Part 2: Making Housing More Affordable

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Homelessness in an affluent country is inexcusable, yet it remains a disturbing reality in the United States. In recent years, some progress has been made -- especially in providing housing for veterans and people with disabilities. But there is still a long way to go. According to the Department of Housing and Urban Development (HUD), based on a point-in-time count on a selected night in January 2023, approximately 653,000 men, women, and children were homeless (i.e. without permanent homes). 40% of them were unsheltered. While these statistics are inexact, the sad story can be seen on the streets of many American cities.

For ten years I worked for Downtown Emergency Service Center (DESC) in Seattle. It's a nonprofit that provides emergency shelter, mental health and chemical dependency treatment, and permanent supportive housing for disabled homeless individuals. DESC is a fine organization with hundreds of dedicated staff doing good work. They help stabilize people's lives and, in many cases, provide them with homes, about 1,400 units of which are operated by DESC itself. With the addition of about 100 new units to its inventory every year or two, the agency's contribution to meeting the housing needs of our homeless population, along with that of several other nonprofits, continues to increase. Yet it's also clear that Seattle, as many other cities around the country, is only making modest progress in addressing the problems of homelessness and housing affordability.

Let’s identify key elements of this ongoing predicament:

1. Thousands of people across America are homeless and living in shelters, other temporary quarters, or outdoors every night.
   

2. The temporary facilities currently available are unable to take in all the homeless people who would prefer to spend the night inside. This includes not only those seeking permanent housing, but also those in transitional phases, such as homeless youth, domestic violence victims, and ex-felons recently released from prison.
   

3. Some of those living on the streets refuse to consider staying in shelters as traditionally designed, given these facilities’ overcrowded conditions and unwillingness to accommodate couples, pets, and other special circumstances. Fortunately, cities around the country are starting to shift to “low barrier” shelters and develop other flexible, healthier arrangements (a process that was accelerated by the coronavirus pandemic).
   

4. There is an insufficient number of “permanent supportive housing” units, which enable homeless people with severe mental illness, substance use disorders, and other disabilities to live successfully with support services in set-aside apartments or buildings dedicated to housing this population. (Even where such units are available, a small percentage of mentally ill individuals are resistant to re-locating off the streets, raising difficult issues regarding when, and for how long, involuntary commitment may be appropriate for their well-being.) There is also a subset whose mental health is so compromised as to require residency in a facility with more skilled care than typical supportive housing programs can offer. Their needs are not adequately being met either.
   

5. The supply of housing at affordable prices is insufficient. Many homeless people are, in fact, employed, and many households spend more than 50% of their income on housing. So while homelessness can arise from joblessness, it can also come about in circumstances where a person is working, but cannot afford market-rate housing. As a result, they must wait months or years for subsidized housing.
   

6. In the process of creating housing that is affordable for low-income and working class people, we have developed an intuitively appealing, but flawed, public subsidy system. Our public housing and other programs that directly or indirectly subsidize tenants divert critical taxpayer dollars for bureaucratic purposes, such as monitoring tenant eligibility and determining authorized rent charges. Also, the policy of limiting the availability of subsidized units to households that meet a specific income requirement creates unfair outcomes. Put simply, if your income is slightly above a given threshold, the opportunity that's available to someone with a slightly smaller income is not available to you.
   

So, how should we address these challenges?

Placing a roof over the head of anyone who would otherwise need to survive outdoors should be our first priority. Developing an adequate supply of suitable temporary housing arrangements can be achieved if we choose to apply the resources. The same goes for meeting the permanent housing needs of low-income seniors and disabled people. Accomplishing these goals is purely a matter of will.

More complex is the challenge of housing those who are employed, or at least employable, but unable to afford market-rate housing. So let's consider what can be achieved in closing this affordability gap if Basic Need Accounts (BNAs) and a Public Jobs Program were created. (Part 1 of this series introduced these as mechanisms that could enhance economic security and opportunity.) To what extent could they make it possible to bring permanent housing within reach of such individuals and families?

For those households where someone is already employed in the regular marketplace, the addition of short-term Basic Need Account funds ($350 monthly per household member) will in most markets be sufficient to make permanent housing affordable.

Also, for those who don't have a regular job, when we combine an individual or family’s short-term BNA funds with the wages that could be earned at a Public Job, a household would, in the vast majority of communities, have enough money to pay market rent and meet its other immediate needs. 

Consequently, apart from the needs of low-income seniors and disabled people, subsidized housing would only be necessary for lower income households in the most expensive metropolitan areas.

Let's take the case of a single adult seeking a studio apartment. If that person doesn't have a job in the regular marketplace, but is employed full time at a Public Job, based on a projection of 2,000 hours per year at $15.06/hour, his/her gross monthly income for meeting their short-term needs will be about $2,860 ($30,120 / 12 months, or $2,510 in Public Job wages plus $350 in Basic Need Account funds).

The conventional guideline for the maximum a person should pay for rent, including utilities, is 30% of gross income. But since under A Basic Deal, health insurance premiums would be fully subsidized, it seems that could be pushed up to 35% without creating undue hardship. Multiplying the $2,860 by 35% equals $1,001 as a manageable rent level – a rent that is affordable under a “worst-case scenario.”

Rents for comparable units vary widely from one part of the country to another. For its subsidy programs. the Department of Housing and Urban Development applies a standard called Fair Market Rent (FMR). This equals the 40th percentile rent in a given housing market and represents what one can reasonably expect to pay for rent (including utilities) in that market. Where I attended college, in Knox County, Ohio, the 2024 FMR for a studio is $722. This suggests that with the benefit of a short-term Basic Need Account and the availability of a Public Job as an employment option, and $1.001 considered a manageable rent level, an able single adult should be able to afford an unsubsidized apartment in this market. (It's, of course, up to that individual to take advantage of this job opportunity.)

Or let's assume the household consists of two parents and a small child, and only one parent is employed, working at a Public Job. With all three household members receiving $350/month in short-term Basic Need funds, the total family monthly income would equal $3,560 ($2,510 in Public Job wages plus $1,050 in short-term BNA dollars). Multiplying that figure by 35% results in $1,246 as their manageable rent level. The FMR for a 2-bedroom apartment in Knox County, Ohio is $923. So again, the combination of the Basic Need Accounts and a Public Job opportunity should be sufficient for this household to secure housing in the private market, even accounting for the likelihood that these programs will increase demand and nudge up the price of housing.

In contrast, where I now live, in King County (Seattle), Washington, the FMR for a studio is $2,211 and is $2,645 for a 2-bedroom unit. So while the Public Job and BNA income supplements might make market-rate housing affordable for some households in this locality, they would still not be sufficient to put it within reach for many lower income people.

However, there are two strategies that, in combination, could ensure a permanent job will lead to housing that is affordable in place like Seattle.

One is to increase supply by squeezing more out of the unsubsidized marketplace. This can be achieved through such means as 1) adjusting zoning and other guidelines and incentives to increase housing density; 2) ensuring the preservation of existing affordable units by making it more difficult to reduce supply through the demolition of viable buildings; and 3) vacant unit and short-term rental limitations.

In addition, controversial as they are, rent control measures can contribute to the affordability of a community’s housing stock. Such policies must be designed carefully, however, so as to not discourage the upkeep of existing units and the development of new ones.

In the end, the greater the reliance on the private, unsubsidized market for providing an affordable housing supply, the less need there will be for costly subsidized units. But where a metropolitan area's private market falls short, we need a second strategy, a new form of publicly assisted housing.

Under current arrangements, whether in regard to public housing or private units managed by business or nonprofit entities, the subsidized housing system's shortcomings include the burden of weighty bureaucratic oversight, inequitable renter eligibility rules, and lengthy waiting lists.

In addition, those subsidized renters who must find their own housing through the use of a voucher often face discrimination by landlords during their apartment search. Many owners assume these applicants wouldn't properly maintain their living units and would otherwise engage in irresponsible or illegal behavior. (To discourage discrimination on this basis, some jurisdictions have established “source of income” protections, but their effectiveness is still an open question.) Furthermore, the vouchers may not support a high enough rent to meet a given neighborhood's market conditions, and landlords feel they can do better.

So from a number of perspectives, the current structures beg for change.

This is where a new option called Community Housing could come into play, filling the affordable housing gap on a more equitable and efficient basis.

Specifically, Community Housing would be subsidized housing that is affordable for all households with at least one fully employed member, even if that person is engaged in a Public Job.

Here's how it would work. Nonprofit organizations, with support from public funding sources, would develop (or acquire) and manage residential buildings. (Public housing authorities can certainly perform the same functions, but from my experience, nonprofits are generally more mission-driven and the better alternative.) Set-aside rent-restricted units within privately owned buildings would also be subsidized and developed. Both of these processes are already in place throughout the country. But with Community Housing, rents would not be based, as is common, on a percentage of income or some other such formula. Instead, rents would be uniform for all units of a given size.

Rent calculations would be founded on a presumption of how many adults and minors would typically occupy such a unit, with one household member being employed, working at a Public Job. By applying a percentage - again, say 35% - of the sum of all household members' short-term Basic Need Account dollars and the Public Job wages, a manageable rent level would be calculated.

For example, using the numbers from our earlier arithmetic, rent would be set at $1,001 for a studio apartment (typically housing one person), eliminating the affordability gap for this sized unit in expensive metropolitan areas. (For simplicity's sake, this calculation ignores the possibility that Public Job wages might be set higher, and the rent adjusted accordingly, in certain localities.)

To ensure Community Housing units and the subsidies to develop them don’t stray from their intended purpose, these residences would come with certain leasing constraints, such as a prohibition on subletting.

But this is still a pretty sweet deal. So who would get to live there?

The playing field needs to be level – no distinction between haves and have-nots. These units would be allocated through a lottery process and open to any household able to pay the rent. In other words, everyone making a decent effort at self-sufficiency would be eligible for selection. Even the wealthy among us could apply - although another limitation should be that these units may only serve as a household's primary residence.

Not restricting eligibility will, of course, result in the development of more subsidized units than if they were available only to lower income households. However, especially in Community Housing-only buildings (vs. set-aside units within market-rate buildings), these units are likely to disproportionately attract households of modest means. Also, it should be remembered that Community Housing will only need to be created in the most expensive markets.

Our first obligation, of course, should be to end homelessness. So we would initially prioritize housing for those who are homeless and those who are housed, but living at the margin under stressful economic conditions.

More precisely, regarding the former, priority should be given to those who have been homeless for some minimum period of time, at least several months or even a year. Otherwise the system can easily be gamed.

With respect to the latter, households whose monthly personal income and short-term BNA deposits multiplied by 35% does not reach that locality's FMR standard (and are thus excessively burdened by market rent payments) would qualify for priority status as well.

Community Housing units would initially be occupied via separate lotteries with, say, 70% being those who qualify under the homeless or “near-homeless” status and 30% those who are currently housed with rent-manageable incomes. (Keep in mind that those given priority would not include homeless individuals with disruptive tendencies due to their mental health or substance use disabilities. A different response, permanent supportive housing, has been developed to address their needs.)

This preference, though, would be phased out in the interest of impartiality. Upon turnover, all Community Housing units would be open to any person or household that could manage the rent, regardless of their income or existing housing status.

So given these guidelines, how would tenants be selected?

Vacancies for each unit would be filled by lottery, with limits placed on the number of lotteries any adult could enter at a given time.

This would serve two purposes. It would increase the probability of success for any household seeking a Community Housing unit in competition with those who would otherwise flood the system with numerous applications. In addition, the process of lottery entrants identifying a limited number of specified units will enhance applicants' chances of securing housing in neighborhoods where they have a prior connection or which offer convenient proximity to their workplace.

Apart from the issue of evenhandedness, there's one additional advantage to not dedicating 100% of the units to homeless or near-homeless people at the outset. To the extent Community Housing projects are spread around geographically rather than concentrated in lower income areas (as should be the case, this being a region-wide responsibility), more prosperous neighborhoods would likely be less resistant if these buildings initially included a number of residents who would be viewed, fairly or unfairly, as stabilizing influences.

In other words, Community Housing would help integrate neighborhoods economically in a relatively unthreatening way.

And while I don't believe lower income communities lack the capacity to succeed, I subscribe to the idea that more economically integrated neighborhoods – which often means more racially and culturally integrated neighborhoods – are healthier. They can serve to increase personal contact and enrich those of different backgrounds. They can also increase lower income families' exposure to a greater variety of role models and job support networks. (Along similar lines, they would enable children from lower income families to attend better schools, although it is inexcusable for schools in all neighborhoods not to be high-quality.) Finally, such mixing might contribute to social cohesiveness. Especially in these divisive times, that could serve us well.

The establishment of Community Housing would not only result in the development of an improved form of subsidized housing, but also changes in the existing lower-income housing programs. Most personal rental assistance subsidies such as Section 8 vouchers could be phased out, with the funds re-allocated to Community Housing. Current subsidized and set-aside rent-restricted units, upon turnover, could be rented under Community Housing terms (with the exception of units serving low-income seniors or low-income disabled people, for whom existing eligibility requirements and subsidy arrangements remain justifiable due to these individuals' inability to work). And in jurisdictions with low enough market rent levels so that Community Housing isn't needed, vacated subsidized units could be “de-subsidized” and re-established in the private market.

In sum, with the introduction of Basic Need Accounts, a Public Jobs Program, and Community Housing (as well as an increase in traditionally subsidized units for certain populations requiring additional support), we can more effectively and efficiently meet the need for affordable permanent housing. And in doping so, we can make significant headway in bringing an end to homelessness.

Part 3 will address the issue of health care affordability, proposing essential insurance principles and a linkage to the Basic Need Accounts – Public Jobs Program framework.