If they are stable and not a threat to themselves or others, then yes they can benefit from living on their own. It depends on the type of mental illness and whether or not they have some type of support system on the outside, but if they do have support, either by friends or family, or even the mental health system if they are compliant, they can live safely and happily in the "real" world. Some of those who need more support include schizophrenics and manic depressives. Those who suffer from major depression still need support, but as long as their meds are working and they continue to follow their prescribed treatment, there is no reason to keep them cooped up in a hospital. The biggest worry for me would be that they would go off their meds and end up in the streets. If there is someone...a caseworker or friend or family member who checks on them regularly, this is much less likely to happen.