Background To reduce homelessness, it is important to gain a better understanding of the differences between homeless people who remain in institutions and those who gain and can sustain independent housing. This longitudinal study explores differences in housing transitions and differences in changes in health and self-determination between formerly homeless people still living in institutions 2.5 years later and those now living in independent housing in the Netherlands. Methods This study mapped the housing transitions of 263 participants from when they entered the social relief system (SRS) to 2.5 years later when they were in independent housing or institutions. These individuals were compared at the 2.5-year mark in terms of gender, age and retrospectively in terms of duration of homelessness. They were also compared with regard to changes in psychological distress, perceived health, substance use and self-determination. Results Two and a half years after entering the SRS, 81% of participants were independently housed and 19% still lived in institutions. People in institutions had a longer lifetime duration of homelessness, were more often men, and their number of days of alcohol use had decreased significantly more, whereas independently housed people had shown a significant increase in their sense of autonomy and relatedness. Conclusion Formerly homeless people living in independent housing and in institutions show few health-related differences 2.5 years after entering the SRS, but changes in autonomy and relatedness are distinctly more prevalent, after the same period of time, in those who are independently housed.