Alexander Dukes April 9, 2019
Housing prices are chronically unaffordable in many American cities. Most prominently, mega-cities like San Francisco and New York feature home prices that effectively price out poor and middle-income people from vast swathes of their environs; however, there are also plenty of mid-size cities that have less extreme affordability problems. Several strategies are frequently on the table to make housing more affordable to those of moderately low incomes. These include: (1) increasing allowed residential construction, (2) incentivizing housing by offering additional air/development rights, (3) subsidizing housing, (4) requiring the mandatory provision of affordable housing alongside market-rate development, and (5) increasing the amount of government-run housing.
All these strategies are potentially valid ways to address different manifestations of a lack of housing affordability. However, many provide long-term rather than short-term relief, and/or do not reach the poorest people or those in the most dire circumstances: namely, the homeless.
Homelessness is the most extreme manifestation of an affordable housing crisis, and ending homelessness is the focus of this article. Because my objective is to end homelessness, I will use the fifth strategy of providing government-run housing. I consider homelessness to be an individualized “state of emergency,” where the government must take urgent action to address the needs of its homeless residents—much like a municipality would swiftly put out a fire or stop a bank robbery. Slow-acting tactics like zoning law changes or providing subsidies strike me as an unacceptably lethargic solution to the immediate needs of homeless people. Governments should provide housing for the homeless first, then work to get them into various configurations of private housing over a longer term.
Studies show that the most effective means of addressing the underlying causes of homelessness is to provide homeless people with housing first. A housing first strategy seeks to give homeless people (literally) a solid foundation to recover from the trauma which precipitated their homelessness. After all, can we really expect a person to apply for jobs when they don’t have a roof over their head? And how can we expect a person to recover from addiction if they must sleep on the ground?
A housing first strategy also sets a strong foundation from which many other government social programs may work. Social programs become both easier to administer and more effective when beneficiaries have a known address and the security of guaranteed housing. Every taxed and charitable dollar spent on people with secure housing tends to have a greater effect than dollars spent on people without housing because hospital visits and overall public spending are reduced per beneficiary. Because spending on medical care and other services are reduced, governments and charitable organizations can use the savings to either improve service by spending more money per beneficiary, or benefits can be distributed to more people.
A Practical Foundation
Because chronically homeless people tend to have little income they can afford to spend on housing, this article assumes municipalities will provide these homes to the homeless completely free of charge. In practice, there will often be cases where people living in the houses can contribute to the maintenance or funding of the facilities—either by small payments or work in lieu of payment—but such cases are dependent on the nature of the municipality and the nature of the homeless population being served. Therefore, this article will forgo the substantial revenue and services many homeless residents will be able to provide in exchange for their houses in order to better demonstrate the practicality of simply building houses for homeless people.
Taxpayer money is being spent to provide these houses, so prudence requires that planners figure out design specifications that will yield the best house possible for the least amount of money. All nonessential features of a “standard” American house must be stripped away until we are left with a “basic” house. This basic house will function to provide a reasonable level of comfort and shelter for its occupants. The tiny houses that are in vogue today are examples of houses that provide adequate shelter and comfort at a low price with quality materials.
Since 2013 a few cities and private organizations have begun to construct tiny house developments for their homeless populations. The video below provides some insight into the character of these places and the effect these houses have had on formerly homeless people: https://www.youtube.com/embed/-qQ0ou3hA10?wmode=opaque&enablejsapi=1
As the video illustrates, providing houses for homeless people serves as a foundation from which a recovery from the underlying causes of homelessness can be built. The Home Not Found study in Santa Clara County, California (aka Silicon Valley) found that the county’s chronically homeless population of 2,800 people cost the county’s economy a yearly average of $83,000 per person in services (Home Not Found: Cost Study, p.2). Most of these costs were related to medical care. Providing houses for homeless people can potentially reduce these economic expenditures, especially in the medical sector.
In this article, data from the Home Not Found study will be used to establish Santa Clara County as a case study for a comprehensive, government-run, housing first intervention that provides shelter and food for the county’s homeless population. While this is a direct, “big government” policy targeted at solving a problem normally addressed by charity, I think the benefits of a comprehensive government-run housing first program outweigh the costs to taxpayers. Let’s do the math.
What Would a Housing First Program Cost?
In a Reader’s Digest interview, Chris Dorsey—who helps produce the Tiny House, Big Living television show—states that the average cost of tiny houses ranges from $30K to $40K. (K = Thousands) However, these homes tend to be designed for middle-class people seeking to compress a living area, bedroom, full kitchen, full bath, full laundry, and heating and air conditioning into a footprint that can be hauled down the highway. That’s not our objective, so we can strip away many of the features listed above to transform a boutique tiny house into a tiny house designed to serve homeless people.
In a scenario where we are supporting the homeless, an in-home kitchen becomes optional. Santa Clara County could save money by building small cafeterias among a cluster of tiny homes to feed residents more efficiently. Washer and dryer functions in the tiny house would also shift to a small laundromat attached to the cafeteria. The dining area of the cafeteria could also serve as a multipurpose space, effectively turning the combined cafeteria-laundromat building into a community center.
With the laundry and kitchen spaces being removed from each tiny house, the living area and the bedroom can be consolidated into the same space. The full bath and heating and air conditioning would remain. Thus, the minimum features the tiny houses must provide are: (1) four exterior walls, (2) a roof, (3) an entry door, (4) a combined bedroom/living area, (5) a full bath, and (6) heating and air conditioning. I estimate you could build a standalone tiny house like this for $15K to $25K—depending on how many houses you’re building at a time, the local climate, and whether efficiencies are gained from communal plumbing, heating and air across multiple houses.
This rendering from Tent City Urbanism illustrates what a 160 square foot tiny house built to these specifications (with an added kitchenette) could look like. Note that this tiny house design can either be built standalone or slightly modified to fit within an apartment building configuration. And for those wondering about an apartment configuration, according to Fixr.com the high-end cost to build an apartment is about 86K per apartment unit, assuming the apartment units are 861 square feet in area. Because the aforementioned tiny house design is only 160 square feet, that 160 square feet can be divided by 861 to find a per-unit apartment cost estimate. Diving 160 by 861 yields 0.185, which tells us that 160 is about 19 percent of 861. Nineteen percent of 86K is about 16K—near the low-end of the aforementioned estimate to build a tiny house, and this estimate assumes Fixr.com’s high-end of what it costs to build an individual apartment unit.
Using our high-end price of $25K, municipalities could build a homeless person a tiny house for 30 percent of the $83K it costs Santa Clara County’s economy to provide annual services for a chronically homeless person. Even if a smaller municipal economy found that homeless people only consume $40K in services, it would still make sense to simply build homes for each homeless family. This is because most chronically homeless people will find reliable housing before the service life of a house ends. When a tiny house helps one homeless person get back on their feet, it can continue to serve other homeless people after its original occupant has left. The $25K a municipality invests in a tiny house can serve multiple people before it is replaced.
How Much is the Cost to Taxpayers?
Now that we’ve determined that constructing these homes would be worth it, let’s determine whether Santa Clara’s economy can afford to build these tiny houses. In a word: Yes. Santa Clara can afford to build these houses (at least in the abstract, but more on this later).
As previously stated, there are 2,800 chronically homeless people in Santa Clara County. Multiplying 2,800 by $25,000 yields $70 million.
Next, we need to construct the community centers which will house the cafeteria/multipurpose space and laundromat. According to a survey by restaurantowner.com, the median total cost to open a full service restaurant (including construction, equipment, and training) is $475,000. Considering our “cafeteria” is not going to be a retail facility and the laundry area will be added, we’ll just round that cost off to $500,000 to construct each community center. Let’s assume our community center will optimally serve 280 people, meaning there will need to be 10 community centers to serve a population of 2,800 chronically homeless people. Multiplying $500,000 by 10 yields $5 million in total cost to build 10 cafeteria and laundry facilities, bringing total construction costs for the houses and community centers to $75 million.
While that may seem like a lot of money, in a county of 1.93 million people it’s not that much. When we divide the $75 million cost to build the homes by the 1.93 million people in Santa Clara County, we learn that building the houses would cost about $39 per resident of Santa Clara County.
Finally, let’s consider maintenance and operating costs. HGTV recommends that homeowners set aside a maximum of 3 percent of their home’s value per year for maintenance. Three percent of $75 million worth of houses and community centers equals $2.3 million in total maintenance per year for Santa Clara County, or about $1.17 in taxes per year for each resident of Santa Clara. Operating costs related to providing meals, laundry, and administrative oversight of the houses and community centers must also be accounted for. Let’s assume that the county will spend $25 per day, per resident for meals, laundry and administration. This $25 assumption includes the costs of food, staffing, and the cost of equipment maintenance. Multiplying $25 by 2,800 people yields $70,000 per day spent on operations. Multiplying $70,000 by 365 yields $25.6 million in spending per year on meals, laundry, and administration for Santa Clara’s chronically homeless population. Dividing $25.6 million by 1.93 million people yields $13.24 in taxes per year for each county resident. Therefore, it will cost each resident of Santa Clara County about $15 per year to maintain the houses and provide laundry and meal services for its chronically homeless population.
To recap: A one-time fee of $39 per Santa Clara County resident (paid over several years) would build housing, cafeteria, and laundry facilities for the county’s entire chronically homeless population. A $15 a year fee for Santa Clara residents would feed the homeless people and operate the facilities. A one-time tax of $39 and a yearly fee of $15 seems like a small price to pay as a citizen to house and feed 2,800 people who cannot house and feed themselves. I’d pay that tax in a heartbeat. I hope this illustrates to readers that the fiscal cost of ending homelessness in America is not insurmountable.
This is especially true when you consider the tax revenue already spent making life more comfortable for wealthier homeowners in isolated subdivisions on the edge of town. Unfortunately, discussions of the cost of housing the homeless are undertaken in the context of ballooning road, sewer, and water service costs that cities are currently unprepared and ill-designed to bear, as we often note on Strong Towns. The bills to pay for utilities and road service to far-flung, single-family homes are coming due. These critical maintenance bills are taxing the pockets of Americans such that many are unwilling to provide substantial government benefits to the needy. This inherent inequality in the development of America’s cities is a long-term problem we must resolve.
Many municipalities in America could raise enough tax revenue to adequately house and feed their chronically homeless populations. Using a “housing first” strategy to help homeless people get back on their feet is more effective than the piecemeal strategies most municipalities use now. It is easier to address challenges like addiction, unemployment, and mental health when the person you are treating has a home and is well fed. If we’re serious about solving homelessness in America, we need to start paying for a comprehensive, “housing first” strategy. Fortunately, it doesn’t cost that much.
(Cover photo via Flickr – Creative Commons License)