Transformative change to mental health systems involves transformation in how practices, policies, and research respond to the needs of individuals with psychiatric disabilities. This paper presents Amartya Sen’s capabilities approach as a promising framework for outcome measurement congruent with the aims of transformative change in mental health systems. In this paper, Sen’s capabilities approach is contrasted with therapeutic and citizenship values as well as the Housing First approach to housing. The capabilities approach is examined in detail with regard to outcome measurement. Finally, this paper shows the value added of the capabilities approach to transformative mental health.