Ten-year plan to end homelessness is stuck without affordable housing

by: TRIBUNE PHOTO: JAIME VALDEZ - Randy went from a six-figure salary to unemployed and  living at the Portland Rescue Mission the past seven weeks. Increasingly, Portland's homeless are working people caught in a bind.At the depths of the Great Recession a few years ago, nonprofit homeless agency Human Solutions was getting 200 to 300 calls a month from desperate families about to be evicted from their homes, unless someone could help pay their rent. This winter, the agency is getting 1,000 calls a month, and only has enough money to help 40 of those 1,000.

In addition, calls for family shelter have grown to unprecedented numbers this year, says Jean DeMaster, executive director of Human Solutions. About half the adults Human Solutions shelters on any night DeMaster classifies as people who never expected to be homeless — people like Rhonda.

Rhonda (not her real name) has a hard time thinking of herself as the face of homelessness in Portland. If you had asked her a few years ago what homeless people looked like, she would have said older men “looking for their next beer” or street kids.

Rhonda and her family, like others in the Portland area, are the new working poor, earning just enough to get by, but saddled by steep rents in a region that lacks low-rent housing, vulnerable in the face of the unexpected.

Rhonda is 28, married with a 2-year-old daughter. For most of her adult life she has had a job, mainly in the service industry. Most of the jobs paid $8 to $12 an hour.

Rhonda works for a debt collection agency. Her take-home pay is about $400 a week, or $1,600 a month. Her husband cares for their daughter at home.

The cheapest apartments Rhonda and her husband have been able to find are $700 or $800 a month, about half her monthly salary. Their last Portland apartment — which they realize was too much of a reach on Rhonda’s income — had two bedrooms and rented for $915 a month. After paying their medical bills, the couple had little left for food and none for an emergency. When their apartment became infested with insects, they left to temporarily live with family in California.

That led to Rhonda going two and a half months without work. It also meant that when she, her husband and daughter returned to Portland, they were homeless. Last week, the three of them were lucky to get into Human Solutions’ family shelter in Northeast Portland, which Rhonda must leave at 4:30 every morning to get to her job in Beaverton.

Misguided thinking

This wasn’t supposed to happen. Nine years ago the Portland Housing Bureau, along with other agencies, embarked on its ballyhooed Ten-Year Plan to End Homelessness. Unemployment has been dropping since the official end of the recession in 2009. Signs of new apartment building construction are everywhere. Yet homelessness in Portland is on the rise.

Housing officials and authorities such as DeMaster blame two converging trends. First is the economy, with the loss of living wage jobs for those on the lower rungs of the income ladder. Then there’s the lack of places to live for the growing number of people who, like Rhonda, make minimum wage or a little more.

About 100 years ago there were boarding houses, tenements and cheap single-resident occupancy hotels for the working poor. In recent years, very little housing that someone like Rhonda can afford has been built in Portland, despite a huge expenditure of taxpayer dollars.

Still, a number of economists, nationally and locally, say ending homelessness is possible, but not the way we’ve been going about it.

“I certainly think it’s feasible,” says University of Virginia economist Ed Olsen. “We already spend enough money to do it. We just don’t spend that money wisely.”

Economists like to think in terms of efficiency and incentives, and Olsen thinks the government incentives involved in getting low-income housing built ensure that the housing will cost more and fewer units will be constructed. Government funding comes with too many strings attached, say Olsen and others, from requirements that buildings be built green to extra regulations that force developers to pay exorbitant amounts to attorneys and accountants just to make sure they meet all the requirements.

Another piece of the puzzle, Olsen says, is that most money to build low-income housing comes from the federal government through local nonprofit agencies that don’t feel the pressure of efficiency that might result in more units per dollar. In the private sector, Olsen says, if an owner of rental housing can figure out how to provide equally good housing less expensively, he makes more money. If the director of a nonprofit figures out how to do the same, he doesn’t see the benefit. He doesn’t even know whether he has made good or bad decisions, Olsen says, because government money for public housing projects will continue to flow, and most tenants will remain in taxpayer-subsidized public housing because they have few low-rent options.

“It’s still a good deal for (nonprofit developers), even if a lot of money is wasted,” Olsen says.

Those government-funded housing projects will never be financially efficient, according to Olsen. So he would stop funding them and instead put the money into providing housing vouchers for homeless and very low-income people.

In a 2008 paper for the Brookings Institution, Olsen estimated that local governments across the nation spend about $50 billion a year on low-income housing programs. Put that money into vouchers, Olsen says, and 2.4 million more families would have a roof over their heads. Those families would choose the apartment building or complex at which they would use their vouchers, thus making suppliers of low-income housing competitive with one another. Olsen says that would even hold true in tight rental markets such as Portland.

Government-driven housing policies have long been subject to “iatrogenesis,” according to University of Portland economist Mark Meckler. “It’s when you create new problems and often bigger problems by trying to solve one problem,” Meckler says.

One example: nonprofit organizations that use federal money to build low-income housing use retention — how many who entered public housing remain there — as a measure of success.

Meckler says the policy fails to properly use incentives and rewards. He draws an analogy to orphanages of a bygone era. Historically, he says, orphanages received funding based on how many orphans they housed. But that provided an economic incentive for the orphanages to keep children as long as possible rather than work to find them adoptive or foster homes.

The same misguided thinking, Meckler says, pays physicians based on how many tests and treatments they perform, rather than on the health gains of patients.

“In systems, you step back and think really carefully about what are we hoping for and then look really carefully at what are we rewarding,” he says. “We’re hoping to get people off the street and move them on to be productive members of society. What we’re rewarding is them not moving out to be productive members of society.”

The wrong incentives

The worst examples of misguided incentives are developer’s fees, says Rob Justus, founder of nonprofit homeless agency JOIN, and now a private developer of low-income housing. When a private developer or a housing nonprofit uses taxpayer dollars to build low-income housing, they get a fee for their work that is usually 10 percent of the total cost of the project. A $50 million public housing project will include $5 million for the agency.

That 10 percent fee, Justus says, encourages developers to build bigger, more expensive public housing rather than work efficiently to save money for future housing projects. Justus says he has seen the corrupting influence of the developer’s fee first-hand.

“I’ve got executive directors (of nonprofit agencies) in town saying, ‘I’ve got to get my project up to $12 million because

I need $1.2 million to run my organization,’ ” Justus says. “Why we do what we do has been compromised.”

Human Solutions’ DeMaster says she would never take more public money just to raise the cost of a project and get a larger fee. “We bring the project down to as little as possible because the rest is going to be mortgage,” she says.

And DeMaster says increasing the supply of housing vouchers won’t solve homelessness for many unless the people with vouchers get other social services, such as job training, to help them become independent.

Noted Columbia University housing economist Brendan O’Flaherty says even homeless shelters send the wrong message by providing a kind of incentive to people living on the edge of poverty to become homeless. O’Flaherty would expand taxpayer subsidized rental insurance. Working poor people suffering a setback such as a lost job or an unexpected medical bill could be kept from becoming homeless if temporary rental insurance were widely distributed, O’Flaherty says.

Rental insurance is incentive-based, O’Flaherty says, if guaranteed up front. If landlords know there is public money ensuring the rents they get from low-income tenants, in a tight rental market they’ll be more willing to accept low-income tenants, he says.

O’Flaherty also would provide incentives for people to continue living with their families. Food stamp policies, he says, encourage people such as young adults to live on their own. He’d go much further, making government rental assistance and food stamps available for everybody who qualified on the basis of income, regardless of the state of city and federal budgets.

Homeowners all get to deduct their mortgage interest, he says, regardless of whether government coffers are full or empty. And firefighters don’t stop going on calls in October because the Fire Bureau budget for the year has been exhausted. But that’s pretty close to what happens with housing vouchers and rent assistance, and O’Flaherty thinks it’s a shortsighted policy.

But expanding housing vouchers or rent assistance would necessitate a city with many more low-rent apartments. And, according to economists, it would take a much more efficient use of public housing money to make those apartments a reality.

Portland Housing Bureau Director Traci Manning says there are about 10,000 units of taxpayer-funded subsidized housing operating in the city. About 12,000 more units of low-income housing need to be built if all of Portland’s low-income residents are going to be housed at a rent they can afford. But Manning says there are fewer than 300 new units in the pipeline. Building of low-income housing has come to a virtual halt.

Next week: New ideas for building low-income housing

Housing incentives: too harsh or too necessary?

As an economist focused on how incentives affect behaviors, the University of Portland's Mark Meckler thinks that housing policies at projects such as the Apartments at Bud Clark Commons lead to inefficiency in public spending. The price, Meckler says, is that fewer homeless people get the help they need.

The Commons apartments are part of a complex that was built with a $47 million taxpayer subsidy to house Portland's 130 homeless people most likely to die or be assaulted if left out on the street. A vulnerability test was used to determine which of the city's homeless qualified. Tenants are provided the apartments for life, rent-free. If they acquire income a percentage is taken for their rent.

Meckler says using a vulnerability index to decide housing makes sense, but only if one more criterion is added to the index — the likelihood that residents of the building will stabilize their lives and eventually move out to less subsidized housing, freeing the Bud Clark apartments for other residents.

“If you're going to spend this much money on this kind of building, where the city puts up only a limited amount of housing and we're not going to kick you out, then you should see a percentage of them transitioning out of that housing and moving on,” Meckler says.

After two and a half years of operation, only one tenant at Bud Clark Commons has earned income and three or four have moved out to less subsidized housing.

Nationally, money for public housing in the past decade has been driven by Housing First policies, which demand that housing be virtually unconditional and without deadlines that require tenants to move to less subsidized housing.

Meckler says simply hoping that tenants decide to get help rather than making conditions after an initial period of stabilization doesn't make sense. “Look at the system, who is getting rewarded here?” he asks.

In the housing community, the idea of making demands as a condition of housing is considered out of date, says Eric Bauer, executive director of the Portland Rescue Mission. Bauer says he's very much considered an outsider among housing officials in Portland, despite the fact that his Christianity-based mission provides about 65,000 nights of shelters and addiction services to thousands each year.

Housing First was intended to serve the chronically homeless, Bauer says, but he estimates that defines only about 15 percent of Portland's homeless. The majority, he says, will react positively to incentives, including making housing for addicts available on the condition that they at least work on the problems that contribute to their homelessness.

In Bauer's view, a policy making housing for the homeless conditional isn't lacking compassion. In fact, he believes in the opposite. “It's unkind to disincentivize for people who are capable,” he says.

Jean DeMaster, executive director of nonprofit Human Solutions, the agency primarily responsible for housing eastside homeless families, takes a similar view. Able to help only a small fraction of the families that request rental assistance, Human Solutions pays the rent for homeless families for between five and nine months. After that, parents are required to show they are making an effort to get the help they need to hold steady jobs and pay their own rent. If they don't, DeMaster says, Human Solutions stops its assistance. About three out of four families in the program eventually manage to start paying their own rent.

But most of those families aren't among the chronically homeless, beset by a number of conditions that might keep them from ever achieving independence. For the chronically homeless, Meckler says, housing officials could come up with decent, but much less expensive alternatives than $253,000 per unit, which was the price of the 130 apartments at Bud Clark Commons.

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