Cyclical Housing Markets and Homelessness

• DOI: http://doi.org/10.1111/ajes.12322
• Author: Fred Harrison
• Date: 01 March 2020
• Published date: 01 March 2020

Cyclical Housing Markets and Homelessness

By Fred Harrison*

abstract. The fundamental explanation of homelessness has eluded

governments that claim to operate with “evidence-based policies.” The

underlying cause of most homelessness is inherent in land markets,

which are subject to wide swings of speculative manias followed by

debilitating depressions. Rather than seeking to rectify the economic

roots of homelessness by altering the tax treatment of real estate,

governments focus on ameliorative strategies that are destined to fail.

Cycles of boom and bust in land markets have persisted since the 19th

century. They exacerbate homelessness by pricing low-income renters

out of the market during the upswing, as land prices rise, and by

generating massive foreclosures and evictions during the downswing.

The most important action government could take to remedy the

problem of homelessness is to devise policies to dampen the swings

in land prices.

Introduction

Although governments profess to want to solve the problem of home-

lessness, the remedy remains tantalizingly out of reach. Perhaps this

means that no government actually wishes to end homelessness, but

that seems unlikely, given that finding a humane solution would give

great credit to the problem-solver. Another possibility is that the ana-

lytical categories commonly used to assess the problem may be an

obstacle to correct understanding.

Physicists who search for causal relationships work with the laws

of nature. These laws do not create the kinds of problems that con-

front social scientists. Quantum particles do not vary their responses

American Journal of Economics and Sociology, Vol. 79, No. 2 (March, 2020).

DOI: 10.1111/ajes.12322

© 2020 American Journal of Economics and Sociology, Inc.

*Director of the Land Research Trust, London. Read PPE at the University of Oxford

and received his MSc from the University of London. Relevant publications include:

Power in the Land (1983) and Boom Bust: House Prices, Banking and the Depression

of 2010 (2005), which predicted land prices would peak in 2007, followed by an eco-

nomic crisis—at a time when economists claimed no such predictions are possible.

Email: fred.geophilos@gmail.com

592 The American Journal of Economics and Sociology

on a willful basis: they do not exercise agency. The physicist can

declare with confidence that A causes B (A → B). Social scientists are

challenged with complexities that lead to cautious pronouncements.

People, after all, change their minds. Furthermore, assessments are

vigorously contested by others with distinctive ideologies that shape

their viewpoints. The outcome, within the social sciences, is a lack

of confidence in isolating causal mechanisms. This may explain why

data that quantify behavior are generally offered as correlations rather

than revealing causal mechanisms at work. One result is the unnec-

essary prolongation of socially significant problems. One of these

is homelessness, an abiding feature of prosperous civilization for

centuries.

Correlation is offered as implying a relationship, when there may

be no such meaningful connection. Part of the analytical difficulty

may be attributed to the inadequate availability of relevant data, but

that begs two questions: Why are relevant data absent, and how is the

relevance of data determined? Part of the explanation for the cautious

approach to diagnosis is associated with the willingness to accept the

status quo as the analytical starting point (for problem-solving pur-

poses), combined with the commitment to language that describes,

but cannot explain, the dynamics of the social structure. Homelessness

serves as a case study within which to frame some of the heuristic

issues.

The variety of explanations for involuntary homelessness, and the

persistence of this phenomenon over long time periods, suggest that

the fundamental explanation has eluded governments that claim to

operate with “evidence-based policies.” I hypothesize that the root

cause of the problem is inherent in the land market, a market that

attracts little attention. The focus, here, will relate to homelessness in

the Anglo-American world.

Historical Origins

One starting point for homelessness is the historical context. In

late 16th-century England, homelessness became an institution-

ally observed phenomenon through the enactment of a number

of Vagabond Acts. This was followed in the 17th century by the