Conor here: The following piece from Fran Quigley, the director of the Health and Human Rights Clinic at Indiana University McKinney School of Law, provides first hand accounts of the struggle to avoid homelessness. They mirror evermore research, such as report from the University of California, San Francisco released last year — the largest representative study of homelessness in the state in thirty years — which unsurprisingly found that economic factors were the main driver of homelessness, including low wages, a sudden unaffordable expense, and the rising cost of housing.
According to most experts on the issue, the first step toward making any progress on the issue is to stop people from losing housing. Here Quigley provides a simple solution: give them money. Why not?
The plutocrats’ government certainly has no trouble coming up with the funds when the issues are important to them:
As Rebecca Riddell, the economic justice policy lead for Oxfam America, told Newsweek:
“Persistent poverty in the U.S. is really about policy choices,” she said. “The choices that have been made on taxes, on the social safety net, on corporate power, on public services—those have not been designed in order to end poverty and hardship, and in many ways, they contributed to skyrocketing inequality.”
By Fran Quigley who directs the Health and Human Rights Clinic at Indiana University McKinney School of Law. Originally published at Common Dreams.
Katrina is the mother of three children, one of whom lives with major disabilities that require Katrina to spend most of her time as a caregiver. Katrina was already struggling to make ends meet, but then an unexpected car repair and reduced work hours caused her to fall behind on her rent.
Darren was hurt on the job and lost six weeks of pay. Now he is trying to put in as much work time as his employer will give him, but the pay is only about $17 an hour. Darren shares custody of two very young children, ages three and nine months, and he is desperately struggling to catch up on overdue rent.
Sheila‘s husband has been arrested and jailed for violently abusing her. Safe for the moment, Sheila has returned to work as a manager at a retail business. But she owes several months of back rent, plus late fees and court fees. It is more than she can pull together, so Sheila will have to move within the month. She is putting most of her possessions into storage. She is also packing a few trash bags of clothes to take with her to her new home—a friend’s unheated garage with no access to plumbing.
I teach a law school clinic in Indianapolis, where my students and I represent Katrina, Darren, Sheila and other clients in eviction court. They have a shared need, one that also applies to the nine million U.S. households that are behind on their rent right now:
They need money.
Katrina, Darren, and Sheila are among the three of every four households who qualify for subsidized housing, but do not receive it because we don’t fully fund the programs. They are forced to try to pay market-rate rent, which takes up most of their income even in the good times. In the bad times, the rent is more than what is coming in. So we see them in eviction court.
We can do better than this. We know we can, because just a few years ago Katrina, Darren, and Sheila and almost everyone else we see eviction court now were safely housed. Emergency rental assistance, expanded child tax credits, maximized food stamps, and extended unemployment benefits prevented more than three million eviction cases, according to the Eviction Lab at Princeton University. In fact, poverty rates actually dropped during the Covid pandemic.
Since then, researchers from Columbia University and City University of New York, CUNY, studied the impact of those benefits, and confirmed what we saw in our clients’ lives. “We find that direct cash payments were the single most useful tool for helping people ride out the pandemic and were first and foremost, used to cover basic needs, including rent or mortgage payments, utilities, and food,” they said.
That is powerful evidence pointing us toward what we can do to help. Add that to the pile of research showing that strings-free cash leads to dramatically positive outcomes. Specifically to housing, studies have shown that unconditional cash given to unhoused persons both reduced homelessness and saved money that would have been spent on government programs the recipients. Cash is so effective because this and other studies show that low-income people are far more likely to spend cash assistance on rent, food, and transportation than “temptation goods” like alcohol or drugs.
More broadly, analysis in the Annual Review of Psychology reviewed multiple studies examining what actually makes human beings happier. Turns out that some of the usual suspects—volunteer work, random acts of kindness—may not be as impactful as we hoped in delivering happiness. But what does work? You guessed it: money, especially for low-income folks.
“A growing number of rigorous preregistered experiments suggest that such cash transfers and other forms of financial support can provide an efficient mechanism for enhancing happiness,” wrote Dunigan Folk and Elizabeth Dunn, professors of psychology at the University of British Columbia. “Cash seems to be as good or better than other interventions that carry similar costs, including psychotherapy and job training.”
This analysis matches what we see in court. Would Katrina and Darren and Sheila benefit from psychotherapy? Maybe. But for most clients it appears that their financial crises are causing their mental health struggles, more so than the other way around. Would job training help? Again, maybe. But these people are already doing work in the community—home healthcare, food, service, retail work, warehouse work, etc.—that is essential for our economy. So, shouldn’t those jobs pay a living wage?
As we evaluate presidential candidates’ responses to our housing crisis and the clamor over building more housing, it is worth keeping this simplicity in mind. Until and unless we create much more subsidized housing, which is the real solution to the crisis, what our clients need most is straight-up cash.
Perhaps the issue is that if capital gains derived from owner occupation enjoy fiscal privileges, then credit will flow into the residential mortgage market and prices will rise regardless of whether there is an increase in supply, like pushing on a string. This, prior to the GFC there was an enormous expansion of supply which made little difference to the trajectory of house prices because credit was chasing prices and prices were chasing credit. Prices only fell when credit froze as the market lost faith in the ability of a large class of mortgagors to redeem their liabilities.
Credit began to be liberalised in the US from 1982 (the Garn-St Germain Depository Institutions Act, which scrapped maximum loan-to-value ratios for real estate loans and aggregate limits on real estate credit issuance). However, the great secular rise in home prices did not occur until the mid/late 1990s: https://fred.stlouisfed.org/series/USSTHPI.
Why was this? Why did credit liberalisation not turbo-charge prices from 1982? As I see it, the trigger was the Taxpayer Relief Act 1997. This exempted the primary place of residence from capital gains tax: the first $250,000 for a single person and the first $500,000 for a couple.
We see the same dynamic elsewhere. In the UK owner occupiers were subject to a tax (under Schedule A of the income tax) on the ‘imputed rent’ derived from the primary place of residence. That hailed back to chapter II of book V of Adam Smith’s ‘Wealth of Nations’: everyone is in a landlord/tenant relationship, but the owner occupier receives rent from himself as tenant to himself as landlord (the imputed rent). This formed part of the income tax from 1799. The imputed rent was assessed by surveyors on a quinquennial basis until 1939/40 when valuations were suspended as surveyors were overwhelmed by war damage assessment claims, which remained the case for some time after 1945. By the mid-1950s the 1935 valuations were obsolete the revaluation had become politically problematic. The Liberals agitated for the abolition of Schedule A from 1955 and Labour from 1959. However the Tories abolished Schedule A in 1963. In 1965 Labour introduced a new capital gains tax which exempted the primary place of residence. However, this did not result in any house price bubble because credit has not been liberalised. The first bubble occurred in 1971-73 when credit was liberalised in 1971 (Competition and Credit Control); credit was re-regulated (the Supplementary Deposits Scheme or ‘corset’) in response to the secondary banking crisis of 1973. However, it was de-regulated in 1980 following the termination of exchange controls in 1979. In addition, in 1980 the retail banks were permitted to intrude upon the residential mortgage market, which had hitherto been the preserve of the building societies. The building societies could only ever lend what they had in deposits, whereas the banks could (to some extent) create credit ex nihilo. The combination of the unique fiscal privilege to owner occupation *and* liberalised credit has resulted in endless house price bubbles (even when the population was falling, as in the 1980s), as well as the stagnation of the rest of the economy as credit is transferred from the productive economy to the parasitical housing market. Moreover, as productivity in the productive economy falters, wages also stagnate, making owner occupiers that much more dependant on the untaxed capital gain for their future security; they do not earn their capital gains, but the gains still have to be earned via a proportionate loss to successors in title (who are also defined contribution pensioners).
We also see the same phenomenon in Ireland. Credit was liberalised in 1984 and 1986 (there was some residual liberalisation thereafter). However, it was not until the Taxes Consolidation Act 1997 that the primary place of residence was exempted from capital gains tax: https://www.cso.ie/en/releasesandpublications/ep/p-ieu50/irelandandtheeuat50/economy/residentialpropertyprices/
Of course this all needs further study. Almost every major social problem in many developing nations has its source in the toxic combination of liberalised mortgage credit and the fiscal privileges accorded to owner occupation. Which, of course, is also about buying votes from owner occupiers. The ‘solution’ is therefore either to reimpose taxation on the ‘unearned increment’ (which may not be possible politically) or to force lenders to divert credit from residential mortgages to industry (which seems perfectly possible if done slowly).
Just limit rent and mortgage payments to (pick a number) 10% of family income, so that landlords and financiers would promote raising incomes and full employment. People with no income to contribute would get a government subsidy that is high enough to avoid the pressure to send children to work. This scheme would also promote larger family units living together, care for elders, reduced inflation, greater diversity in neighborhoods, etc., etc., etc.