In October, Philip Mangano, former executive director of the U.S. Interagency Council on Homelessness (under Presidents Bush and Obama) and currently CEO of the American Roundtable to End Homelessness, addressed a conference organized by the Chatham-Savannah Authority for the Homeless.
Mangano’s message was clear. Ending homelessness is not only a moral goal. It also is an economic imperative. Multiple studies have found that society pays $20,000 to $30,000 per chronic homeless person annually for social services that have little or no positive outcomes. These services do not work for people who do not have stable living conditions.
Once people have safe and secure housing, programs that alleviate problems such as substance abuse, mental illness and other health issues are dramatically more effective. Thus the term “Housing First” describes efforts to provide housing for homeless people as the first step in their healing process.
Positive examples abound.
Salt Lake City, hardly a bastion of bleeding heart liberals, has applied this approach successfully to become the first American city to claim they have virtually eliminated homelessness and saved money doing it. Their spending on services for people who had been homeless has dropped significantly.
As an economist, I must ask what is the most efficient way to provide housing? The answers can be organized into two groups: demand side and supply side.
The well known Section 8 program is an example of demand side intervention. People deemed qualified to receive housing assistance have rent payments made for them to landlords. A few cities have used similar payment programs to reduce homelessness for veterans. Vets receive vouchers to pay their rent.
The problem with demand side programs is that, all things being equal, the increased demand increases the overall price of housing. In Savannah, we know well what happens when parents of SCAD students rent apartments for them downtown.
Rents increase to a level beyond the reach of many working people. While the higher rents do encourage a small increase in the supply of apartments, the overall result is that low income families cannot afford housing.
Supply side intervention includes efforts focused on increasing the supply of housing. When supply increases, all things being equal, prices fall. The movement to build public housing during the Great Depression is one example. This well intentioned program, however, had a major unintended consequence: concentrating poverty level people in one place can produce harmful anti-social behavior.
During the 1980s the federal government had special tax benefits for investors and developers who built low-income housing. Unfortunately, they were eliminated when the government lowered overall tax rates.
Some northern cities use their building approval process to induce developers to fund low income housing expansion. Minneapolis, for example, requires that any new multi-family project include a specified number of below market rent units. Boston, on the other hand, forces developers to contribute to a low income housing fund.
At the federal level, the National Low Income Housing Coalition lobbies for programs to increase the supply of housing. Its goals for 2015-16 include; 1) preserving existing federally assisted housing and housing resources, 2) $30 billion funding for the National Housing Trust Fund for the next 10 years and $5 billion for next year and 3) 3.5 million housing units produced, rehabilitated or subsidized through 2025.
In Chatham County as of October 2015 the waiting lists for affordable housing are abysmal; 5,647 for public housing and 11,421 for housing choice vouchers.
The Department of Housing and Urban Development (HUD) has two other programs that support affordable housing. The Home Investment Partnership Program provides grants to state and local governments to support building, buying or rehabilitating properties for low-income households. The Self-Help Home Ownership Opportunity Project supplies funds for nonprofit organizations that develop below-market housing units.
There are two problems with federal support. First, the Tea Party perspective, which claims that all social spending is wasteful, threatens even the inadequate funding currently available to build needed housing.
Second, federal funds have building code requirements that restrict low-cost housing innovation such as the Tiny House Movement. As one local activist said, the feds seem about eight years behind society in their specifications.
The project to house homeless vets in 128-square-foot Tiny Homes being developed by the Chatham Savannah Authority for the Homeless therefore will have to be funded by private donations.
Kenneth Zapp is a professor emeritus at Metropolitan State University and a mentor for SCORE Savannah. Contact him at Kenneth.Zapp@metrostate.edu.