In Australia, it is widely believed that most homeless people have mental health issues and that mental illness is a primary cause of homelessness. This paper uses information from a study of 4,291 homeless people in Melbourne to investigate these propositions. The research found that 15 per cent of the homeless had mental health issues prior to becoming homeless. This challenges the community perception that mental illness is the primary cause of homelessness. The research also found that 16 per cent of the sample developed mental health issues after becoming homeless. Homelessness causes mental health issues for some people, particularly anxiety and depression. The claim that most homeless people are mentally ill sends the wrong message to policy makers about the services that are needed to assist homeless people.