An Economic Disaster: The California Homeless Crisis
People often subject homelessness to a liminal space between government failure and a lack of responsibility on the part of the homeless individual; But homelessness at its core is an economic issue that has resulted in over 500,000 people—some of which being veterans, college graduates, and young children—on the streets each night. Whether you remain on the right or left of America’s political divide, homelessness should be a basic issue that we as a nation can all come together on to fix.
While homelessness is a national issue, almost 25% of homeless people in America reside in California. Some point to the elimination of mental health treatment facilities while others cite the misguided use of the state’s budget as reasons that homelessness in California specifically has turned out of control.
Billions of dollars are being spent by the state and federal government each year on the crisis yet it continues to spiral out of control. Last year alone California’s homeless population rose 16% despite roughly $20,000 spent on each homeless person through social welfare programs. In California Governor Gavin Newson’s 2019-2020 fiscal budget, he outlined his focus as being on building more emergency homeless shelters and rental tax incentives to get people off the streets. In mid-January 2020, Governor Newsom signed an executive order that would identify state land that could be used as homeless shelter locations to temporarily remove people from the streets but permanently contain them in the cycle of homelessness.
To date, the California state and local government policies have disregarded the very basic economic concept of supply and demand when addressing the homeless crisis. Today’s politicians have to deal with the precedent of state government failure must turn their attention to the housing market if they wish to create meaningful solutions.
First, the supply side of the homelessness is often more talked about than the to-be-discussed demand issues. One could argue that despite California being in a major homeless crisis, the overarching issue is actually an affordable housing catastrophe plaguing the state’s economic and political functionality. California is a very nice state with consistently sunny weather, soft sand beaches, and major business hubs from the tech capital of the world, the Silicon Valley, to the film industry in Hollywood to the budding biotech epicenter in San Diego. The influx of young, successful business minds for these industries—certainly a positive development for business—have caused home and rent prices to surge. In Los Angeles County, for example, the average apartment rental is now around $2,550 which requires an income of around $100,000 or over $40,000 above the area’s average yearly income.
California’s environmental standards have also driven construction costs up to five times the national average which results in higher, often unaffordable, home prices. There have also been documented examples of the application process for new developments being drawn out for over 25 years due to endless environmental lawsuits by the state. Important to note is the environmental impact of homelessness is arguably far greater than that of new mixed-use developments which could stimulate investment into renewable energy and carbon neutral projects. Human waste, habitat destruction, and freshwater contamination are just some of the environmental impacts of a rising homeless population.
Second, the faltering demand side of the housing crisis has primarily been led by the rise of an influx of higher income professionals have led to many native Californians being priced out of the housing market. Many renters across the state are making risky financial decisions partially out of necessity to meet their housing needs. According to data from the Department of Housing and Urban Development, 54 percent of California renters are “rent-burdened”—spending more than a third of their income on rent—and 29 percent are “severely rent-burdened”—spending over half of their income on rent.
For many of these people, they are just one car repair away from losing their home. Despite the supply and demand imbalance in the housing market, as reflected by the unfathomable prices, the state has done little to aid this financially unequipped population by continuing to focus policy initiatives on rent control and incentivizing housing density.
Instead, the state must shift its focus to increasing supply in non-coastal areas with a lower cost of living such as the Cascade and Central Valley regions. One issue with this, however, is that the leading industries in these regions do not tend to match the skill sets of those living in the coastal business metropolises. The state could institute initiatives to increase investment into these regions that encourage people to move or start businesses and also mitigate the growing effects of the “exodus” of people and businesses to lower-taxed states like Texas, Utah, and Idaho. California saw a net loss of 138,000 people in the last Census Bureau report covering 2016 to 2017 and should see a significant jump in that number given recent developments surrounding cost of living.
To create a more just and prosperous society, we must shift our focus across the nation to our homeless populations to prevent emergencies like that in California develop in other states. Through a continued focus on investment in affordable housing and strong middle-class jobs, the nation can steer clear of the wrongdoings in California. While the homeless population is often neglected, their success should be of the utmost importance to achieve continued economic, environmental, and social progress for the entire nation.
