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.
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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).
Froghole, what role do you think property tax levels plays in this process?
California has relatively low property taxes on its own (average ~0.75% of assessed value, max of 1%), but it also has a cap on assessment increases of 2% per year. Hence, the earlier one buys in the California housing market, the earlier one “locks in” property taxes basically forever.
I’ve read that China has low or no property taxes–and that may be tied to the run-up in the Chinese property values.
Texas has relatively high property taxes and, while there are expensive houses in parts of Texas, overall affordability seems healthy.
What do you think?
Many thanks, Cervantes! Yes, I think that there is a close correlation between the rates of property taxation and the cost of housing. Your comment about California is especially interesting as Prop. 13 had the effect of making some owner occupiers subject to far lower rates of tax than others, depending on when they purchased their homes (though the Amador Valley and Nordlinger cases held that rather unfair distinction this did not violate the equal protection clause); also Prop. 13 appears to have the effect of penalising immobility, as the 2% compounds over time.
My argument is that it is not so much the rates of property taxation which make the difference per se, as the combination of unregulated credit *and* a tax exemption, as credit will flow – like water – to where it is taxed the least. Thus, if property were taxed at the same rates as other asset classes, much of the difficulty might disappear. However, politicians would lose votes!
The other point which is worth stressing is that a ‘tax’ need not be imposed by a government to function as such. Thus, a successor in title who is having to fund the capital gains of his/her predecessor in title and endures a proportionate reduction in his/her living standards plus interest (his/her loss being his/her predecessor’s gain, in zero sum game fashion) is effectively being taxed. Indeed, it might be even worse than a government-imposed tax, insofar as taxes are paid in exchange for the receipt of government services. So, on this basis, perhaps Proudhon was right: ‘property is theft’.
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.
So many people are fixated on trying to solve the housing crisis on the demand side when it is first and foremost a supply side problem and always has been. Household formation has exceeded new units of housing constructed basically every year since the Great Financial Crisis and the chickens finally came home to roost during COVID. Price controls on rent like this are at best a stopgap solution. Not saying they shouldn’t be done per se, but that government funds would be put to far better use incentivizing the construction of affordable multifamily housing. Construction never really recovered from 2008.
This is likely stating the obvious, but the reason higher interest rates did nothing to make housing more affordable is for the very obvious reason that construction is overwhelmingly financed by debt and higher rates makes constructing new apartment buildings less attractive to developers at the same time as it tamps down demand. It is close to a net zero effect on housing prices, and that’s basically been the result.
Nothing will ultimately get better until more housing is built. We are in a kind of slow motion supply shock in housing and in that environment the limited supply will only go to the highest bidder.
Also, the mismatch between where housing exists and where jobs exist. A place with more jobs tends to have higher rents, and we are supposed to take this for granted, yet places where rent is 200-300% of the national median won’t have grocery costs that high–because the supply of one is restricted but not the other. And yet some defenders of the status quo will compare total housing units nationwide to population and say it’s not a crisis.
Absolutely, not only that jobs tend to be in densely populated urban areas which have much stricter zoning and permitting regulations as well as higher construction costs. If a city is lucky farmland in an outer suburb gets converted, and with work from home becoming the norm this kind of development is more viable. This is all just a long way of saying building housing in urban city centers is significantly more expensive and difficult that just converting farmland in outer suburbs or smaller towns.
In Greater Boston we are in upside down land because restrictions on building apartment buildings mean that it is still more feasible to knock down a building in an urban area than to build on greenfields. Only Mcmansions getting built without state encouragement.
Which will be the case until housing is made a public charge: building well, that’s what code requires, will always be expensive.
As we’ve required builders to build well (relatively speaking, I’m not claiming builders don’t cut every corner they can get away with), so they have concentrated on the luxury market where margins can cover the requirements.
And farm land will get priced as the necessity it is as extreme weather bites both monoculture and the supply chains monoculture relies on. These are all artifacts of treating public goods as commodities, subjecting them to market pressure rather than public planning and resourcing.
Every last detail in what you wrote is wrong.
“Building well.” If you ever saw the plywood palace Mcmansions going up, you would laugh along with me at the idea that they are “building well.” Construction quality was much better in the past when houses were much cheaper. So no, improved construction standards are not the reason apartment buildings and smaller homes don’t get built.
Apartment buildings and smaller homes don’t get built because the suburban municipalities just flat out refuse to allow apartment buildings to be built. This is not complicated, they zone themselves for “no multi-family” and have large minimum lot sizes.
Farm land???….not a lot of farming in major metro areas (admittedly, there is some). And anyway, financialization/speculation has a lot to do with farmland being worth more than the “going concerns” of the farms on top of them.
Housing is a public good and should be treated as such. The public should plan and fund what is in the public interest.
Safe, clean, well designed housing should be expensive to build and should be built safely, further adding to the cost.
To its own standards, this is what China has done with both housing and transportation. The result is Chinese pay a relative pittance for housing and transportation and as such can produce world class manufactured goods on significantly lower wages, while having growing, not shrinking, purchasing power. Because Marx was a classical political economist who made utopian claims, we’ve blinded ourselves to an obviously effective way of thinking about economics.
Just saw this David Dayen piece:
Homeowners Want Housing Prices to Go Up
“This is ultimately the biggest hurdle for affordable-housing policy.”
This is also the psychological backdrop for all the commenters on NC who claim to be for The People against The Man and come up with nonsensical justifications for not building apartments …on this issue, they are The Man.
It is good to provide support in cash especially to low income folks but, if that were rolled out in any large area….I would bet that the speculative interests and investors (not the actual occupant of a unit) would drive the base price of “affordable housing'” to fully absorb any support to the occupant.
The late 90s or more specifically 1999 was when Glass – Steagal was repealed so here we are again. Bring G-S back?
I think the tax code should be reversed to aid the owner occupied home-apt. and to penalize the speculator.
“The great sore spot in our modern commercial life is found on the speculative side. Under present laws, which foster and encourage speculation, business life is largely a gamble, and to “get something for nothing” is too often considered the keynote to “success”. The great fortunes of today are nearly all speculative fortunes; and the ambitious young man just starting out in life thinks far less of producing or rendering service than he does of “putting it over” on the other fellow. This may seem a broad statement to some: but thirty years of business life in the heart of American commercial activity convinces me that it is absolutely true.
If, however, the speculative incentive in modern commercial life were eliminated, and no man could become rich or successful unless he gave “value received” and rendered service for service, then indeed a profound change would have been brought in our whole commercial system, and it would be a change which no honest man would regret”.- John Moody, Wall Street Publisher, and President of Moody’s Investors’ Service. Dated 1924
Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the source from whence they are drawn.
Recently sold my relatively modest NYC apt. To my surprise, when it hit the market, there were 3 offers right away. One was a full price offer where the buyer would take out a mortgage for 70% of the value. Second there was a full price offer with all cash payment. Third offer made was for all cash payment at a price above the asking. Well of course, the third offer prevailed and the apt was off the market in a matter of 2-3 days and, most likely, it will not be lived in. Surprising, b/c NYC is in a low ebb just now, I thought.
The next surprise was when I evaluated what had become of the apt over 30 years of owning it. While the maintenance had doubled (2x), the price had exceeded stock performance (7x).
This was a modest apartment (650 sf) I had purchased using a mortgage. Now such a one as I had been is cut out of the market by millionaires buying housing they do not need for living in but will use as a store of value.
Then the topper was how NYC government benefits from this state of affairs. They have multiple transaction taxes they collect on during these sales. This came out in the closing settlement. How is government going to fix something to which it is addicted?
I would not know or appreciate the system drivers except for living through them. It is like the tax system. We all know what we pay but not the other guy … until your circumstances change and you get to see the other aspects of the tax code.
Because of this, I no longer think that new building is the main factor toward housing more people. New building would certainly be the solution that the developer class would like to see get favored, but it is not going to be enough, not by a long stretch. Many apartments in Manhattan south of 96th Street are not really lived in. They have become a store of value. IMO this effect is a price driver and contributor to a shortage of housing for home and shelter.
Manhattan is in no way typical of the US. Not much demand for a pied a terr (sp?) in New Jersey or the exurbs.There are numerous examples, studied to death, where new housing led within a few years to falling prices. No more room for debate on this at this point.
Could you link to some of those studies? I would like to see them.
There are too many studies to include that many, this is what I got in literally the first 5 results on Google:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4629628 (NYU Law meta-study of different geographies)
https://www.lewis.ucla.edu/research/market-rate-development-impacts/ (“roundup” of recent studies showing that even market-rate development tends to slow down rent growth)
https://www.forbes.com/sites/rogervaldez/2022/11/08/report-affirms-more-housing-means-lower-rents-and-prices/ (Federal Reserve Bank of Boston report on Greater Boston)
The experience of Austin is too recent to get a lot of studies but it’s being talked about a lot because we’re watching this happen in real time, here’s one of many articles: https://www.theatlantic.com/ideas/archive/2024/03/austin-texas-rents-falling-housing/677819/
Thank you
This is not correct. Jersey is FILLED with vacant homes or homes that are vacant almost all the time. I sold real estate in Princeton from 2004-2022 and I can tell you, TONS of dwellings are used just to park money and get a better ROI from printed money appreciation than you can get from a bank. Many of these places are not rented out. Some are used literally one weekend a year–reunion weekend, when rich Princeton alums come to town to act like fools and GOD FORBID they take a hotel room–no, they’d rather own a place that sits empty 362 days a year.
Then there’s the over-55 developments–don’t get me started! This is about the only large scale construction that’s been allowed in most NJ towns for DECADES. Drive through any of these and you will notice their ghost town quality. That’s because nobody really lives there–they live in Florida. But we actually give TAX BREAKS to people who own these as second homes they use a couple months a year (maybe).
I don’t think anyone should be entitled to a tax break on a second home. In fact I think second and so-called investment (actually, exploitative speculative) properties should be taxed at rates FAR HIGHER than owner occupied properties. I don’t think anyone should be able to buy a taxpayer-subsidized over-55 property unless it is their ONLY real estate holding. If you’re rich enough to own two or more properties, you should be rich enough to pay the taxes on them (if not, SELL ONE).
Well said Anne! :-)
Rather than profiting from this indecency and then complaining here, would it not have been better to sell to a couple (with mortgage) who would live there?
You could have prevented this; yet here you are posting of your spoils of war.
I actually wrote a softer version of this before deleting it. The most charitable explanation I thought of is that this person needs to live somewhere and needs to pay for it.
Thank you for the consideration. Yes, I am retired and need to live. To have done the altruistic thing would have cost many thousands of dollars and extra grief. The coop board involved preferred the all cash deal that validated the highest share value. I’ve no doubt most people would have done the same in the same situation.
Part of the design of the current economic system is to align the incentives to maintain the infighting among the working class, whose members at the end of the day are all victims of the people at the top.
L am surprised there is no quote about the UK Attlee Government from 1946 Governments actions (A labor Government) to build Public Housing (Called Council Hoisting) for many, which eliminated, or appeared to eliminate homeyness, by providing funds to house the unhorsed in the .
It worked. I believe it also cut crime. By about 1956 it appeared to eliminate homelessness, and crime. However, I was about 6 or 7at the time, and my memory is not so clear,
If someone has better details please post them.
The issue is the Fed and their illegal buying of trillions in MBS.
Their policy of keeping asset prices high to generate the magic wealth effects will go down in history as the biggest crime against the American citizens.
The real solution to the housing crisis is to stop forcing the population up at a pace that greatly exceeds the rate at which we are actually building new housing units.
NOT the rate at which we might be building new housing units in a parallel dimension where Spock is evil and has a beard, but the ACTUAL RATE AT WHICH WE ARE BUILDING HOUSING UNITS.
Please, let’s not hear that this is ‘scapegoating immigrants.’ If the rich use an excessively high rate of immigration to drive wages down for the many, and rents and profits up for the few, then that’s what they are doing. That most of the immigrants themselves are just pawns in this process – the real villains are the globalist oligarchs that have created/maintained crushing poverty in the third world, and that are using this poverty as a hammer to beat down the working class in the first world – but this does not change the physical and economic reality of what is happening.
If 1000 people are forced onto a bridge that could safely hold 100, and the bridge collapses, it’s because an excessive number of people were forced onto the bridge. The hypothetical possibility of building a stronger bridge does not count. The hypothetical possibility of someday maybe enacting policies that encourage building stronger bridges does not count. FIRST make the bridge stronger, in reality, or stop wringing your hands ‘oh how terrible that so many people are homeless.’ More people do not instantly and automatically create stronger bridges – or more housing units. If we cannot face these facts because it’s ‘scapegoating immigrants’ then we are ceding the field to the rich and we should stop even trying.
the author misses the gigantic pink elephant standing right next to them. the meteoric rise of just about any bubble possible, plus the destruction of americas civil society and middle class, started in ernest in 1993.
every dollar added to the crushed workers in america, will immediately be absorbed by the financial parasites bill clinton unleashed onto us.
more housing, a huge chunk of what goes into building housing, is no longer made here. so it will help super charge a already debilitating trade situation, and in fact, will encourage even more free trade.
the UBI the rich parasites are foaming at the mouth over, will only encourage more free trade, less american production, which equals more part time go no where jobs, exacerbating poverty even more.
there is no way out of this mess till we bite the bullet, and reverse what bill clinton and his uni-party allies did from 1993-2001.
those policies created the 2008 depression, and we never have left a depression, except for a slight blip upwards under trump, that was complelety wiped away in 2021.
we are mirroring the long depression, which led us into the severe depression in the 1890’s.
It would be good if the FED tracked housing costs and transportation costs as part of inflation. It’s insane that the uniparty can say “the economy is good” when the reality is housing, vehicle and many other prices (healthcare, education) are out of reach of average Americans.