Combating Homelessness in Metro California

Introduction 

Homelessness affects countless individuals and families with growing numbers. While homeless people are generally seen as drug addicts or physically handicapped persons, the term applies to a much larger group. A small family who has fallen on hard times and must forfeit their current housing and live with relatives is considered homeless. People who live in their cars or in shelters are homeless. We are seeing an increasing population of homeless students as well. We see families who have jobs, but they cannot afford to live anywhere. Homelessness can be defined as any individual or family that is at risk of losing a fixed residence or any person who currently does not have a fixed residence. The reason homelessness becomes a public issue is because the public spends money on taking care of the homeless. The causes of homelessness are extensive. I will analyze and attempt to measure the effects and magnitude of homelessness, specifically in the state of California.

The California government has countless resources, reports, and articles dedicated to the study of the effects of homelessness and how they are currently trying to combat this massive problem. I also pulled information from the United States Interagency Council on Homelessness (USICH), which is a great asset in accurate numbers on this problem. My other sources include local newspapers in California, as they are closest to the issues. I tried to stay away from very biased sources, but obviously, some of these newspapers do have bias, which is why I veered away from articles that mentioned current political administrations, and instead focused on the issue at hand.

How to Measure Homelessness

In the article, The Methodology of Counting the Homeless, the authors explain that the best way for us to determine how many homeless individuals there are is to perform a technique called Indirect Estimation (Cowan, 1988). This method of measure is by far the most economical, however, it also leads to largely inflated rates. Another method is screening for homelessness in census questions. This method of measure only happens once every ten years, so we have to estimate the rates between the census dates. Random telephone surveys are another method used frequently to count the homeless, even though not all homeless people will have a phone. The most used way is by counting the number of shelter inhabitants, how many the shelters must turn away, and how many people contact the state department of housing. We then inflate those numbers by 10% to give a rough estimate of how many people are currently in categories of homelessness one and two.

The Department of Housing and Urban Development has four categories to determine the level of homelessness an individual or family is experiencing. Homeless can range from someone attempting to leave a domestic violence situation with nowhere else to go and no funds to live elsewhere, to individuals and families that lack a “fixed, regular, and adequate nighttime residence” (HUD, 2012).  By looking at the report just cited, we can separate and better define homelessness. Category One refers to all persons who are “Literally Homeless”, we see these people the most often. They are the ones on the side of the road, under overpasses, in shelters. Category Two are all those who are in imminent risk of homelessness. This category includes everyone who will lose their residence within 14 days and have nowhere else to go. Category Three is reserved for youth under the age of 25 who have no stable residence, meaning they have moved at least twice within the last 60 days and are expected to remain in that state. Category Four is for all those who are attempting to flee or who have fled domestic violence and do not have anywhere to go or the funds to leave their situation.

If we look at the 10 States with the highest counts of homelessness, we can see that California eclipses other states by a large margin.

Figure 1. Ten States with Highest Homeless Counts/Rates, 2018 (NAEH, 2018)

Causes of Homelessness

The leading causes of homelessness are insufficient income and lack of affordable housing. Smaller causes include mental illness and substance abuse.  The cost of housing is out of reach for many families and individuals in California (LAFH, 2019).  While this may be due to cities and counties charging fees sometimes up to 18% of the total sale price for new home construction (Dillon, 2019), the main cause of high housing costs was the business boom California experienced in the 1980s (Lindsey, 1981). The high emigration rates to California from Asia led to an influx of Asian money. This drove real estate prices up and through the roof. Housing costs have been increasing ever since, only having a slight downturn during the Great Recession).  The average rent in California is also 50% higher than the rest of the country. Affordable housing has become increasingly difficult to find and isn’t at all affordable to develop.

California has also had a lot of pushback for upwards expansion. Southern California especially, is full of single-family residential homes. Many citizens do not want to see high-rise apartment buildings in their city, and do not want to live in one. Developers could not keep up with the demand for homes, causing a massive shortage, increasing prices. While many residents of California earn higher incomes than other states, the cost of housing is keeping them from being able to buy or rent a home. California State Housing Department estimates that 180,000 new homes are needed per year in order to stabilize the housing market, and numbers show that the average is less than half of that per year (Levin, 2018).

The Problem

California has one of the largest homeless populations, accounting for over 23.55% of all homeless persons in the nation (USICH, 2018).  While homeless populations across the United States of America are decreasing steadily, California’s continues to increase. Much of this is due to rising housing costs, with the average California home costing $440,000, more than double the average cost of a U.S. home ($180,000) (Alamo, Uhler, & O'Malley, 2015).  The average rent in California is also 50% higher than the rest of the country. Affordable housing has become increasingly difficult to find and isn’t at all affordable to develop. The California Senate knows this is an issue in their state and has been trying to implement policy to increase the construction of affordable housing units (2018). In California, we see the need to create both supportive housing and affordable housing to not only reduce the population of the homeless, but to also reduce spending on public services. Health care costs could decrease by millions of dollars (RAND Corporation, 2018).

Homelessness puts a strain on public services and spending, which then takes funds away from other important policies, some of which could be used to proactively reduce homelessness, rather than creating reactive policies. Many Americans focus on how much it will cost. We don’t like seeing homeless people on the street, most of us probably feel bad for them, but we don’t know how to help, and while we might understand the importance of higher taxes for the government to intervene, we don’t like seeing more money coming out of our paychecks. While some may argue that we should be doing more as a society to fix homelessness, our hands are tied in how much we can afford to help. Therefore, government intervention is now required. I cannot think of an argument for private intervention only that, when given the issues and causes of homelessness, could still stand on solid ground.

California has one of the largest homeless populations, accounting for over 23.55% of all homeless persons in the nation (USICH, 2018). Much of this is due to rising housing costs, with the average California home costing $440,000, more than double the average cost of a U.S. home ($180,000) (Alamo, Uhler, & O'Malley, 2015).  While homeless populations across the United States of America are decreasing steadily, California’s continues to increase (Cowan, 2019). Last year’s count of the homeless population revealed an increase to over 130,000. This means that per 10,000 people, 33 of them are homeless. California accounts for 25% of our nation’s total literal homeless population (Mejia, 2019).  If we look at a map of where the homeless population of California is located, we can see that the highest concentrations of homeless people reside in the most metropolitan areas where housing is most expensive.

Figure 2. Homelessness by County (HUD, 2017)

These numbers might continue to increase as they are based on a fragile balance of economy and wages in California. “Our state has more than 1.7 million low-income households spending more than half their income in housing costs,” said Ben Metcalf, the director of the state Department of Housing and Community Development. “When you’re paying that much for housing, with so little left over, even a minor shock can start a cycle of homelessness.” (Cabales, 2019). California is seeing a deficit between what they can afford to give and what they cannot. They cannot keep building more shelters and funding them. Providing shelters doesn’t fix the problem, it just helps to keep people out of parks and the streets.

While we generally saw a decrease in the homeless population of the nation over the last decades, there has been an uptick in homelessness more recently across all states (Routhier, 2018), and we can see the national numbers in Figure 2.

Figure 3 California Homelessness Statistics (NATEH, 2019)

Still, throughout the last decade, we have been steadily decreasing homelessness. New programs are going in to help reduce that number, and we will see whether they are effective.

Policy Option 1: Increase Supportive and Transitional Housing

California currently has several plans in place to mitigate the homeless crisis, with the largest one being the CalWORKs Housing Support Program. This was established by SB 855 in 2014 to “assist homeless families in quickly obtaining permanent housing.” (CalWORKs, 2014) The budget of the CalWORKs HSP was expanded in 2016-2017 to bring total funding to $47 million (CWDA, 2016), with another expansion in 2018-2019, raising the total to $71.2 million (HSP, 2019). This program finds eligible families or persons who lack a fixed nighttime residence, have resided in a public or private place not designed for sleeping accommodation for human beings, or any person who has been evicted. (CalWORKs, 2019) In their yearly report published in January 2019, the HSP declared they housed over 14,500 families since inception, received over 46,000 requests for assistance from eligible families, and has grown their budget with the latest proposal to $95 million (HSP, 2019). In June 2019, the state of California agreed to allocate $650 million in one-time funding to support local governments to address homelessness by building supportive and affordable housing (LAHSA, 2019).

Supportive housing can be defined as affordable housing for which government provides a long-term, fixed interest loan to the recipient. This helps secure housing for those who cannot afford housing. This policy needs to include transitional housing to support 67% of those who are sleeping outside on the streets affected by mental illness, substance abuse, poor health, or a physical disability (Smith, 2019). Los Angeles County has housed “more people than ever”, but they have seen a 16% increase in homelessness just in Los Angeles City, with a 12% increase over the entire county (LAHSA, 2019). Los Angeles is mainly using supportive housing to combat homelessness, and it does not seem to be doing a great job. This policy alternative is a good idea to fix a problem that has stopped spreading, however, this problem continues to spread with no real decrease in the major, metropolitan areas of California. The state has yet to receive a substantial amount of funds from the Federal government, and I do not believe they will receive those funds until they do more to combat the underlying issues creating more homelessness. This policy overall uses a lot of funds to produce little results. The only way to make this policy work is to combine it with other policy to combat lack of affordable housing and the cost of living associated with living in California. This depends solely on the cities, counties, and state of California to combat. Homeless rates across the nation have been decreasing since 2007 while California’s are increasing (National Alliance to End Homelessness, 2018). The Federal government will be able to provide help once the situation can be controlled.

This policy alternative has a low to medium efficiency rating. It would be somewhat cost effective, could be run very optimally, but overall would not fix the problem entirely. Political effectiveness would be very low as it would not solve the homelessness crisis but would assist in getting people off of the streets. Political equity is medium as it takes care of all those who end up on the streets but does not affect those currently at risk of homelessness. Political Feasibility would be rather high as California is a very progressive state and this policy would help cleanup cities.

Policy Option 2: Build More Affordable Housing by Incentivizing Developers

In October of 2019, the State of California Treasurer’s office allocated $1.8 billion bonding authority and $88.2 million in federal tax credit to build affordable housing in California (Ma, 2019). The point of affordable housing is to keep rent prices down as well as decrease the risk of homelessness (Wiblin, 2019). California has seen the advantage of building affordable housing to combat homelessness and climate change and has used the revenue from the state’s cap-and-trade program to fund housing closer to jobs in Sacramento (Garber, 2019). Los Angeles estimates that it needs 516,946 new affordable housing units to meet the needs of lower income renters but needs more funding to produce those homes (LAHSA, 2019).

For many years, California has seen a huge deficit in housing supply and demand due to outdated policy and zoning laws (Buyahar, 2019). This caused extreme housing prices, making living in California nearly impossible without a large salary. Because of lost revenue on property taxes, California increases any and all other taxes they can to account for the deficit (Buyahar, 2019). This means cost of living is high because of the government. Now we are at a breaking point in California where the government cannot send enough money to cover the need for affordable housing. This has led tech giants like Facebook and Google to contribute $1 billion each to help solve the housing crisis (Rodrigo, 2019). Apple has also decided to pledge $2.5 billion to help address affordable housing shortages, but their fund will be managed by themselves, with $1 billion going towards affordable housing investments, $1 billion going into a first-time homebuyer mortgage assistance fund, $300 million towards donating Apple-owned and available land for affordable housing, $150 million for Bay Area housing fund, and $50 million to address the homeless population in Silicon Valley (Apple, 2019).

The issue has gotten bad enough that corporations have gotten involved in fixing a state’s problem. I believe this is an all-hands on deck approach. By activating local, county, state, federal, and private sector funds, more housing can be built more quickly to deal with the housing shortage and drive costs down. The goal and theory of this policy options is that by building more housing, specifically affordable housing, rent prices will lower (supply & demand principles). This will then decrease the risk of homelessness as a lower percentage of income will be spent on housing. The best plan would be to use the aforementioned funds to offer development loans as well as tax credits to developers who focus on affordable housing.

The efficiency of this policy option should be medium to high as it can be very efficient in getting more affordable housing built as long as there is sufficient oversight. The political effectiveness would be quite high as it attacks the root problem and would spark economic development. The equity on this option would be medium as it helps solve the root issue of why citizens become homeless but would not have an effect on those currently on the street who need supportive housing. However, the political feasibility would be high as California, again, is a very progressive state, but this would be a bi-partisan issue as it helps stimulate the economy while helping to solve a crisis.

Policy Option 3: Raise Minimum Wage, Introduce Rent Control, Cut Property Tax

This approach is more radical than the others, but it does have a chance to pass in California. The first part of this policy would be to raise minimum wage across the state according to the cost of living in your county. This would increase the amount of money that could come back into the county and state as tax revenue. This causes a greater strain on business and could hurt the economy.

The second part of this policy would be to introduce rent control. California has already passed a rent control law which caps rent hikes at 5% each year plus inflation and bans landlords from evicting tenants for no reason to raise the rent for a new tenant (AP, 2019). This is a good program, however, per a study by Zillow done in 2017, a 5% increase in rent prices would push 2,000 more residents into homelessness in Los Angeles County (Holland, 2017). The only way to combat this rent hike would be to make the rent control cap at the nationwide inflation rate. This would require more policy and a department being assigned to manage the percentage each year, which in turn would increase oversight costs.

The final part of this policy would be to repeal Prop 13 which created an incentive to build commercial development over residential construction (Buhayar, 2019), while also increasing developer fees of up to 18% of the home’s value (Dillon, 2019). “While fees offer a flexible way to finance necessary infrastructure, overly burdensome fee programs can limit growth by impeding or disincentivizing new residential development, facilitate exclusion (gentrification), and increase housing costs across the state.” (Raetz, 2019). Proposition 13, implemented in 1978, also included a measure with limited property-tax increases on homes until they are sold. This means that long-term homeowners are selling their houses to new buyers who have to subsidize their low property tax by paying an enormous increase at time of purchase. (Buhayar, 2019). By repealing this proposition, California would raise up to $11 billion annually for schools and local government (Garofoli, 2019). The local cost of staffing for the increased workload would only amount to $470 million (Garofoli, 2019).

This third and final policy requires only state and local government intervention, however, it would include a dramatic overreach of current powers. This option would have low efficiency however, as it is not the most optimal way to take care of the homeless crisis. Political effectiveness would be medium as it helps to eliminate certain aspects of the root causes of homelessness. The equity of this policy is high as it provides even footing across the board for all residents of California. The political feasibility however is quite low. Even in a progressive state like California, this policy is radical. Only certain key points would pass, and my short analysis would indicate that only eliminating Proposition 13 would pass.

Conclusion

Homelessness is currently a crisis in California. The numbers continue to increase. California needs to not only remove residents from the streets and get them into supportive housing, but also remove the key factors of homelessness, the main one being providing more affordable housing.  Providing supportive and transitional housing would get people off the streets and into programs to allow them to get back to normalcy. Incentivizing affordable housing development would reduce the risk of homelessness and allow lower income families to afford housing.

State, county, and local government will need to take the biggest hand in addressing this crisis. The Federal Government would have to step in and manages this crisis if California cannot control this, however, California is currently enacting huge chunks of legislation to reduce their homeless population. Currently, the goal is to control the rise of homelessness, and then to work on eliminating it. Private companies are also funding construction to build affordable housing because they have realized they might have caused part of the increased housing costs.

By implementing my first two policy options, increasing supportive and transitional housing as well as increasing the incentives towards affordable housing developers, we could see a large decrease in the homeless population. These two options would lower the risk of homelessness as well as remove people from the streets and getting them the help, they need. The government needs to act as this crisis was started by poor legislation planning and high regulation. This would require bi-partisan support and should not have a problem achieving it as these options help to stimulate the economy and lower government public expenditures on caring for the homeless.

By implementing the last portion of my third policy option, which is repealing proposition 13. This measure is already gaining momentum and will most likely pass within this next year. This allows for homebuyers to have a more accurate foresight of costs of homeownership and would allow the state to collect more revenue on currently undervalued properties. Repealing this proposition would also reduce residential developer fees and increase developments.

By taking a no-action alternative, we can assume homelessness rates would continue to rise and public costs in taking care of those who are homeless would also continue to rise. We could assume a drop in tourism if tent cities continue to increase. We could also assume that there would be a high political turnover if no action was taken. Many residents/citizens are already frustrated with the problem of homelessness and lack of affordable housing.

In conclusion, government needs to step in and fix this issue. They can no longer just increase shelters but start to address the underlying problems as well. If left unchecked, homelessness in California will continue to grow.

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