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Homelessness, the Poor, and Local Property Regulation

James Rogers

Too often when facing the question of homelessness we give wrong emphasis to the question, and so we're directed to wrong remedies.

We may easily hate New York city and Berkeley for imposing rent control and causing homelessness -- most of us, after all, don't live there. It's a little more difficult to oppose the governmental largesse that we all receive in the form of satisfying our middle and upper class demand for homogenous neighborhoods -- i.e., local zoning ordinances. Nonetheless, recent conservative analyses of homelessness have focused on the former not the latter. My goal is not to ignore the effects of rent control in causing homelessness but to emphasize the far more pervasive species of local property zoning regulations which contribute to this social problem.

The homeless fall into four broadly distinct categories: very poor families, substance abusers, deinstitutionalized mental patients, and runaways. The last two homeless groups, although significant social problems in themselves, do not represent, strictly speaking, a residential housing problem; they're homeless for reasons other than a general housing shortage.

Nonetheless, existing indices confirm the suspicion that even with runaways and the mentally ill excepted, the number of homeless poor and substance abusers has increased.[1] Unfortunately, the precise number of homeless people is mired in dispute. The most credible estimates belie the truth of the oft-cited figure of three million homeless, a figure snatched out of the air by self-styled homeless advocates.[2] A recent article in the National Journal reports more accurate estimates of the homeless population which range from a low of 254,000 to a high of 735,000.[3] Writing in The Public Interest, housing expert Tom Main comments that "[b]etter nose counts of the homeless...would not only clear the air of current inaccurate figures but would provide useful guides to policy."[4] One would think that Main expresses only the blandest of bland truisms in his sentiment -- who opposes better information, after all? -- but such is not the case in the hyper-charged political atmosphere that poisons reasonable discourse on homelessness. Many homeless advocates, most notably Mitch Snyder, believe that homeless folk numbering "only" in the several hundreds of thousands would not warrant our concerned attention. Such advocates habitually oppose attempts to get accurate counts of the homeless -- their opposition to the recent Census effort being only the most public attempt in a series of similar attempts. Be this as it may, the existing, albeit fragmentary evidence, confirms what our eyes tell us, that there are more homeless people populating our cities, streets, and shelters.

So what to do? Too often when facing the question of homelessness we give wrong emphasis to the question and so we're directed to wrong remedies or we give up, believing the problem intractable. The question with its usual spin asks: Why are there more people without housing? The question, slightly altered, better directs our attention to an oft-neglected factor: Why is there less housing for this segment of society?

The answer to this question, while not requiring the correction of wholesale "institutional violence" and "exploitation," as ritual declamation would have it, nevertheless does strike at the flabby belly of perks reserved by our local governments for America's prosperous majority. And our responsibility for the impact of these policies upon the poor and marginal cannot be discharged simply by thrusting a quarter into an anonymous, outstretched palm.

The recipe for state-generated homelessness? Mix sixty years of local zoning regulation with one part rent control; add a generous dash of wholesale mental hospital deinstitutionalization and a severe breakdown in family structures, especially among the poor -- and you have a dandy social tragedy. As noted above I treat only the residential aspect of the problem; I emphasize that my solution is no panacea for the entire problem. There is no magic policy elixir to remedy every illness, spiritual as well as physical, resulting in this social tragedy.[5] In years gone by, the poor could find inexpensive, permanent and livable housing. Less concerned with permanence, alcoholics and drug abusers desired only a flat in which to crash for the night -- but that could be had in any number of marginal, dirt cheap hotels. Returning to those days, Tom Main writes, requires "reforming [cities'] housing policies with an eye to increasing the availability of low-income housing"; policies like zoning and rent control are prime targets for reform.[6] Even a cursory examination of the dynamics created by zoning laws and rent control indicate their importance in the economic pathology of homelessness. Local zoning laws, initiated in the 1920s, quickly spread to all but a few cities, and effectively ended growth of housing affordable to the poor. Of course, the effects were not immediately visible. Zoning regulations do not change cities' existing housing and business patterns immediately upon institution. Rather, the laws alter housing and business patterns over decades as cities experience steady growth. Unintended consequences, thus, do not manifest themselves for many years.

Both residential and business zoning contribute to creating homelessness. Residential zoning affects the poor especially; commercial zoning regulation seems to affect substance abusers most heavily. In the late sixties, the National Commission on Urban Problems concluded that "the regulatory powers of local governments in [many cities] are being used to bar vast land areas to apartments, mobile home parks, and other dwellings that can meet minimum standards of health, safety and amenity..."[7] How does this occur?

Local zoning boards set minimum lot size requirements for new residential developments. These limit new housing construction to more expensive homes: No contractor, after all, would build a $5,000 house on a $100,000 lot; and if he did, there would be no one to buy it -- the poor couldn't afford the lot, and the prosperous wouldn't want the small house.

Additionally, boards impose "single-family" restrictions over entire developments, thereby stifling apartment construction as well as preventing two or more poor families from sharing the rental or purchase cost of one house. Economist and law professor Bernard Siegan found that these restrictions sharply increase apartments' real estate costs because they induce an artificial scarcity of land on which to build apartments.[8] Larger cities also ban affordable mobile homes from being located on vacant lots. Dartmouth economist William Fischel, summarizing the finding of a study of Houston, Texas, one of the few cities without zoning, writes that "[housing] cost is lower and [housing is] more plentiful for lower-income people than in comparable cities."[9] In all, Siegan concludes, zoning "appears to lower the price [of housing] for the rich and raise the price for the poor."[10] In addition to the burden of distorted housing markets placed upon the poor by the many U.S. communities with strict zoning control, cities with rent control (most significantly, New York City) further distort rental markets to the detriment of the poor. On the one hand, if newly constructed apartments are also rent-controlled, the controls render the facilities less profitable, and thus deter new construction and constrain supply relative to an unregulated market. On the other hand, if the new apartments are not rent-controlled, then older apartments -- those most likely to be affordable to the poor -- are torn down and replaced by expensive new apartments or condos. In either case the supply of affordable housing is more constrained relative to the demand than it would be without rent control.

At first glance, a constrained supply of low-priced rental units might not appear to burden the poor especially. But rent control, which prohibits allocating apartments through the price system, requires an alternative allocation mechanism -- "connections." Often only the more affluent have, or can purchase, the connections needed to find an apartment. The dynamic of the situation gradually and disproportionately squeezes the poor out of access to the given supply. A study of rent control in New York found that richer people displace poorer people in rent controlled housing at the rate of about 1 percent every year. (While this may not seem like much displacement at first glance, the percentages add up significantly over the span of, say, a decade or so.)

When we shift our focus from regulation of residential property to regulation of business property, we see local governments establishing a similar dynamic in the market for cheap hotel rooms. Zoning boards geographically limit businesses to certain districts -- thus putting a premium on the land in those areas. Cheap, marginal hotels have been torn down by the score in order to erect more profitable establishments on the land.[11] Without zoning regulation, many, if not most, of these hotels would have remained and served that niche of the market created by equally marginal persons -- drunks and addicts.

To be sure, a lot of people don't like drunks and addicts, but that's no reason to take away their market access to a roof and a mattress. What's more, if we, that is our communities, thought we would get rid of this group of people by tearing down cheap hotels, we were obviously wrong: they did not disappear with the shabby hotel. We see them every day; indeed, we step over them every day. The question is, shall they be with us on the street, or with us protected, at least, by a roof?

Over the years our communities, in effect, have prohibited the construction of new, cheap housing. Over the years we've built homes for only the middle class and those richer; we've left poorer folk to bid against each other for a dwindling supply of affordable housing. Many poor families balance on a very thin edge: rent swallows a substantial portion of the monthly check; any unexpected expense -- broken arm, temporary layoff -- is sufficient to push such families into overcrowded temporary shelters.[12] Sixty years of zoning laws have had their intended effect: our neighborhoods need not admit cheap housing; our business districts need not suffer run-down hotels. But to ban low-cost housing does not and cannot ban the people who need and use low-cost housing -- they are still with us, albeit without shelter and on the streets.

Here, also, we find the genesis of the need for public housing: Our communities passed laws that prevented construction of low-cost housing, yet the people who would have otherwise used that housing must live somewhere. In response to this need, the government constructed hundreds of thousands of units of housing since the sixties. Today, many projects are abandoned; many others are not decent places to live, but no options exist for their residents. Public housing is perhaps the most spectacular failure of Great Society programs.[13] We must remember, however, that it was affluent America's political demand for "nice" neighborhoods that caused the housing shortage for the poor; that caused their need for public housing. The lesson is true so often: unwise government intervention begets only more intervention. Zoning and rent control must end in order to provide a permanent solution to homelessness.

Deregulation, in this case, accomplishes an end that liberals think conservatives ignore, through means that conservatives think liberals ignore. (Not to worry, the common law nuisance tort, a free market mechanism, will still prevent the location of an unwanted garbage dump next door.) This solution equally challenges both sides to live by the principles they advance: Will we give up our state enforced privileges and let the poor back into our neighborhoods and again let substance abusers crash in a shabby hotel instead of the street?

James Rogers, Christian author, has an MA (economics) from Brown University and is a former Publius Fellow at the Claremont Institute.


[1] The numbers discussed by conservatives and skeptics tend to avoid the hyperbole of the self-styled homeless advocates. See, e.g., Tom Main, "The Homeless Families of New York," The Public Interest, Vol. 85, Fall, 1986, pp. 4-6; William Tucker, "The Housing Crisis that Overregulation Built," Policy Review, Vol. 50, Fall, 1989, p. 20; Robert C. Ellickson, "The Homelessness Muddle," The Public Interest, Vol. 99, Spring, 1990, pp. 53, 57-58; Tom Main, "The Homeless of New York," The Public Interest, Vol. 72, Summer, 1983, pp.14ff.; E. Fuller Torrey, "The Scandalous Neglect of the Mentally Ill Homeless," Policy Review, Vol. 48, Spring, 1989, p. 10; Peter Salins, "Toward Permanent Housing Problem," The Public Interest, Vol. 85, Fall, 1986, p. 28; W. Robert Curtis, "The Deinstitutionalization Story," The Public Interest, Vol. 85, Fall, 1986, p. 45.

[2] Carl F. Horowitz, "Mitch Snyder's Phoney Numbers," Policy Review, Vol.49, Summer, 1989, pp. 66-69, and Ellickson, pp. 52-53.

[3] "How Many Americans Really Are Homeless?" National Journal, No.48, Nov. 26, 1988, p. 3032.

[4] Main (1986), p. 20

[5] Yale law professor Ellickson, pp. 55-57, discusses several of the distinctive social transformations contributing to the increase in homelessness in the eighties. Perhaps Tom Main (1986), p. 7, best described the relationship between the social factors and the housing problem: "The housing crisis...seems to be a necessary but not a sufficient condition for bringing on the kind of problems we see now."

[6] Main (1986), p. 21

[7] National Commission on Urban Problems, Building the American City (New York: Praeger Press, 1969), pp. 7-8, 18-20, 199-234.

[8] Bernard Siegan, Land Use Without Zoning (Lexington, MA: Lexington Books, 1972), pp. 114ff.

[9] William A. Fischel, The Economics of Zoning Laws, (Baltimore: John Hopkins Univ. Press, 1985), p. 233.

[10] Siegan, p. 99

[11] Although the number may be somewhat inflated, Kim Hopper and Jill Hamberg, of the New York Community Service Society's Department of Public Policy, claim that between 1970 and 1982, 1,116,000 single-room units, representing nearly half the total stock, were lost to the market. The Making of America's Homeless (New York: Community Services Society of New York, 1984), p. 34.

[12] Among the poorest households, the median rent burden hovers around 46 percent of income, and for over one fourth of these households, rent consumes upwards of 75 percent of income. Harvard-MIT Joint Center for Housing Studies, cited in, Irving Wedfield, "Poor Tenants, Poor Landlords, Poor Policy," The Public Interest, Vol. 92, Summer, 1988, p.11.

[13] Incidentally, regarding the notion that cuts in federal housing dollars caused the increase in the homeless population, Ellickson, pp.54-55, observes: "According to computations by University of Virginia economist Edgar Olson, federal housing subsidies for low-income families went from $5.8 billion in fiscal 1980 to $13.8 billion in fiscal 1988. Adjusting for rent inflation, this represented a real spending increase of over 50 percent. Between 1980 and 1987...the stock of public-housing units increased from 1.2 million to 1.4 million, as projects that Carter's HUD had put into the system were completed....Thus from 1980 to 1987, the federal government came to provide housing aid to an additional 1.3 million low-income households -- more households than the entire public-housing program had assisted in 1980."

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