Thoughts on Housing Affordability and Homelessness in California

I am honored to have been invited to join a group of policy experts in the SoCal Policy Forum, a project of the Southern California News Group—which consists of 11 Southern California newspapers, including the Orange County Register, (Riverside) Press-Enterprise, Los Angeles Daily News, (Torrance) Daily Breeze, and Long Beach Press-Telegram—and the University of California, Riverside. The experts, who have a diverse set of viewpoints and backgrounds, are asked on a quarterly basis to briefly weigh in on issues of the day, and their responses are published on the project’s website. Other project contributions include full-length columns in the newspapers and community forums with the experts and state and local stakeholders.

The SoCal Policy Forum recently kicked off with its first set of issues, tackling housing affordability and homelessness. My responses are available at the project’s site, but I am copying them below since it is easier to see them all in one place, since the site organizes the experts’ responses randomly for each question, rather than by author.

Question 1: From your perspective, how are the problems of housing affordability and homelessness linked, and how are they different?

There is certainly a good deal of overlap between the housing affordability and homelessness crises, particularly here in California, because financial issues are one of the leading causes of homelessness, and housing is typically one’s greatest expenditure. But there are a number of other reasons people become homeless—including job loss, substance abuse, mental health issues, physical disabilities and medical emergencies, death of a loved one (particularly a head of household) and other family issues—so it is far from a perfect correlation.

According to San Francisco’s 2019 survey of the homeless, for example, the loss of a job was the No. 1 primary reason for homelessness (26 percent), followed by alcohol or drug abuse (18 percent), eviction (13 percent), being kicked out by family or friends (12 percent), and mental health issues (8 percent).

As a result, improving housing affordability (as well as other costs of living and making it easier for people to obtain sound employment) will significantly reduce homelessness, but it will not in itself solve the problem, just as focusing solely on substance abuse and mental health issues will not eliminate it. This is why homelessness, especially, is such a difficult problem, and why steps must be taken in a number of policy areas—from taxation and regulation to housing to job growth and economic opportunity—to adequately address these issues.

Question 2: From your perspective, what is missing in the HOUSING AFFORDABILITY conversation so far in Southern California? And in looking for solutions, what role should government (federal, state, or local) play? And what roles should the private sector and non-profits sector play?

There is a growing realization that California’s housing crisis is fundamentally a supply problem, but too many of the commonly proposed solutions fail to address the issues that discourage homebuilding in the state—and many would even make things worse.

Soaking taxpayers with expensive housing bonds will only add to their cost burdens, and making housing less profitable through rent control or affordable housing mandates only inhibits the investment needed for more housing. Even government-funded “affordable housing” developments average about $425,000 per unit, and can reach $700,000 or more per unit.

The state and local governments should, instead, simply remove the obstacles they have put in place that have driven up land and construction prices so much. Restrictive zoning limits the amount of land that can be developed, thus driving up prices, and has been used to discourage more affordable options like boarding houses. Development fees average more than $23,000 per single-family home—about three times the national average—and can be much higher in certain areas, topping $60,000 per home in Oakland and totaling roughly $150,000 per home in Irvine and Fremont. Prevailing (union) wage mandates drive up construction labor costs by as much as 30 percent. The California Environmental Quality Act has been used to squash or tie up developments for years and “greenmail” developers into adopting prevailing wage requirements and extract additional amenities and other concessions, further discouraging homebuilding. Excessive building code requirements also add to home prices, and the solar roof mandate will likely add another $10,000 to $20,000 to the cost of a home, beginning next year.

Getting rid of so many taxes, fees and regulations—which easily account for one-quarter or more of the price of a new home (see here and here)—would bring down housing costs substantially and spur the development needed to meet demand.

Question 3: From your perspective, what is missing in the HOMELESSNESS conversation so far in Southern California? And in looking for solutions, what role should government (federal, state, or local) play? And what roles should the private sector and non-profits sector play?

It strikes me that there are a couple of aspects of the homelessness problem that need more attention, one demographic and one economic.

The demographics of the homeless population are complex, and people become and remain homeless for a variety of reasons, which is why there is no single “silver bullet” to solving the problem. Some see homeless people as primarily those with drug and alcohol addiction problems or mental health issues, while others see people mainly down on their luck due to financial issues, oftentimes beyond their control, who just need a temporary helping hand. There is truth to both views, and both of these issues represent significant pieces to the puzzle, but the reality is more nuanced and varied, as noted in the response to the first question above.

Many acknowledge that securing a decent job is among the best ways for one to get himself or herself out of homelessness, but not enough attention is paid to the impediments that make this so much more difficult. Occupational licensing laws, for example, serve as a barrier to work by imposing government fees and oftentimes unnecessary education and training requirements, like hair braiders forced to attend expensive cosmetology schools to learn skills they will never use.

In addition, a job paying $10 an hour might allow a homeless person to live in a boarding house or stay temporarily in a flophouse until he can work his way up the economic ladder, but minimum wage laws and zoning restrictions prevent such arrangements. Even payday loans, though they may not be cheap and are often demonized, nonetheless help many get through short-term financial emergencies. These may not be ideal arrangements, but they are still much better alternatives than resorting to loan sharks or sleeping in one’s vehicle or on the street.

Question 4: Is there anything else you would like to add on the topic of affordable housing or homelessness?

As much as we would all like to eradicate homelessness altogether, we must recognize that some portion of the homeless population will refuse all help, and direct our scarce resources to those who can most likely benefit from them. The hard truth is that we cannot force assistance on those who reject it, and we cannot afford to waste time and money on them when those efforts could be so helpful to others willing to do what it takes to improve their situation.

Finally, precisely because our resources are scarce, it would be more effective for individuals concerned with the homelessness problem to direct their time and money to private charities, rather than large, sweeping government programs (with their large, sweeping government bureaucracies). Private charities generally are more responsive to the needs of their communities because they have greater local knowledge of what must be done, and they have greater incentives to show positive results in order to generate future donations. Heavy-handed government involvement, by contrast, relies on compulsion (i.e., taxation) instead of charity, and need not be effective in order to continue receiving its funding.

Adam Summers is a Research Fellow with the Center on Entrepreneurial Innovation at the Independent Institute.
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