Root Causes of Homelessness in the United States and Potential Solutions

Variation in Homelessness Across the United States

Task:

We first document how homelessness varies across the United States. Homelessness is concentrated in major cities on the West Coast and the Northeast. Almost half (47 percent) of all unsheltered homeless people are found in the State of California, about four times as high as California’s share of the overall U.S. population. Rates of sheltered homelessness are highest in Boston, New York City, and Washington, D.C., with New York City alone containing over one-fifth of all sheltered homeless people in the United States.

In the context of a simple supply and demand framework, we analyze the major causes of this variation in homelessness across communities: (i) the higher price of housing resulting from overregulation of housing markets; (ii) the conditions for sleeping on the street (outside of shelter or housing); (iii) the supply of homeless shelters; and (iv) the characteristics of individuals in a community that make homelessness more likely.
The first cause we consider is the overregulation of housing markets, which raises homelessness by increasing the price of a home. Using external estimates of the effect of regulation on home prices and of home prices on homelessness, we simulate the impact of deregulation on homeless populations in individual metropolitan areas. We estimate that if the 11 metropolitan areas with significantly supply-constrained housing markets were deregulated, overall homelessness in the United States would fall by 13 percent. Homelessness would fall by much larger amounts in these 11 large metropolitan areas, for example by 54 percent in San Francisco, by 40 percent in Los Angeles, and by 23 percent in New York City. On average, homelessness would fall by 31 percent in these 11 metropolitan areas, which currently make up 42 percent of the United States homeless population.

Second, more tolerable conditions for sleeping on the streets (outside of shelter or housing) increases homelessness. We show that warmer places are more likely to have higher rates of unsheltered homelessness, but rates are nonetheless low in some warm places. For example, Florida and Arizona have unsheltered homeless populations lower than what would be expected given the temperatures, home prices and poverty rates in their communities. Meanwhile, the unsheltered homeless population is over twice as large as expected—given the temperatures, home prices and poverty rates in their communities—in States including Hawaii, California, Nevada, Oregon, and Washington State. Policies such as the extent of policing of street activities may play a role in these differences.
A larger supply of substitutes to permanent housing through shelter provision also increases homelessness. Boston, New York City, and Washington, D.C. are each subject to right-to-shelter laws that guarantee shelter availability of a given quality. These places each have rates of sheltered homelessness at least 2.7 times as high as the rate in every other city, and this difference cannot be explained by their weather, home prices, and poverty rates. Boston, New York City, and Washington, D.C. also have substantially higher rates of overall homelessness than almost every other city, suggesting that most people being sheltered would not otherwise sleep on the street. While shelter is an absolutely necessary safety net of last resort for some people, right-to-shelter policies may not be a cost-effective approach to ensuring people are housed.
The final cause we consider is the prevalence of individual-level demand factors in the population. Severe mental illness, substance abuse problems, histories of incarceration, low incomes, and weak social connections each increase an individual’s risk of homelessness, and higher prevalence in the population of these factors may increase total homelessness.

After analyzing the fundamental causes of homelessness, we next discuss the record of previous Federal policies to reduce it. The Federal Government has supported a major expansion of permanent supportive housing (often under a Housing First approach that does not have service participation requirements) and rapid rehousing. While these policies increase the demand for homes and thus reduce homelessness in the short-run, this short-run reduction can be reversed in the long-run through unintended consequences. In fact, it is not clear that this strategy has been successful in reducing homeless populations. Research suggests that previous Federal policy is not capable of explaining a substantial portion of the reported decline in homelessness between 2007 and 2018. In addition, we show that contrary to reported trends, it is unclear whether homelessness in the United States has actually decreased since 2007, due to an inconsistent definition of homelessness and miscounting of unsheltered homeless populations.
To reverse the failed policies of the past, the Trump Administration is addressing the root causes of homelessness. President Trump signed an executive order that will seek to remove regulatory barriers in the housing market, which would reduce the price of homes and reduce homelessness. Individual risk factors that shift the demand for homes inward are being addressed as well, through successful efforts to stem the drug crisis, improve the Federal response to mental illness, improve the chances of people exiting prison, and increase incomes for people at the bottom of the distribution. The administration has also consistently supported the police in promoting safe cities. Finally, the U.S. Department of Housing and Urban Development has improved Federal homeless assistance programs by providing flexibility for communities to utilize service participation requirements and more strongly encouraging self-sufficiency. These reforms may more successfully reduce homelessness and address the underlying problems that people experiencing homelessness face.