It takes some serious chutzpah to assert that the answer to homelessness is obvious, as a piece published earlier this year in The Atlantic does. If only “The Obvious Answer to Homelessness” actually had offered the answer, obvious or otherwise. Sadly, it didn’t. And even more sadly, it perpetuated a narrow and misleading—and ideologically charged—view of the homelessness crisis. The more this view is propagated, the more it gets in the way of thinking clearly about a problem that should be solvable, but is far from simple.
The article, authored by journalist Jerusalem Demsas, does get a couple of things right. Yes, the homelessness problem is much worse in the “superstar cities” like Seattle, San Francisco, or Washington, D.C. And no, people do not go to these cities to become homeless, or because of their mild climate or liberal politics. But to conclude that the answer is (drumroll, please) to get rid of burdensome regulations so that developers can build more housing in those superstar cities, is to seriously misinterpret a number of facts on the ground. In fact, eliminating regulations would hardly make a dent in the problem. Regulation is a red herring that directs attention away from finding real solutions.
I’m not saying we don’t need more housing supply. Yes, we do. Since the Great Recession, we have under-produced housing relative to the growth in the number of households and the need to replace old units. In the last couple of years, the number of new households being formed and looking for a place to live has spiked, and housing production has not kept up. This is one of a host of reasons why prices and rents have skyrocketed in the last two or three years. There is little doubt that if we built more housing, particularly plain vanilla housing like the small single-family homes and modest garden apartments that relieved the post-World War II housing crisis, we would make a big dent in the needs of the millions of young people, middle-income families, and others for decent, affordable housing. I have been saying this since long before the idea became the solution du jour. But there are some big catches.
Limits to Zoning Reform
Zoning reform is not a magic bullet to create supply, as its advocates seem to believe, with their “rezone it and they will build” mantra. There are many reasons why we are not building enough housing in the United States other than restrictive zoning, particularly in the already heavily developed urban centers where most of the conversation is taking place. Finding or assembling buildable sites is extremely difficult, time-consuming and, in cities like San Francisco or New York, insanely expensive. Skilled construction workers and capable subcontractors are in desperately short supply, and the traditional training pipelines have dangerously atrophied. According to Construction Dive, an industry site, “The industry faces a gap of roughly half a million workers, a shortage that will only worsen with increased demand for labor as a result of the billions of dollars set to flow from federal infrastructure funding.” New firms trying to break into large-scale real estate development find daunting barriers to entry, while existing firms as often as not profit from the undersupply and see no particular reason to reach downward to less affluent markets. I can go on, but the point is clear. Removing regulatory hurdles moves the needle a little, but a lot less than many people believe.
Zoning reform in high-cost coastal cities may at best yield a modest increase in what might be generously called “middle-priced housing.” In the San Francisco area, the construction cost alone to build a modest 1,000-square-foot two-bedroom apartment is close to $300,000. Even if you only add to that normal fees, a fair profit, and not terribly expensive land, you’re still looking at a price upward of $500,000. In Phoenix, a much lower cost (and wage) market, you’re looking at $250,000 or more. Building more housing in these price ranges would be a good thing. Many people would benefit. But we won’t even get to those prices until after we have ramped up production enough to have removed the undersupply pressure.
And even that might not do the job. As long as places like San Francisco continue to create thousands of jobs for highly paid workers, many of those workers will probably want to live there. Just as adding lanes to a highway draws more cars, a phenomenon known as “induced demand,” increasing housing supply in a fast-growing, high-wage labor market draws more buyers and tenants, with the higher-paid ones outbidding the others. Yes, if you increase supply enough, you reach a balance point where you’re actually starting to reach down the income ladder to less affluent—but still non-poor—families. That works fairly well in places like Houston, where you have vast expanses of relatively cheap, flat, dry land to build on. It may be hard to get to that point in densely developed cities hemmed in by seas and mountains. And if you’re starting with a base cost over $500,000 for a modest two-bedroom apartment, prices have to fall a long, long way before they become affordable to even working-class people.
Increased Building Won’t Help Homeless People
None of this, however, will benefit people who are homeless, a diverse population whose sole unifying characteristic is that they don’t have enough money to afford housing even at the bottom of the market. That leads to the question I posed at the beginning: Can we solve homelessness?
Basic reality check: Until or unless the federal government provides enough funds so that every homeless person can get a Housing Choice Voucher or the equivalent, we cannot eliminate homelessness. Even when we build new so-called affordable housing with the Low Income Tax Credit or other programs, most homeless people can’t afford those units . . . unless they can get housing vouchers. Even with public subsidies for capital costs, we cannot build housing that will rent at levels most homeless people can afford. And even if we increased production of moderately priced housing to the point where some older units filtered down to become more affordable, their rent will not fall below the cost floor a landlord needs to cover their costs and make a reasonable return on their equity investment or make their mortgage payments.
I’m not saying that having enough vouchers will by itself end homelessness. But it is a necessary step.
The second step is having enough housing supply that is appropriate, affordable, and available for voucher holders so that every person or family who gets a voucher can find someplace decent to use it. That includes supportive housing for those who need it. For cities like Houston, with easily buildable land as far as the eye can see, building enough of the right kind of housing may be feasible. No possible zoning reform will give San Francisco, or Los Angeles, or New York, access to Houston’s undeveloped, buildable land supply. And if you can only build at scale by redeveloping already fully or largely developed areas, the cost, time, and difficulty of building goes up exponentially.
Third, it requires an across-the-board commitment to solve the problem, which, among other things, requires a consistent strategy, clear direction, and everybody—government, police, social service agencies, landlords, developers, advocates—working together. As Marc Eichenbaum, who coordinates Houston’s homelessness initiatives, says, “We want everybody going on that same path. [Whatever the funding source], any organization or agency that receives funding [has] to be part of our homeless response system.” That is, as any experienced public official knows, a lot easier said than done. There are a lot of different agendas in the fiercely competitive worlds of housing, planning, social services, and community development, and they are often in conflict with one another.
Houston has received well-deserved kudos for making dramatic inroads into its numbers of homeless. Contrary to what the supply-sider true believers like to say, however, what made that possible was not so much Houston being “less encumbered by the sorts of regulations that make building housing so difficult elsewhere,” but good strategy, effective coordination, and uncompromising focus in their use of federal money. Houston aggressively and consistently targeted the vouchers it does have, along with a large part of the city’s CARES Act and American Rescue Plan Act funding, to homeless people and families.
Houston’s ability to build less expensively—which again, has more to do with land than regulation—distinguishes it from cities like Seattle or San Francisco in a completely different but critically important way. When a high school graduate moves to Houston and gets a job that pays $30,000 or $35,000 per year, she can usually find a place to live that she can more or less afford, even if she has to find a roommate or two. If she moves to San Francisco, where the same job might pay $45,000 or $50,000, she can’t. And as long as San Francisco keeps drawing highly paid tech jobs, workers will be needed for low-paid support jobs, and at least some people will keep coming to fill those jobs. Many will become homeless. And what that means is that however hard the city tries to address the problem, the homeless population will constantly be replenished.
San Francisco is in a bind. If the homeless population is steadily being replenished whatever the city does, is it in fact possible for that city to solve its homelessness problem within its boundaries, or even within the immediate region’s boundaries, which is heavily built-up right to the mountains?
I’m not saying to give San Francisco, or any similarly situated city, a pass, just suggesting the complexity of the problem. Given the thousands of low-wage (but higher than the same job elsewhere) support jobs in a place like San Francisco, and given the huge disparity between the cost of developing housing and what those support workers can afford, looking to the city of San Francisco to solve on its own what is a regional or even a national problem may just be unrealistic. Under pressure from the state, the city has recently committed to a plan of zoning reform and equitable development that, at least on paper, is fairly impressive. At the risk of sounding like a hardened cynic, I seriously doubt that even if all of its provisions were put into effect, the picture five years from now would look very different from that of today.
We need more housing production at all levels to meet many of our nation’s housing needs, but if we’re even going to begin to address homelessness seriously, we have to avoid facile arguments and misplaced blame. Here’s where The Atlantic article’s thesis becomes even more troubling. Most people who have studied homelessness identify a lot of different factors that triggered the crisis: the wholesale closing of mental institutions without sufficient investment in the promised community-based alternatives, the demolition of SRO housing, and the stagnation of real wages relative to rising housing production costs, all of which came together during the 1970s and 1980s.
Instead, Demsas writes, “liberalism is largely to blame for the homelessness crisis,” arguing that the root cause of homelessness is the “web of regulations, laws and norms that has made blocking the development of new housing pitifully simple.” This she argues, was the product of a coalition of “conservationists, architectural preservationists, homeowner groups and left-wing organizations […] whose central purpose is opposition to neighborhood change and protection of home values.”
Again, there’s a kernel of truth here, though it has little to do with homelessness per se. It has become too easy to block developments (although “pitifully simple” is an overstatement). There certainly are people fighting to prevent neighborhood change and prop up home values. And we’re all familiar with neighborhoods full of “welcome refugees” and “love is the answer” signs that band together to fight LIHTC projects. But is this a liberal or left-wing conspiracy?
Hostility to development—particularly high-density and/or affordable housing—was common long before the conservationists and the lefties supposedly got their coalition going. In fact, what is known as exclusionary zoning, or using land use regulations to keep out everything but expensive single-family housing—not to mention poor people and people of color—goes way back. Hundreds of suburban areas, starting in the 1920s and accelerating after World War II, incorporated themselves as separate municipalities in order to gain the power to zone out undesirable land uses and people.
Exclusionary zoning and anti-development activism and the underlying motivations for them cut across political lines, being first and foremost a class phenomenon, as those with more protect their turf from those with less. But the opposition to exclusionary zoning, led by people like Paul Davidoff and supported by the NAACP, the ACLU and others, long before the current wave of zoning reform, was a project of the liberal Left. If there were conservatives who objected to the government interference with their property rights inherent in exclusionary zoning, they kept their objections to themselves.
The type of historical revisionism this assertion about a longstanding Left-NIMBY alliance engages in is therefore not only in conflict with the facts, but dangerous to the extent that it influences people’s thinking about the roots of homelessness and the ways in which we as a nation should be addressing the problem. It proposes a largely bogus origin story for homelessness, which if accepted, allows people to disregard not only the complex social and economic reasons driving homelessness, but also allows them—particularly politicians—to argue that it can be solved with little or no public money, simply by abolishing unnecessary regulations and “unleashing the private sector” to solve the problem.
Second, pinning the blame for the problem on the Left feeds into the right-wing narrative that cities are incompetent or worse, and at fault for their problems. One doesn’t have to idealize America’s big-city governments to believe that for the most part they recognize their problems but need help to fix them, rather than dismiss them as being the problem. In the end, even Demsas seems halfway to realize this, saying that “we should harbor no illusions” that the emerging confrontational politics of homelessness “will lead to humane policy change.” Sadly, this article will only contribute to fanning the flames of those politics.
Great piece, Alan!
Beautifully argued Alan. Our penchant for simpleminded solutions to homelessness and the the affordable housing crisis is dangerous and distracting. It is important to note that any supply strategy is at best a medium- to long-term solution to the latter and, as you point out, not a solution to the former. Meanwhile the transformation of the existing housing stock runs apace—losing hundreds of thousands of units annually because of expiring affordability terms for subsidized rentals and speculative purchase of moderately priced owner-occupied homes by institutional investors. Until we’re ready to take a wholistic approach to address housing challenges nationally, and contextualizing approaches to local conditions, we’ll continue to lose ground every year.
Thank you, Alan, for pushing back against a dangerously oversimplified piece in the Atlantic.
We specifically need permanent affordable units for people making 30% or less of the Area Median Income. Without available, deeply affordable housing we are exacerbating the housing crisis while private equity firms make bank on overpriced rental units for workers that do not have options to buy in so many markets across the country.
Thank you for this excellent corrective to the dangerous oversimplification, and often sophistry, on display lately in the Atlantic and elsewhere on these important issues.
Excellent corrective Alan. As someone who has worked on affordable housing and homelessness in San Francisco for 25+ years, i find that both left and right are drawn to oversimplify. The left in SF often underestinates the importance of market forces and the moderates overstate it. And unfortunately there is real truth to the anti-growth alliance of progressives, preservationists and single family homeowners in our great city. It’s an alliance that began in the 1970s and has stood steadfast even as it became clear that stopping housing development was counter productive to middle and working class San franciscans. Today our folly seems to be thinking that we can build our way out without recognizing that we need to simultaneously address the fetanyl and mental health epidemics that have magnified the homelessness crisis. In this case, both moderates and progressives fail to acknowledge that we all need to re-examine the fit between our ideologies and reality.
Alan, Good to see you were able to discuss the problem of homelessness and how many “simple” solutions do not solve the problem. It requires lots of parts and pieces and a serious commitment from all key players.
I agree with much of this; for example, it is certainly true that there are obstacles to new housing other than regulation (although I’m not sure how easy it is to separate construction costs from regulation).
However, I’m not sure the “induced demand” point makes sense (or maybe I just don’t understand it!) It seems to me that the most likely way new housing would induce demand in a city is that if it lowered prices significantly enough to make people want to live in that city. So to plausibly claim that “induced demand” applies to housing, you actually have to admit that new housing DOES lower housing costs significantly.
I also think its easy to exaggerate the importance of California’s seas and mountains. In San Francisco in particular, builders can always build higher; much of the city is now dominated by two-story buildings. If the city of San Francisco was built at Brooklyn level density, it could accommodate about three times as many people (although construction costs might be a problem for taller buildings). And if there’s a shortage of developable land in California’s suburbs, that’s partially because those suburbs have chosen to make large amounts of land off-limits to development.
Having said that, I do agree with one key point of the article: even if San Francisco DID have Houston prices, that would still be too much for many people.
These are all good insights, but I’d like to add this: govt typically steps into the picture to alleviate these types of challenges when we see “market failure”, a catch-all term reflecting labor market conditions, workforce quality, educational attainment, “hard” skills, the influence of in-migration influxes, the pace of innovation capacity, etc. Thus, the need to view govt as acting behind the curve rather at its cusp, always too little, too late.
My city of San Antonio, Tx is typical: our leaders love to play the role of becoming excellent “service providers”, winning awards for service delivery. In the meantime, we emerge to become the nation’s most impoverished city, & ranking nat’lly in economic segregation. But we are not alone: too many urban leaders take pride in being service providers rather than becoming policy entrepreneurs, learning what “profit” looks like in the public sector. Sadly, they are not interested in changing their old, narrow, limited ways. That’s my experience.
The experts quoted below come to somewhat different conclusions.
“Bailey, Tanner, and Colburn called for a comprehensive approach to increasing housing supply that includes increasing subsidies for affordable housing and removing obstacles to the development of market-rate units, which, through filtering, is an important mechanism for producing naturally occurring affordable housing.”
“The results from several random effects regression models suggest that a one standard deviation increase in the restrictiveness of local land use regulations directly increases the adult homelessness rate by between 9 and 12%, depending on the type of constraint.”
“Using accessible statistics, the researchers test a range of conventional beliefs about what drives the prevalence of homelessness in a given city… and find that none explain why, for example, rates are so much higher in Seattle than in Chicago. Instead, housing market conditions, such as the cost and availability of rental housing, offer a more convincing explanation.”
“Taken together, these analyses help support the assessment that severe housing affordability challenges, limited supply, increasingly high rents and rent burdens on households, and low vacancy rates with tighter competition for units in many communities are helping to drive the increases in unsheltered homelessness reflected in the Point-in-Time count data in 2017 and 2018.” https://www.usich.gov/resources/uploads/asset_library/Housing-Affordability-and-Stablility-Brief.pdf
You’re talking a lot, but you’re not saying anything.
First I’m struck by your failure to make the obvious connection between permitting and all the issues listed in the Limits to Zoning Reform section. Clearly slow permitting makes all of these issues much much worse. With huge barriers to entry and risk of delay of course you will have fewer competitive firms in the market. With no firms doing the work, of course there will be no bench of specialized labor to draw from. Removing discretionary zoning and expediting the permitting process would greatly improve all of these problems. Did this thought ever cross your mind? If so, you do not mention it.
In the Homelessness section, I don’t see any discussion of aggregate supply or vacancy rates. Obviously you can’t live in a voucher. Is the implication that through vouchers and subsidies you will remove tens of thousands of people from their secret second residences? Or will they trade places with the homeless? Or be forced to move? Through what means? Without vacant supply, subsidies and vouchers are completely useless. This simply is not a serious proposal.
A much more concise version of your critique would concede that Demsas is correct that zoning is the proximate cause of all these issues, but that undoing zoning alone will not solve all these issues. But that’s boring and also not really something Demsas herself disputes. On the other hand, across all these words, you don’t actually manage to dispute her central claim: zoning caused this mess and must be undone to solve it.
A “voucher over every head” liberalism is just a vote for the status quo aka conservatism.