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The $17.5 billion project
On NIMBYism, retirement funds, and the gigantic elephant in the room we have to address in order to reduce homelessness
Over the last four years, California has spent $17.5 billion on programs and projects to reduce the incidence of homelessness. That sum is hard to conceptualize, so consider this: The budget for the entire government of the state of Iowa is about $8 billion a year. So, in other words, California's public efforts to resolve homelessness are on roughly the same order of a magnitude as running an entire medium-sized state.
■ California bears a burden on that scale in part because it has 30% of the nation's population of unhoused people, and the problem is growing. But, significantly, that problem is homegrown: Contrary to popular myth, of the people experiencing homelessness in California, 90% lost their housing while already living in the state.
■ When we talk about the basic human needs, the traditional "big three" are food, clothing, and shelter. Some people think they can be supplied merely by calling them "human rights"; unfortunately, they cannot. Those universal needs represent material goods that must be produced somehow by a world of limited resources.
■ There are a hundred ways to try to make the situation more complicated than it is, but the inescapable fundamental fact is this: If the market produces a shortage of a good you want at the price level you deem reasonable, then the only thing that will help you is a boost in production. American states in general, and California in particular, have a lot of regulatory and other reversible obstacles to housing production.
■ Meanwhile, we observe a perverse set of policies that treat housing as a major vehicle for saving, storing, and building wealth. For many, especially in lower wealth brackets, home equity is the primary household investment. The obstacles should go away, and we need to find sound and rational substitutes for those policies that turn housing into most households' primary financial investment.
■ All else being equal, building a lot of new housing would tend to drive down the average price of housing -- and thus undermine the household "savings" of a lot of families up-front. Any permanent solution to housing shortages must take that effect into account and find ways to soften the blow. Tax and regulatory policies have treated homeownership as a primary investment for so long that unwinding the consequences has to be taken as part of the overall solution. Otherwise, NIMBYism will always have a guaranteed constituency among those who view any opening-up of the housing market as a threat to their biggest source of wealth.
■ That's even though the long-term effect of meaningful reductions in housing costs would tend to make families wealthier by freeing up cash flow to go to real investments (in retirement plans, educational spending, or a hundred other places) rather than to payments for rent or a mortgage. California and other states can go on spending fortunes trying to ameliorate the problem, but in the end, more than anything else, it's a problem of under-supply and the widely-held interests deeply invested in keeping prices moving upward.