Homelessness is an economics problem

Instead of new buildings and taxes, local government should partner with charities on the issue.

The plight of the homeless has become a major issue. That is a good thing in that we’ve got our priorities straight. The human side of the problem is more important than the flood of real estate market statistics.

What is less good, though, is that we are largely ignoring the overall housing statistics and what they can tell us about the causes of, and cures for, homelessness.

Homelessness does not arise or exist in an economic vacuum. It can be the product of a major economic upheaval such as a depression, a recession or a technology-driven unemployment surge. Perversely, it can also be an unintended consequence of an economic boom, through its effects on the housing market.

We saw an accelerated example of how homelessness can be caused by an economic upturn in the North Dakota boomtowns of the shale oil cracking surge. Workers lured by jobs that paid very well flooded the existing housing market, including the suddenly growing room rental market and overflowed into “man-camps,” barracks-like dormitories filled with camp cots. Some workers slept in the cars and trucks they arrived in, which was not good in any environment but life-threatening in a Dakota winter.

Our area’s housing shortage was mostly involuntary and was also slower to develop. The statistics told us that the population pressure was still growing faster than our cities and suburbs could absorb even with a building boom. One of the results was that many workers in lower-paying jobs could no longer afford homess, even after bouncing down the quality staircase to its landing. They became homeless.

Charities stepped in and various religious and other private organizations helped individuals and families cope with their displacement. But the need exceeded, and still exceeds, their current resources, as it has in many cities, and governments began looking for ways to intervene.

If a city’s economic growth includes enough high-paying jobs to fuel a housing bubble, it drives out the existing residents who can no longer afford the rental costs of apartments, condos, or houses. It also raises the carrying costs of owner-occupied homes as assessments and taxes go up. Depending on their financial and employment situation, that situation motivates some to sell their houses and move to a less costly area.

Local governments are often driven to take action about the homeless or the affordable housing issues, or both. Unfortunately, most of the actions usually undertaken by governments have a history of disappointments.

The economics and the time-line of the homeless problem make it a tough problem for government to solve. Building new housing units in a city — apartment houses, town houses, or single-family dwellings — is expensive during a housing boom, often prohibitively so. That’s why many people can’t afford it and some eventually end up on the street.

If governments are not gifted with foresight, then, government’s direct building options are limited to building outside the city somewhere or “building up” — funding and managing high-rise apartment houses in the city itself. In addition, there is the option of mandating or subsidizing affordable housing. Also, government can use the permit-issuance process to induce developers to include some affordable units in its building.

Building outside the city is no longer an option for any municipality near the Tacoma-Seattle-Everett area, since “outside” the city has already been built up. Government high-rise projects, which are economically more efficient, have such a disastrous history of becoming centers of squalor and crime — Chicago’s notorious Cabrini-Green project, for example — that even a willful government would hesitate to launch one.

The non-building options such as rent control, mandated wage increases and head taxes for employers have never worked right. Instead of working with the prevailing economic environment they are trying to defy it — a process very much like surfing against the waves instead of with them.

Instead of building or mandating, the option that might be the most promising would be to subsidize charities in their work of getting the homeless off the streets. It would get the job done more efficiently not only because of the charities’ greater experience but also because they have neither the resources nor the resources to acquire dependents. They see their work as getting people back on their feet, so they can move out on their own and fit into the economy as it exists.

Instead of a history of disappointments, working with charitable organizations have worked well in the past. Both New York City and the federal government, neither noted for their management skills, have had successful, effective subsidy relationships with charitable organizations.

The bottom line for governments is that homelessness is fundamentally an economics problem. Unless a proposed solution recognizes that reality and works within it, it is doomed.

James McCusker is a Bothell economist, educator and consultant.

Talk to us

More in Herald Business Journal

Members of Gravitics' team and U.S. Rep. Rick Larsen stand in front of a mockup of a space module interior on Thursday, August 17, 2023 at Gravitics' Marysville facility. Left to right: Mark Tiner, government affairs representative; Jiral Shah, business development; U.S. Rep. Rick Larsen; Mike DeRosa, marketing; Scott Macklin, lead engineer. (Gravitics.)
Marysville startup prepares for space — the financial frontier

Gravitics is building space station module prototypes to one day house space travelers and researchers.

Orca Mobility designer Mike Lowell, left, and CEO Bill Messing at their office on Wednesday, Aug. 16, 2023 in Granite Falls, Washington. (Olivia Vanni / The Herald)
Could a Granite Falls startup’s three-wheeler revolutionize delivery?

Orca Mobility’s battery-powered, three-wheel truck is built on a motorcycle frame. Now, they aim to make it self-driving.

Catherine Robinweiler leads the class during a lab session at Edmonds College on April 29, 2021. (Kevin Clark / The Herald)
Grant aids apprenticeship program in Mukilteo and elsewhere

A $5.6 million U.S. Department of Labor grant will boost apprenticeships for special education teachers and nurses.

Peoples Bank is placing piggy banks with $30 around Washington starting Aug. 1.
(Peoples Bank)
Peoples Bank grant program seeks proposals from nonprofits

Peoples Bank offers up to $35,000 in Impact Grants aimed at helping communities. Applications due Sept. 15.

Workers build the first all-electric commuter plane, the Eviation Alice, at Eviation's plant on Wednesday, Sept. 8, 2021 in Arlington, Washington.  (Andy Bronson / The Herald)
Arlington’s Eviation selects Seattle firm to configure production plane

TLG Aerospace chosen to configure Eviation Aircraft’s all-electric commuter plane for mass production.

Jim Simpson leans on Blue Ray III, one of his designs, in his shop on Friday, August 25, 2023, in Clinton, Washington. (Ryan Berry / The Herald)
Whidbey Island master mechanic building dream car from “Speed Racer”

Jim Simpson, 68, of Clinton, is using his knowledge of sports cars to assemble his own Mach Five.

Yansi De La Cruz molds a cheese mixture into bone shapes at Himalayan Dog Chew on Thursday, Sept. 21, 2023 in Arlington, Washington. (Olivia Vanni / The Herald)
Give a dog a bone? How about a hard cheese chew from Arlington instead!

Launched from a kitchen table in 2003, Himalayan Pet Supply now employs 160 workers at its new Arlington factory.

Inside the new Boeing 737 simulator at Simulation Flight in Mukilteo, Washington on Wednesday, Sept. 20, 2023. (Annie Barker / The Herald)
New Boeing 737 simulator takes ‘flight’ in Mukilteo

Pilots can test their flying skills or up their game at Simulation Flight in Mukilteo.

An Amazon worker transfers and organizes items at the new PAE2 Amazon Fulfillment Center on Thursday, Sept. 14, 2023, in Arlington, Washington. (Ryan Berry / The Herald)
Amazon cuts ribbon on colossal $355M fulfillment center in Arlington

At 2.8 million square feet, the facility is the largest of its kind in Washington. It can hold 40 million “units” of inventory.

A computer rendering of the North Creek Commerce Center industrial park in development at 18712 Bothell-Everett Highway. (Kidder Mathews)
Developer breaks ground on new Bothell industrial park

The North Creek Commerce Center on Bothell Everett Highway will provide warehouse and office space in three buildings.

Dan Bates / The Herald
Funko president, Brian Mariotti is excited about the growth that has led his company to need a 62,000 square foot facility in Lynnwood.
Photo Taken: 102312
Former Funko CEO resigns from the Everett company

Brian Mariotti resigned Sept. 1, six weeks after announcing he was taking a six-month sabbatical from the company.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Paper or plastic? Snohomish County may require businesses to take cash

County Council member Nate Nehring proposed an ordinance to ban cashless sales under $200. He hopes cities will follow suit.