Housing affordability has become a big problem in recent years, driven in part by immense amounts of new money creation. As money loses its value, those who hold it look to put their money in assets that better hold their value. Real estate and housing is a popular destination for a declining currency. Over the past century, purchasing a home has rarely been less affordable.
Yet, not everyone can aspire to own a home due to a variety of circumstances. While homeownership is appropriate for many, a well functioning housing market also provides housing for the lower-income members of society, such as the non-working elderly, the disabled, and the unlucky. Moreover, young workers just starting out are going to need low-cost housing.
Yet, it is clear that many local markets—and housing markets are generally very local in nature—are not providing a supply to match the demand. This is especially acute at the lowest income levels, and as a result, we continue to see increases in the homeless rate, which rose 18 percent in 2024. What is causing this? Well, if you’re a regular reader at mises.org you can already guess: government regulation and policy have a lot to do with it.
On this week’s Radio Rothbard, Chris Calton, Research Fellow in Housing and Homelessness at the Independent Institute, and I take a look at homelessness and how many governments are making it worse.
Calton notes that California—followed closely by New York—is the state-level poster child for failed homelessness policies. Most especially, California is bad in two ways: it imposes more regulations on housing production than most other places, and the state discourages treatment for drug addiction.
Other jurisdictions, such as Florida and Texas, take a better approach and have seen less growth in homelessness.
Calton notes that California even goes so far as to prohibit government employees from even encouraging homeless drug addicts to seek treatment. According to California politicians, encouraging treatment constitutes stigmatizing drug addicts. Yet, persistent drug addiction is a leading cause of long-term homelessness. Many of these people remain homeless even when cheap housing is available.
On the other hand, many other people are homeless due to a true lack of housing supply. Not all homeless people are drug addicts, and many homeless people are only temporarily homeless. These are people who would not be homeless at all, or would be homeless for shorter periods, if only lower-cost housing were available.
Yet, government routinely intervene with policies that essentially ensure that the market is unable to provide more low-cost housing. Calton notes that jurisdictions with more lax zoning and regulatory laws provide more housing that helps this population that is homeless due primarily to a lack of affordable supply. Places like San Francisco? Housing almost never gets built—outside a few token subsidized units—because local politicians and the local population like it that way.
Even among housing activists, the reflexive anti-capitalism of those who oppose new housing development leads them to believe that building new housing somehow drives up the price of housing. This incoherent view sadly persists even though mountains of empirical evidence—and common sense—shows that building new housing works to reduce overall housing prices.
This is true even when the new housing being built is luxury housing. After all, as new luxury units come online, the higher income renters then move into these units leaving the older units behind. These older units then become available to the less wealthy segments of society. These has been witnessed again and again, yet local governments and homelessness activists routinely oppose new housing supply, instead insisting that new production focuses on government-subsidized units. These sorts of units are never produced in numbers sufficient to actually provide any sort of solution, however.
We also discuss issues surrounding “tent cities” and how some policies can also attract new homeless populations from elsewhere. Moving homeless populations around, however, does not address the underlying issue of policies that prevent markets from responding to the clear need for more housing.
