Economic Updates

The homeless crisis in Los Angeles and across the state is by no means unique to California.  Leaders across the country and around the world have struggled to address it as factors such as high housing costs have intensified it.

In Europe, for example, the rate of homelessness has risen dramatically in a number of countries.  It has increased by as much as 50 percent in an 11 year span in France and by 35 percent in Germany in a two year span.  By contrast, Finland’s homelessness has fallen around 40 percent over the past decade, despite a double dip recession.

The key difference between Finland and its neighbors: it flipped the traditional housing model on its head.  Whereas homeless policies have traditionally been based on the premise that an individual must overcome challenges such as being unemployed, facing mental health issues, and/or fighting drug addiction before being housed, Finland put in place a scheme called Housing First.  It is based upon the premise that it’s a lot easier for an individual to solve social and health problems while living in stable shelter; in fact, challenges are likely to escalate without cover.  A briefing from the World Economic Forum elaborated on Finland’s strategy: 

“The homeless are given permanent housing on a normal lease. That can range from a self-contained apartment to a housing block with round-the-clock support. Tenants pay rent and are entitled to receive housing benefits. Depending on their income, they may contribute to the cost of the support services they receive. The rest is covered by local government.”

In Los Angeles County, the passage of Proposition HHH and Measure H demonstrates strong public will to put in place the architecture, quite literally and in the form of services, to achieve what Finland has.  Yet a few years after their passage, construction of housing units is not moving fast enough.  At an average cost of $550,000 for a supportive housing unit, it is extraordinarily expensive when it occurs, and that limits the number of people who can get shelter right now and take the first step toward self-supported permanent housing.

The net result: the Los Angeles Homeless Services Authority (LAHSA) January 2019 count found approximately 44,000 individuals in this region who are homeless and have no shelter, a reemergence of diseases that doctors have noted unseen since medieval times, basic safety compromised throughout the community, and businesses with normal operations disrupted as people try to find places outdoors to rest.

The 44,000 estimated unsheltered homeless represents about 75 percent of the total homeless population in our region.  By contrast, just 5 percent of the people who experience homelessness in New York are unsheltered. 

At the Coalition meeting this Friday, we learned that United Way has made great progress in cutting down the cost of supportive housing units to around $350,000.  Still, more options are needed, options that are cheaper and can be made available faster.

Below is a list of additional options we have identified for the tens of thousands of individuals that still lack shelter.  We have described some of these in previous weekly publications.  Some are already being implemented by the City of Los Angeles.  Others, such as mobile homes, do not qualify for Proposition HHH funding and will require alternative philanthropic and public sources of funding.  They include less expensive forms of shelter and the use of existing and vacant spaces.

Accessory Dwelling Units (ADUs) – ADUs, accessory dwelling units, are essentially bungalows in the backyards of homes in low density neighborhoods.  HUD executed a similar program in the 1970s whereby developers received federal grants in exchange for keeping a certain percentage of units at affordable rates for 30 years.  Governments could provide grants or loans to more people to build these housing units and create a covenant that requires the homeowner to rent to someone at an affordable rate in order to get the loan.  Non-profits are working to finance the development of ADUs for Section 8 tenants and it could also be expanded to incentivize units closer to community colleges, healthcare campuses and other major employment centers. 

Tiny Houses – Tiny homes are dwellings that are around 400 square feet and provide private space in which to store belongings, sleep, and includes a bathroom.  California cities, including Stockton and San Jose, are planning to build tiny home villages as another option for housing.  Dallas officials constructed tiny homes in 2016 as an option for the homeless.  While the cost of a tiny house will vary depending on actual size, material, and amenities, the price would be lower than the supportive housing units under construction.

Prefab Houses – The goal of this type of housing is to provide flexibility to manufacture a home off-site that can then be transported to a building site, be easily erected and look like modern architecture – all within a reasonable budget.  Prefab homes can be mobile homes, commonly referred to as trailer homes.  Mobile homes have been used at various points by employers as a temporary option, such as during World War II when factories needed to house their workers who would otherwise have to travel long distances to aid in the war effort.  They can also be manufactured homes, which are more customizable and can be placed on a permanent foundation, but still can be relocated as needed.  Prefab homes can be built faster, cheaper, and many are immediately available on the resale market.

Hotels & Motels – Other cities have taken the option to rent out entire motels or blocks of rooms in hotels and motels with capacity.  This is a good use of existing space available on the market in cases where housing will be extremely short-term and before securing permanent or long-term housing.  Earlier this year, L.A. County Supervisor Janice Hahn experimented with this model. When the California Department of Transportation ordered homeless individuals to leave an encampment in Whittier, she leased dozens of rooms from a local motel to temporarily house the encampment’s residents as caseworkers assisted them in finding long-term housing. Rather than renting vacant rooms, she secured a master lease agreement with the motel.  The Board of Supervisors approved Hahn’s motion recently to explore making that model the new standard across the county. Over the next month, the county will identify at least one motel in each of the county’s eight regions that could enter into master lease agreements to shelter homeless individuals. It will also consider allowing people living in their vehicles to park in the parking lots of the motels.

Relocation Assistance – The LAHSA point in time count in January revealed that around 20 percent of unsheltered adults over 25 and children in adult families (excluding Pasadena, Glendale, and Long Beach) reported becoming homeless out of state.  Another 15 percent reported becoming homeless in another California County.  Additionally, the majority of the homeless population reports falling into homelessness because of the widening gap between wages and housing costs, not because of mental illness or substance abuse.  As LA County continues to be one of the most expensive housing markets in the country, individuals who are able and willing to work and afford housing in another lower cost geography could be provided with the financial and counseling support to move, securing housing and a job.  New York City runs a version of this option, but the support provided is for housing only.

The options above are not perfect, nor are they comprehensive of all of the approaches that have been identified to move the unsheltered into shelter, nor will they be a good option for every individual facing homelessness as each will have different needs.  A normal sized house will always be preferable to a tiny house.  Hotels and motels will be reluctant to book rooms for the homeless. Implementers must be sure that housing is safe and clean, as the New York SOTA program has been cited for placing individuals into uninhabitable spaces in exchange for cheaper rent. 

Most importantly, the options above must be administered so that time caps for assistance are put in place and intensive services are given to those that need them – in the form of substance abuse treatment, workforce training, and counseling where appropriate – all with the goal of enabling individuals to live independently and without assistance as soon as possible.

Still, each may have a place in the portfolio of options to house as many as possible and as quickly as possible in an “all of the above” solution.