the political dust-up of 2006. With Paul Martin's minority Liberal government on life support, NDP leader Jack Layton demanded billions in federal funding for housing and homelessness. The bargain eventually broke down, but left behind a mounting public concern that homelessness had been ignored for too long.

"Somebody needed to do something," recalls Michael Kirby, now the chair of the Mental Health Commission and a former Liberal senator.

The Conservative government agreed to set up a program through the newly-minted Mental Health Commission, pushed by then-health minister Tony Clement and Finance Minister Jim Flaherty. As is Harper's style, it was to be finely-targeted, one-time funding.

But top government officials, in touch with Goering and other researchers on the front lines, argued that homelessness was a growing scourge in every major city. And they saw a new approach in the parts of the United States that seemed to be producing results: dramatic reductions in homelessness, all while saving money on social services, and law enforcement.

The approach, known as "housing first", rejects the traditional method of trying to fix homeless people's underlying problems before guiding them towards affordable housing. Instead, the home comes first -- heavily subsidized and with no strings attached. Then, a support team swoops in and bombards the homeless people with services of all kinds, if they want them.

The government was not about to embrace an experimental approach to the homeless wholesale. Instead, taking their cue from Harper, officials decided to zero in on a sub-group: the mentally ill.

Then they narrowed their focus further. In five cities across the country, they targeted a particularly vulnerable sector of the mentally ill homeless population. In Vancouver, it was substance abusers. In Winnipeg, urban aboriginals. In Toronto, visible minorities. In Moncton, migrants from rural areas. And in Montreal, access to social housing was emphasized.

At Home staff and partners in each city scour alleys and sidewalks for homeless people who fit the bill and funnel the willing into the program. They are divided into two groups: a new-approach group and a control group of treatment-as-usual, so the results can be compared.

Khusrow Mahvan was one of those selected and he can hardly believe his luck. The 54-year-old from Iran had been living on the street or in shelters since his business had gone bankrupt in 1997.

Hypersensitive, he purposely isolated himself, cowering in the corners and shying away from the frequent conflict, the noise and the chaos that dominates shelter life.

"I was always thinking I was going to die," he says.

Now, he has a spotless one-bedroom apartment overlooking Lake Ontario in Toronto. He talks at length of the spices and flavours he adds to his food, thoroughly treasuring the ability to cook for himself for the first time in years.

"Until two weeks ago....I couldn't open my eyes," he says, covering his face with his hands.

Still unaccustomed to living in a home, he sleeps on the floor in the living room, and uses the bed and bedroom for storage of his life's belongings, stuffed into countless garbage bags.

"I like the wideness of this place," he says.

In his lucid moments, he talks of developing enough independence to set up a fast-food stand on the street below, hoping to rebuild some savings.

Out in suburban Scarborough, Elizabeth Bennett meticulously organized and hung up a few dozen sketches she has finished, and decorated her tiny new apartment for Christmas. Her Bible and a small backpack are never far from her side, even while relaxing in her home.

She has spent the past few years in and out of shelters and various lodgings, struggling to gain control of her schizophrenia and deal with a former landlord who threatened her family and wanted to "keep" her.

Now, she has privacy, a strong support network, friends in the church nearby, and a sense of home.

"As long as I'm inside, I feel safe," she says. "I feel safe because of my prayer, and because of the security on the door."

A common criticism of the housing-first approach to homelessness is that it can't work in a tight housing market, where landlords can afford to be picky about their tenants.

Core to the idea is to give homeless people a choice in their home, so they can have some control over living conditions. But that's hard if there's not much rental housing available, says York University professor Stephen Gaetz, who heads the Canadian Homelessness Research Network.

"The challenge is that in a tight housing market, if there isn't an adequate supply of housing, how do you get people in?"

But the At Home clients come with ample support and funding attached, as well as a plan to prevent eviction. Often, they're less trouble than regular tenants, says Paula McDougall, the office manager at a building in a gritty part of north Toronto.

The At Home people pay their rent on time, she says, and they are coached on how to live in harmony with their neighbours. McDougall stays in touch with the case workers, and although she has no formal training in dealing with mental illness herself, she has had enough experience to know what to do if someone goes off their meds or causes trouble.

"I'm not pussy-footing around them," she says in an interview in the ground floor staff room that doubles as a smoking room.

At Home has been able to place everyone approached so far. As of November, the program was fully subscribed, with 1,030 homeless people now in homes and a control group of 980 people.

"At any time, 70 to 80 per cent of the clients are doing really well," says Aseefa Sarang, executive director of Across Boundaries, a Toronto mental health organization that is heading up implementation of At Home in that city.

That's an astounding success rate for a problem that has been the bane of many a government policy.

Nationally, almost all of those 1,030 people have stayed housed, although about 30 per cent have switched to different homes along the way. Most of them have moved on to the next step, working with professionals to design a support system that will help them cope and teach them to live more independently in the long run, says Goering.

"It makes it easier for people if they're not surrounded by others who have the same problems," she says.

"It's a pioneering and risque approach that doesn't work for everyone....But in most cases, they are housing people, and they are staying housed."

Organizers have also been able to line up social service partners in every city, successfully setting up the support network that is crucial to making the approach work, she adds.

Researchers are slowly figuring out, in a methodical way, where the housing-first model does not work or needs to be modified, she says. Some homeless people feel too isolated to be living in their own home. And some vulnerable people find their new homes taken over by drug dealers and users because they lack the skills to turn their home into a safe haven.

Goering believes the amounts governments will save on prisons, shelters and emergency room use will offset the subsidies to housing. But the numbers could go the other way, she says, since some of the people who are now receiving an array of social services did not receive much before.

For the case workers, the former homeless people and the landlords who have placed their faith in the program, their concerns lie in the future.

They taste success, but they don't know what will happen when the program winds down in 2013. Some of the clients will only have been housed for two years by then, and for many, that's not enough for a stable life to take hold.

The thought of pulling away support from such a large group of vulnerable people is disturbing, say facilitators.

"We'll move heaven and earth to get the funding continued," says physician-researcher Stephen Hwang of the Centre for Research on Inner-City Health at St. Michael's Hospital in Toronto.

A nationwide program that invests big sums of up-front money in housing subsidies in the hopes of dealing with long-term issues of mental illness and homelessness will be a tough sell with the Harper government.

The prime minister consistently resists calls for new national social programs and is poised to shave funding from affordable housing over the coming years.

Proof the approach saves money will be crucial for government support.

"Either directly (or) indirectly, mental illness has a significant impact on Canadians -- in their homes, workplaces and streets. It also costs our economy billions," Flaherty told The Canadian Press.

"We're happy to see the progress of the Commission in tackling these issues."

For Kirby, who has dealt with more than his share of large and difficult public policy issues, there are two key questions going forward.

Is the housing-first model the best way to go? Without a doubt, he says.

"The second issue is, who pays for it....It's a real issue. There's only one taxpayer."

When governments, both federal and provincial, see the final results, he is convinced they will see the need to take housing-first to a national scale and someone will step up with funding.

"Once it's finished, we're going to make sure that every government in the country knows we saved them a whole pile of money," he said. "The whole thing is unbelievably uplifting."