List of figures………………………………………………………………………………………3
The Housing System in the US. 7
Slow Increase in Housing Unnits. 7
Increase in the Cost of Housing. 8
The Housing Pathway Model and a Critique of Current Policy Actions 12
Ineffective Policies, with Reasons……………………………………………………………..14
The Housing Pathway Model and Proposed Policies. 17
Comparison and Lessons………………………………………………………………………17
Conclusion and Targeted Recommendations. 21
List of Tables/Figures
Comparative Analysis Graph…………………………………………………………………….6
Cost burdened renters in the US……………………………………………………………..……7
Impact of more housing …………………………………………………………………..……10
Families using Federal Rent Assistance………………………………………………………….14
Statistics and research indicate that the US is facing a homelessness problem. In fact, the country is in need of affordable housing. Like many others experiencing the impact of population growth, in the wake of globalization, there has been an upsurge in the demand for affordable housing. The cost of housing has been on the increase because of the slow increase in the housing units. Also, a rise has been noted in the cost of building new housing units. As a result, the cost is transferred to the consumers, targeting the high-end consumers and leaving out the ones at the bottom without affordable homes. Past efforts to address the challenge have focused on the creation affordable housing options. However, the efforts have not worked in providing housing for the homeless. Using the housing pathway model, it is possible to recognize the factors behind what has not worked in terms of the policies to address the housing problem and those that have not worked, including the reasons they have not worked. Again, using the housing pathway model, important lessons are drawn from comparing the efforts in the US and the more effective ones in the United Kingdom. Worth noting is that it is not practicable to construct more houses based on space and resource limitations, the government, with the collaboration with the private sector should work on offering financial incentives towards the ability to rent and buy from the private developers.
Terms of Reference
The research has a focus on the problem of homelessness, one of the critical social issues in the country. The paper presents a critique of the current policy efforts adopted towards the end of addressing the problem, and further provides a proposal for solutions, using the housing pathway model and borrowing from lessons in the UK. The individual project makes use of input from a methodical research on government reports, journals, and other published primary and secondary sources. It is written in fulfillment for an individual assessment and will be subject to a thorough assessment process.
The primary focus of this report is on the problem of homelessness in the United States, among the developed economies in the world. As of December 2015, the country’s GDP was 18036.65. As of 2017, the United States has a population of 326,568,391. The population ranks the country at about 4.34% of the global population. In terms of the population density, the country is 36 per Km2 (92 individuals per mi2) (US 2017). In urban population, the country stands at 82.9 % of the population. From figure 1 below, the country is larger in population than Russia and the UK. Regardless the reality that the US is one of the developed nations in the world, it continues to face a social crisis in the name of homelessness. It is estimated that 564,708 individuals in the country are homeless, out of which 83,170 individuals, or 15%, are chronically homeless. More than half a million people in the country live in cars, on the streets, in homeless shelters, and others in subsidized transitional houses.
(Source: US 2017)
The paper looks deeper into the problem of homelessness in the United States in three main sections:
- Analysis of the homelessness problem and the causal factors
- Using the housing pathways model, a chapter critiquing the state of the housing system in the United Kingdom – what’s good, what’s not and why
- Using the housing pathways model, a chapter identifying key lessons from other countries and how they might address the challenges within the housing system in the United States.
The Housing System in the US
The pathway housing model is the foundation for the understanding of the housing challenge in the United States. The applicability of the model is founded on whether the housing challenges are as a result of individual or structural causal factors (Clapham, 2003). While there are individual factors that play out in the problem of homelessness in the United States, it is the systematic failure in the face of globalization that has contributed to the challenge (UN HABITAT, 2003). Beginning from the period of the Great Depression, the housing policy in the United States was directed towards homeownership. Major developments have made the dream of homeownership to fail and contributed to the high level of homelessness in the country (Culhane, 2008). Instead of many Americans owning homes, many have been left without housing for themselves and their families.
Slow Increase in Housing Units
According to Culhane (2008), the growth in the demand for housing in the United States, emanating from the growth in population amid globalization, would require a matching growth in the supply of housing. In any situation where the demand is greater than the supply, homelessness would be the emerging reality. Brady (2014) suggests that the developers in the US are not creating sufficient residential houses to address the increase in demand as a result of the increase in population (see figure 2 for the trend in population over the decades). Evidently, there have not been new houses being constructed in the country and because of the decline in supply, the cost of housing is skyrocketing. Based on the high cost, the dream of most Americans owning houses has not been realized, leading to the reality of high levels of homelessness.
(Source: US 2017)
USICH (2010) indicated the need to come up with effective policies to address the homelessness in the United States. However, the effective solution has not been achieved because of the failure in the concept of affordability of housing. The cost of housing due to the low supply amid increased demand is the structural reality behind the challenge. From The Components of Inventory Change, a report by the Federal Government published twice every year, the growth in the housing stock between 2011 and 2013 was only 270,000 units. The number was lower, even than the decade in which the nation suffered the effect of the Great Recession. It was concluded that “despite the gradually improving economy, there were large declines in both new construction and net additions to the housing stock during the 2011–2013 period compared to the 2007–2009 period” (Curry and Abrams 2015, p. 146). The reality is that slow growth could not meet the rise in demand.
Freddie Mac’s commentary showed that in 2015, the general rate of housing (single family and multifamily) was lower than the average between the 1970 and 2007 decade by 30% (Buckley, Kallergis, and Wainer 2016). The decade experienced a growth in housing that has not been matched and the National Association of Realtors revealed that presently, the housing units are three million units lower than the demand. Hence, it is no surprise that many Americans are still unable to get quality housing (Balcilar, Katzke, and Gupta 2015). With the current slow growth of housing in the country, there is no doubt that people will continue to suffer homelessness unless prompt and effective policy efforts are adopted.
Increase in the Cost of Housing
Culhane (2008) reveals the cost of housing as another structural causal factor in the housing sector. While the general construction of housing units has declined, there has been a greater focus in the construction of apartments. Compared to the level in 2010, it is evident that multifamily housing units have increased twice in 2012. An additional third increase occurred between 2012 and 2014 and a peak occurred in 2015 at 310,000 units (Balcilar, Katzke, and Gupta 2015). The trend has indicated the possibility of one million more apartments being built in the next three years. However, this increase is not necessarily a positive growth in terms of addressing the problem of homelessness in the country.
DeVerteuil, May, and von Mahs (2009) indicate that the problem is aggravated because of a flawed focus within the housing sector. The newly developed apartments cannot solve the homelessness problem because they are targeted towards the buyers at the top of the housing hierarchy. A research done by the National Association of Home Builders (NAHB) showed that 59% of participants accepted that they were not ready or in a position to acquire a new home at more than $249,000. The findings leave out most of the Americans because only 35% of the homes beginning in 2015 were at the level or below the suggested cost. Figure 3 indicates the increase in the cost of housing in the US. The cost of the housing is especially higher within the metropolitan regions. Beginning in 2012, the majority of the starter and trade-up homes developed in 100 of the metropolitan parts of the US gone up in terms of the market price of more than 40% (Doling and Ronald 2014). Presently, for a newly constructed apartment, the median rent is over $1,300. This price is only affordable for half of the Americans, while the rest are left out.
(Source: Woo 2016)
From an economic point of view, the developers (especially the private ones) are driven by profitability (King, 2009). Targeting the affluent consumers is a guarantee for greater profits as opposed to targeting the homeless who are getting the houses at subsidized cost with the support from the government. It is also more profitable than targeting the young who lack the financial muscle to gain access to such costly apartments (Brueckner, Green, and Saggers 2011). Because of the cost of capital and labor, it sounds rational that the developers target the more affluent segment of the consumers. The decision is also informed by the regulatory fees that fail to provide incentive for the development of low-end houses. The regulatory fee is posited to have increased by about 30%, over the last half a decade, to more than $80,000 per home (Dwyer and Lassus 2015). At the same time, the regulatory setting has to agree with the housing industry, which does not generate sufficient housing to fulfill the demand.
High Building Cost
Groves, Murie, and Watson (2007) suggest the failure of the welfare state to provide sufficient housing for the Americans because of the cost involved in the construction of the housing units. The United States government has struggled with efforts to provide affordable housing for the homeless, but there is proof that this end has not been achieved (DeVerteuil, May, and von Mahs 2009). While the government has played a role in housing, the private sector is the leading stakeholder, which is the factor behind the increase in the cost of housing (Bhatti 2001). From the housing pathway model, the government can be involved as a de facto developer. With this being the sole role of the government, the private sector has continued to increase the cost, especially for the newly constructed houses. Hence, the idea of affordable housing has continued to be elusive in the case of the US.
Culhane (2008) has indicated that the private sector cannot succeed in dealing with the issue of homelessness. To some extent it has played a role in the problem by raising the cost of the houses developing in the country. The most in need in the society cannot be provided quality housing by targeting the private sector because of the social welfare perspective of addressing the problem (Fitzpatrick and Watts 2010). The developers have indicated that the properties do not pencil out (Golant 2003). Additionally, the private developers have asserted that the cost of constructing is greater than the capacity of the homeless can afford. The fundamental math challenge and its related solution are shown by the Top of Form
Bottom of Form
Urban Institute and National Housing Conference (Symonds, Schwartz, and Ferguson 2011) applying the models of housing from Denver.
The Housing Pathway Model and a Critique of Current Policy Actions
This chapter applies the housing pathways model in critiquing the state of the housing system in the US, including the efforts that have been adopted in search for a solution, the aspects that have worked and those that have not worked, with reasons. In theory and practice, major research has been carried out on policies created in dealing with the homelessness problem in the US (USICH, 2010). The extent to which the federal government has worked towards addressing the problem of homelessness is explored, together with their intended and unintended consequences in addressing the housing problem. Efforts toward resolving the issue has focused on the individual versus structural causes of the problem (Clapham, 2003). Establishing the reasons why some have worked while others have failed to resolve the problem.
Affordable housing is a policy that has been adopted in the United States since 1992 with the objective of providing housing at a subsidized cost for the homeless (USICH, 2010). While the needs of the homeless have been a part of the society for all those years, the demand has increased because of the continued growth in population (Kertesz and Weiner 2009). According to the Urban Institute, only 28 affordable units are accessible for every 100 families who live in rental homes. Majority of those residing in these homes have an income of or below 30% of regional median income. The renters are expected to be paying a hefty amount in rent and at the same time take on other expenses.
The housing pathway model, like it is used in other countries such as the UK can be applied to the analysis of the effective policies towards dealing with the homelessness problem. In some cases, the efforts to provide housing implemented by the government have been effective in addressing the challenge (Johnsen and Quilgars, 2009). Affordable housing has been the main housing model adopted in the US, and while in some cases it has been effective, there are circumstances in which it has failed to garner the expected results. The reason for failure is explained by Clapham (2003) as the emphasis on individual rather than structural factors. The model has been the basis for the provision of housing for median household income families.
The model has been positive in providing many Americans, with proper and affordable houses (Lang, Anacker, and Hornburg, 2008). The housing model has been implemented in the form of subsidies by the government to ensure that the Americans have access to homes in a more affordable manner (Bostic et al. 2012). Some of the constructed houses would be provided at a subsidized fee awarded to the mortgage firms to offer cheaper and more affordable housing solutions. Figure 4 below shows the number of people in the country under the federal program.
While the model was well-meaning, it has not been effective in addressing the housing challenge from the perspective of inadequate means for maintaining the houses, especially those given at no cost (MacGee, 2009). For the houses to have a long life, it would be necessary for maintenance to abound. Other costs like water and power have to be serviced regularly. Hence, lack of the financial resources to maintain the houses has led to the failure of the public housing system. The case of Denver is a good example of the environment within which the housing model is likely to work. The model was based on the need to create affordable housing for the residents. Housing fund loans and tax credits were advanced to meet the demands of the project. Like the case of Washington, there are no white-hot housing markets in Denver. However, compared to other states in the country, Denver has an improved construction of new housing.
The Denver market is also not extremely controlled, in terms of the regulatory environment. The housing market in Denver is the same as Charlotte or Minneapolis in terms of the regulations. In relation to the Denver case study, there is a critical question posed: “Why is it that the private market just can’t build housing at a cost people can afford?” (Renaud and Kim 2007, p. 3). For the vast population of the renter, approximately 30% earning local median income, it cannot be possible to build devoid of public support. In Denver, the model has been working because of the consideration of the cost of land acquisition, constructors’ payment, and acquiring of construction materials.
Ineffective Policies, with Reasons
Although well meaning, the federal housing model did not address the housing problem in the country. The public housing policy is a solution that has been tried but has not gained the anticipated effectiveness (Forrest and Yip 2011). The program has not worked in providing all the Americans with affordable housing, especially in some segments such as the homeless youth (Shelton et al., 2012). Using the United States model, it emerges that the construction cost for the new houses is too high to subsidize (Lang, Anacker, and Hornburg, 2008). Apart from the construction of the houses, they need to be maintained. The efforts adopted in the country for housing the homes and destitute Americans, have failed towards the end because of failure in their maintenance. The model has been criticized from the perspective of the homeless pathways (Clapham, 2003), basically, the failure to take into consideration the structural causes of homelessness.
There are different models which have been tried to solve the problem from a structural perspective of homelessness (Clapham, 2003). While well-intentioned the models have not worked on providing a solution to the homelessness problem. The issue would be solved with the potential for the Americans to uphold the cost of maintaining the high-cost houses. The government could subsidize the cost of buying the houses but the renters are not able to pay for their maintenance because of their limitation in income, especially given that some do not have income (Fitzpatrick and Watts, 2010). If the renters were in a position to utilize lower than 30% of their income to pay the rent and maintenance, the housing model would be effective (Aidala and Sumartojo 2007). Construction of affordable housing units for the homeless is the solution to the challenge, but the viability of the model is challenged by the requirement for the renters to pay a high cost for them (Libman, Fields and Saegert 2012). Hence, construction of affordable housing units does not deal with the challenge of housing for the homeless.
Closing the gap in the payment of the affordable houses while offering housing for the homeless can be attained through government subsidies is the model implemented in the country. Regardless of the expected results, the model has fallen short of achieving the projected outcome. It is indicated as the bottom line shows that “building affordable housing is truly a public-private partnership, and the private only takes you so far” (Katz and Turner 2007, p. 5). The reality is that the government subsidizes and places in the hands of the Americans houses that they are not economically endowed to maintain. The issue is the potential for the consumption of more public resources in addressing the homelessness problem by the government (Hall 2007). In fact, this approach would create a more serious social problem in the country.
It is important that the homeless in the United States need more housing, but it is not feasible to construct its way out of the problem. From the graph below, it is possible to slow the cost of housing by building more houses, but this is not the solution because of the maintenance cost implication. Also, it is not possible to have more space to continue building affordable houses (Kingsley, 2003). The available resources call for a solution that does not include aggressive building of more public housing.
(Source: Legislative Analyst’s Office 2015).
The Housing Pathway Model and Proposed Policies
United Kingdom. The United Kingdom has been used as the model for effective policy in addressing the homelessness problem, even though the model is not perfect. The UK government has been proactive in coming up with policies and programs to address the housing problem of homelessness. However, in the wake of globalization, there has been a novel trend where the role played by the government has been reducing, allowing more responsibility to the private developers (Clapham, 2002). Based on the globalization impact, the individual, as well as structural frameworks in addressing the housing problem, have been limiting, taking the case of the UK (Clapham, 2003). Nevertheless, by use of the housing pathway approach, it is achievable to identify the success in the housing policies,
Comparison and Lessons
Just like the United Kingdom, the US government has strived to provide public housing for the homeless in the country. However, the United States model is not on the same level as that of the United Kingdom (Toro, 2007). It is estimated that public housing in the United States is at less than 5%, with the majority of such housing units being concentrated in the major cities. In the country, public housing has been described as “the housing of last resort,” which indicates the low level of importance with which the public housing model is awarded in the United States. On the other hand, the United Kingdom public housing model is an important policy action assumed by the government to address the problem of homelessness (Shinn, 2007). In the UK, unlike the US, the public housing model is not considered a solution for the socially disadvantaged members of society.
The policymakers in the United States have important lessons that they can learn from the United Kingdom housing model. For success in providing housing for the homeless, it is critical to develop an understanding of the causes of homelessness, whether individual or structural. This should be followed by adequate planning based on the model that is best suited to the causal reality of the housing problem (Clapham, 2003). Borrowing from the experience of the United Kingdom, the United States could pick up the pathways to housing that have worked, such as merging the role of the government and the private sector to come up with the most effective solution to the problem. The United States can gain lessons from the UK model where the public housing system is meant for the working-class families, with a blend of ethnicities and incomes (Minnery and Greenhalgh, 2007). Following the United Kingdom model, the United States should seek solutions that bridge the gap between the haves and have nots in society.
The housing model has worked in the United Kingdom following the joint efforts from the government and the private sector. In the United Kingdom, there has been a realization of the role played by globalization and the impact the trend has on the housing sector (Clapham, 2002). In the wake of globalization, the housing sector cannot follow the traditional model and expect success (Laing, Knox, and Smith, 2013). Structured inequalities are a reality in the US society, just like the UK, but the current housing model in the US is not working in dealing with the issues. Hence, important lessons can be learned from the UK (Clapham, 2002; 2003).
Joint efforts between the government and the private sector will work better than the government alone in addressing the housing problem in the US. The focus should be on facilitating financing and the financial capacity of all the people in the country such that they are able to afford housing (Fitzpatrick and Pawson, 2011). Borrowing from the UK model, the United States government can provide funds for the homeless and other socially disadvantaged so that they are able to afford the houses provided by the private developers (Fitzpatrick and Johnsen, 2012). The United Kingdom housing model has revealed that the government does not have to be wholly engaged in the construction and providing housing to the people. In fact, the United Kingdom model has indicated that it is possible for the private sector to be involved in public housing.
The lessons from the United Kingdom housing model indicate the possibility of the United States to implement affordable housing policies for the benefits of the individuals and families whose socio-economic realities is not in line with the cost of housing in the country today (Edgar, Doherty, and Meert 2002). The most important lesson is based on the causal reality of housing problem, necessitating structural efforts to address it (Loomis, 2007). The lessons indicate the potential of diverging from the traditional affordable housing model, to one that is economically viable, even if it means involving the private developers in providing the solution. Thus, the government, working with other stakeholders, will provide the means for the people to access the housing units (Vergragt and Brown, 2012). To address the problem, the government should leave the house construction challenges to developers (including private developers) and then focus on providing the means to acquire the houses at the development cost.
From the housing pathways model, it is possible to come up with viable solutions to the problem following lessons from other countries. Among the countries from which the lessons can be obtained is Britain (Clapham, 2002; 2003). From the structural point of view of the housing problem, addressing the housing problem in the United States cannot be solved by targeting the housing sector alone. The pathway approach can be viewed as a “social constructionism, which is based on the tenet that people construct a social life through interaction” (Clapham, 2003, 122). From this point of view, the problem is not necessarily in the housing challenge, but in the fundamental reality of the challenge. Hence, the solution is not in maintaining houses that are economically challenging to sustain as the people are not paying the rent and not in constructing housing units that are low in quality in order for the occupants to pay less.
The problem of housing has not been solved based on reality that the focus is wrong. Focusing on the individual, rather than the structural factors is the basis for the failure in the adopted policy solutions (Clapham, 2003). Like other countries, including the United States, the problem of housing has been escalated by failure of government to participate in the housing programs, leaving the private developers to take care of building. However, due to the effect of globalization, the economic point of view is the most suited to dealing with the problem. From the perspective of the economics of housing model, increasing the supply of the houses will not be the solution (Clapham, 2002; Clapham 2003). In fact, increasing the supply will make the economic inequality worse and hurt the financial budget and the general economy.
The reality is that the property values are increasing and it is necessary for the changes to be made along the same path. Even as the publicly developed houses are being constructed to address the housing problem, it is necessary to ensure that the majority in society are not being left out (Gerardi, Foote, and Willen 2010). Failure of the government to participate in addressing the problem is the challenge that should be addressed, by enhancing their contribution to solving the challenge. The idea is to make sure that low-income earners are empowered to compete in the housing market, a solution that can be achieved by the government (Clapham, 2002). The reality is a need to raise the standards of living for all the Americans to ensure that they are well suited to access affordable housing for their families.
Conclusion and Targeted Recommendation
The United States is facing a real and serious housing problem. The slow growth in the housing sector, the increase in the cost of housing units, and the cost of construction are among the factors contributing to homelessness in the country. The policymakers have in the past designed affordable housing resolutions, but some have worked while others have failed. Using the housing pathway model and reading from the solutions adopted in the UK, there is potential for addressing the problem. The solution to the problem is an issue of prompt action to avoid an even worse crisis.
Based on the lessons borrowed from the UK, it is possible to gain positive results in dealing with the homelessness challenge. Given that the model of the affordable housing did not work, it is time for the country to implement more options. The government should leave the private developers to construct housing units at the market cost as they maintain the ones that are in place. The government will work towards giving the economic incentives to allow access of more housing for the destitute and the homeless. Economic endowment will allow for access to better housing.