Homelessness and Inequality

• Published date: 01 March 2020
• DOI: http://doi.org/10.1111/ajes.12327
• Author: Mary Cleveland
• Date: 01 March 2020

Homelessness and Inequality

By Mary Cleveland*

abstraCt. Homelessness and housing insecurity in the United States

are not so much a housing problem or a poverty problem as a visible

sign that growing wealth inequality has left millions of people unable

to earn enough to afford adequate housing. The classical economists

David Ricardo and Henry George linked wealth inequality by arbitrage

to unequal income and wages. The greater the inequality of wealth,

the greater the inequality of income and the lower the wages at the

bottom. Neoclassical economics has largely obscured this relationship.

Consequently, proposals from both conservatives and liberals to

address homelessness focus narrowly on housing. Ultimately, reducing

wealth inequality requires national tax reform and a return to vigorous

antitrust enforcement. However, cities can reduce local inequality by

making property tax assessments uniform, or, better yet, by shifting to

taxing land only.

Introduction

Homelessness begins as a local problem. At the local level, it arises

from the interplay of individual and community choices. In any com-

munity in the United States, most people live in privately provided

housing. The poorest residents may be “housing insecure,” which

means they have difficulty every month paying the rent and meet-

ing other expenses. In a crisis—a lost job, a sick child, a fight with

a spouse—they may choose to shelter themselves in ways that the

community considers unacceptable. “Choice” may seem a cruel term,

but such individuals do choose among limited alternatives. Besides

sleeping on a bench in the train station, or in a car, they can double

up with friends, go to a local shelter (if there is one), or leave town.

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

DOI: 10.1111/ajes.12327

© 2020 American Journal of Economics and Sociology, Inc.

*Adjunct Senior Research Scholar, Columbia University School of International and

Public Affairs. Email: mc2264@columbia.edu Website: mclev eland.org Blog: www.mclev

eland.org/blog

560 The American Journal of Economics and Sociology

In 2018, there were some 38.1 million people, almost 12 percent

of the U.S. population, below the federal poverty line; presumably,

most of these people are “housing insecure” (Semega et al. 2019:

Figure 7). Some 568,000 of such people, about 1.5 percent, were

counted as homeless on one night in January 2019 (Henry et al.

2020). Most of them receive some form of federal or state pub-

lic assistance: Social Security for seniors, Social Security Disability,

Medicare, Medicaid, Food Stamps, or child support (Temporary

Assistance for Needy Families), Since the crisis of 2008, funding for

services to poor people has been drastically cut, and states often

skim federal aid intended for localities in order to fill holes in state

budgets (Hatcher 2016).

The community makes choices, too. Public officials can decide

how vigorously to enforce ordinances against sleeping in the park or

on church steps. They can decide whether or not to provide public

shelters or authorize charities to provide shelters. They can choose

zoning and code rules for housing, and decide how vigorously to

enforce those rules. Do they allow only single-family housing or mul-

tiple? Do they set minimum size for rooms and require windows in

each? (Tiny middle-class Japanese apartments would be illegal in most

of the United States.) Do they forbid more than two unrelated individ-

uals to live together? Do they engage in or tolerate racial discrimina-

tion? Most local governments restrict supply, for reasons ranging from

esthetics to keeping down property taxes by trying to exclude families

with school-age children.

The more local officials restrict supply, the more expensive they

make housing, and the more they worsen local wealth inequality—the

gap between property owners and non property owners. In effect,

local officials enable local property owners to act as monopolists. The

wider the wealth gap, the more likely that some impoverished resi-

dents will choose the bench in the train station or the shelter in the

church basement. Or they may accept a one-way ticket out of town,

hoping for a friendlier reception elsewhere.

Clearly, at the local level, “housing insecurity” and “homelessness”

are poverty problems. But how is that poverty problem linked to in-

equality? Has it become worse as inequality has increased nationally?

561Homelessness and Inequality

Can solutions to “housing insecurity” and “homelessness” make much

headway if they do not address inequality?

At a regional or national level, the relation between wealth and

homelessness is not obvious. A long-forgotten model from classical

economics demonstrates that wealth inequality in general physically

limits poor people’s access to decent working and living conditions,

lowering the wages they can earn and putting them at risk of home-

lessness. This relationship requires some explaining as it is not obvi-

ous from statistics. Moreover, the classical economists used different

terminology.

While statistics clearly show that both wealth and income inequality

have been increasing nationally since the 1980s, statistics on poverty

and homelessness are sketchy, and definitions are sometimes ambig-

uous. It does appear that homelessness broadly defined has been

increasing at least since national statistics began in 2007. Desmond’s

(2016) bestseller Evicted paints a shocking picture of conditions

among the “housing insecure.”

In confronting homelessness, conservatives and liberals both

focus on what seems obvious: there is a lack of housing. They also

agree on the one approach that has clearly proved effective: provid-

ing free, permanent supportive housing for mentally or physically

ill, substance-abusing chronically homeless people. Beyond that, con-

servatives and liberals propose different remedies. Conservatives em-

phasize freeing local housing markets from stifling regulation. Liberals

emphasize coercing markets to increase the supply of “affordable”

housing by various means, including rent control and obstacles to

“gentrification.” Such approaches amount to treating symptoms. They

do not address the larger problem that, due to growing inequality, a

substantial portion of U.S. residents are housing insecure in that they

cannot easily afford minimal housing.

Ultimately, reducing wealth inequality requires national tax reform

and a return to vigorous antitrust enforcement. However, cities can, to

some degree, reduce local inequality by making property tax assess-

ments uniform and shifting to taxing land only.