Ending homelessness costs less than doing nothing
Despite being the richest nation in the world, the United States has a total homeless population of over five hundred thousand people. This situation is clearly odious; yet we do not see any substantial effort being made to improve the current circumstances. There seems to be an attitude that there must be a natural rate of homelessness, perhaps in the same way that there is in fact a natural rate of unemployment.
However, this is simply not the case. Homelessness is a net negative, and if the federal government were to spend money to end homelessness, the economic benefits generated would outweigh the cost of solving the problem.
Besides the obvious moral reason that no human being should have to endure the trauma of extreme poverty, the existence of pervasive homelessness is also economically damaging to a society.
Shelter provides a necessary foundation for the economic and financial growth of an individual. Housed people worry much less about surviving the elements, contracting illnesses or becoming addicted to drugs than those who are not housed. Having shelter dramatically decreases medical costs and health risk factors.
In addition to the physical labor caused by lack of shelter, homelessness can cause trauma and trigger PTSD when a previously unhoused person finds shelter. Even after enduring the hardships of getting housing or a job or both, the horrors they’ve experienced haunt them and can often be so difficult to overcome that they find themselves on the streets.
In addition to the instability inherent in homelessness, the circumstances of homelessness push these desperate people to commit criminal acts even though there are often no other alternatives to realistically pursue. In most cities, the lack of public toilets, affordable drug treatment programs, and food for the poor can lead to incarceration for urinating in public, drug use and petty theft. The criminalization of these desperate actions makes it considerably more difficult for homeless people to escape their situation.
To put it simply, the average homeless person is far too concerned with survival to be able to cope with their dire situation on their own. These situations have also come at a significant cost to the US taxpayer by increasing funding for emergency health care services and the police. The status quo is a lose-lose balance.
All of these problems, each of which is caused by a lack of shelter, make it much more difficult for a significant portion of the population to contribute to the country’s real GDP.
When a person’s basic needs are not met, it is almost impossible for them to find work and even more unlikely to have enough income to support themselves. Essentially, they are unable to participate in the workforce. If instead their basic needs were met, the labor force would increase, leading to an increase in aggregate supply in the long run – or the measure of a country’s full employment output relative to real GDP.
If the federal government, during a time of crisis, devoted more time, effort and money to housing the homeless, the United States could likely experience one of its greatest periods of sustained growth as well as ‘a massive reduction in poverty.
The basic economic principle that would cause this is the spending multiplier, or the idea that government spending – whether in the form of stimulus checks, health insurance, or infrastructure – has a multiplier effect when people have an increased marginal propensity to consume, resulting in an increase in GDP. These types of tax measures are often taken during times of recession.
Here is a graphical explanation of the process.
It is clear that the Housing First model (or simply giving houses to the homeless) works well in theory, but how does it work in practice? Various forms of the model have been tried in several cities and regions in the United States and Canada.
As a result of its implementation in Utah, “chronic homelessness has decreased by 72% since 2005 and chronic homelessness among veterans has reached an effective level of zero.” In the five Canadian cities where Housing First was implemented, there was a 79% decrease in days spent in prison, a 66% decrease in hospital days, a 38% decrease in time spent in emergency rooms, a 41% decrease in use of emergency medical services and a 30% decrease in interactions with the police.
Even from a simple personal interest homo economicus From his point of view, the US taxpayer should subscribe to free housing policies for homeless people.
Homelessness is not a necessary evil. It is a failure of the current economic system that hurts everyone involved. However, we can collectively end this scourge. Not only do we have the potential to solve the homeless crisis, but it will massively increase our potential economic output and reduce the tax burden on Americans. Our status quo is not the result of the economy, but rather of a lack of political will to fix the problem.
Ajay Madala is a first year economics student.