Two definitions of the problem of homelessness among persons with a chronic mental illness are examined, along with their implied solutions and ramifications for policy. Homelessness among this group is first viewed as the result of deinstitutionalization, and secondly, as the outcome of a critical shortage of low-income housing. Solutions stemming from the deinstitutionalization definition of homelessness, reinstitutionalization or improvement in the mental health system, are seen as inadequate to deal with the problem of homelessness among the mentally ill. Instead, state departments of mental health are called upon to provide a leadership role in the development of affordable housing.