Friday, November 7, 2014

Should the Department of Housing & Urban Development Fight Homelessness?

Having a roof over your head is so basic of a need that it is at the bottom of Maslow's hierarchy of needs as a physiological need. Shelter is a vital part of human survival, having such stability makes us more productive members of society, and not having it makes life all the more arduous, which is why one could argue that a society shouldn't have any homelessness. Forgetting for a moment that the Nirvana fallacy is being applied here, just how prevalent is homelessness in America? According to the U.S. Department of Housing and Urban Development (HUD) and its latest report on homelessness, the number is at 578,424 individuals experiencing homelessness on a single night, which is a 11 percent decline from 2007 (HUD, p. 7). Part of the decline is attributable to the increase in permanent housing and decrease in temporary housing [see below]. And fortunately, we see a similar decline in those who are chronically homeless (HUD, Section 6), i.e., those who have been homeless for more than a year or have had at least four episodes of homelessness in the past three years. It's no surprise that HUD wants to take credit for the homelessness decline, especially with their budget cuts so they can better justify their budgetary spending. While reading this report, it made me think: "Is HUD doing a good job? Is it the federal government's place to fight homelessness, or should we think of other ways of approaching the issue?"

Before going into who should handle homelessness, I think we should try to delve into some of the common causes of homelessness because making the facile observation of "they don't have a home, and that's why they're homeless" does nothing to address the root causes. Some of the causes are personal crises, causes that are disproportionately an issue for the homeless in comparison to the general population. About a quarter of the homeless have a severe mental illness, which is well above the national average. For this segment of the population, we would need to have a discussion about providing mental health services so they can be treated. Correlated with mental illness is the idea of substance abuse, which is disproportionately high among the homeless. Veterans also make up 11 percent of homelessness, which suggests PSTD as a possible cause of homelessness. If the United States government is going to engage in unnecessary wars, the least it can do is make sure that soldiers can integrate back into civilian society before being released from active duty. It would certainly be cheaper than starting another war. Another cause has to do with throw-away teens, which are children who are kicked out or run away due to family issues. A particularly sad case of throw-away teens is with LGBT youth. When LGBT children come out to their families, not all families react kindly. There are parents who will kick out their own children, which is why 40 percent of homeless youth are LGBT (Cunningham et al., 2013), which means up to 13 percent of homeless individuals nationwide are LGBT youth. Although LGBT rights and acceptance of LGBT individuals has been vastly improving in recent years, there still needs to be work done if they're this disproportionate of the homeless population. Then there's the issue of domestic violence (see my previous analysis on government policy and domestic violence). According to the National Coalition for the Homeless, 63 percent of homeless women have experienced domestic violence.

Some of the aforementioned issues have some overlap, and the policy remedies for these more personal issues have nothing to do with housing affordability or access, which brings me to my next point: there are also some causes of homelessness that are economic in nature. Even in spite of the fact that homelessness has been on the decline since 2007, many took a great hit during the Great Recession when the housing bubble burst, especially when looking at the number of foreclosures. During the Great Recession, the unemployment rate and the quality of jobs took a hit. If we want to point to unemployment as a cause of homelessness, then we need to focus on job creation and creating an environment that encourages entrepreneurship.

Although the Great Recession is complicated and its causes are nuanced, the housing market issues were due in no small part to the federal government keeping interest rates on housing artificially low in attempts to make housing more affordable. The fact that most of subprime mortgages were either on government balance sheets or those of Fannie and Freddie, who were implicitly backed by the Department of Treasury, signals that we sure don't need the government to cause another housing fiasco. Back in 1992, Congress enacted Title XIII of the Housing and Community Development Act, which required lenders to lend out a certain percentage of loans to low-to-middle income individuals, and many of those loans ended up being subprime because the government loosened up the lending standards in the name of "housing affordability." If the government was so instrumental in causing the housing bubble, why trust the government in providing better housing access? None of the other countries' governments have this much interventionist involvement in the housing market. We don't need the government regulating the housing market. If anything, America could use some housing market de-regulation (Wallison, 2012).

If you want further proof that the government shouldn't be regulating the housing market, take a look at some of HUD's operations. A 2013 Government Accountability Office (GAO) report showed that issues with reporting compliance on grant funds limits, not to mention this 2010 GAO report showing how HUD doesn't do a good job complying with the federal government's fair housing law. If you think that's great, consider the Federal Housing Administration (FHA), which is a division of HUD. The GAO points out that the FHA insured $1.14B of home loans for 6,327 borrowers with a total of $77.6M in federal tax debt. This is the sort of oversight that makes me continue to wonder how the government has the clairvoyance or even capability to assess risk when HUD can't even identify borrowers who are a liability.

None of the other countries' governments have this much interventionist involvement in the housing market. We don't need the government regulating the housing market. As senior Cato Institute fellow Doug Bandow points out, there are so many lines of defense that don't even necessitate subsidizing housing. As individuals, we have the free will to act responsibly enough to "relearn how to resist substance abuse, curb wasteful expenditures and save money." If we can't handle it on our own, then we should suck it up and ask family, friends, and community to help. In the off chance that one's social network doesn't work, there are private organizations that can help. The private sector has been coming up with some innovative solutions, such as Housing First, or through the Bill and Melinda Gates Foundation and Conrad Hilton Foundation's funding of the National Alliance to End Homelessness. Even if none of these private-sector remedies do the trick, then government help should be targeted to those who truly need help, and that help should be as localized as possible. Whether looking at rent control, zoning lawsHUD's housing subsidies, or how the government mismanaged the housing industry that resulted in the Great Recession, we don't need a government-backed housing finance system (Wallison, 2012) or have the government help with housing because honestly, hasn't the federal government done enough already?

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