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America’s Desperate Housing Crisis

The homeless crisis hits a tipping point in Reagan’s America


A makeshift tent serves as home for three homeless men in Washington, D.C. in 1988.


The suburb of Reston, Virginia, is like a sylvan jewel on the American landscape — an idyllic, tree-shaded town far from the grime and congestion of this city. Designed and built as a model community for the nation, Reston has everything that most Americans would want for their home. And now Reston also has homeless Americans.

The new community shelter for the homeless sits next to the library, and like almost everything in Reston, it is handsome — a buff-brick building with clean, well-lighted rooms and a congenial staff. The other night when I dropped by, they were serving birthday cake in the lounge in honor of Vicky, a large black woman in a yellow sweater. A volunteer from the community was giving haircuts.

Snacks are served every evening. A full staff of counselors helps the “clients” with everything from mental-health and drug problems to finding jobs and permanent housing. There is a well-stocked library and a playroom for kids. On that particular night, twenty-one of the sixty beds were occupied by children. Since it opened nine months ago, Reston’s shelter has turned away more than 1000 homeless people.

“When I first came here, I thought this place was like a country club,” said Dan Baker, a thirty-six-year-old white man. “I was in this other shelter with twenty-five men in a single room. It was a real rumpus all the time.”

Baker and his wife, living on disability checks and occasional odd jobs, lost their apartment in nearby Arlington last May. “I can remember when rent was $175 a month,” he said. “Now it’s close to $600.” When his wife had to go into the hospital, Baker fell behind. For a while they scrounged cash donations from churches and other charities. Then they were evicted.

Jamie D. West, a young black man nursing an injured hand, had come to the shelter a few days earlier. “I had a job at a service station, and most of the time I was living in my van,” he said. “Then the van was totaled last Friday. When I got out of the hospital, I had no place to go, no transportation. A friend got me in here.”

Finding another job was easy. The northern-Virginia suburbs are booming, and West signed on to dig ditches for a cable-TV company. But finding a place to live had not been easy. “I just trust to God that something good will happen,” said West, whose dazed look suggested a future that was utterly blank.

While we chatted, other residents and staff members gathered around to coo over Candace, a two-month-old “shelter baby.” Her proud mother, an attractive young white woman in sweater and jeans, was already living in the shelter before she went to the hospital for delivery. She came back a few days later with her new baby. “We saved the bed,” a staff aide said, “so they’d have a place to stay.

The homeless of Reston, in other words, are not quite like the “street people” who sleep on heating grates in downtown Washington. Many of those in Reston, black and white, do have mental-health, alcohol or drug problems. But many also have regular jobs or, at least, reliable incomes from welfare and social security. Their trouble is they can’t afford a place to live.

“We’re seeing large numbers of people who lose their housing because they can’t keep up with the rent,” said Jana Graves, a shelter official. “They may be working, even two jobs, making $10,000 to $12,000 a year, and something happens — an illness or they lose a job — and they end up in the shelter.”

Fairfax County, where Reston is located, is one of the most affluent places in America, a suburban retreat where lawyers and bureaucrats have moved to get away from the ugly disorders and poverty of Washington’s inner city. The perverse joke is that wretchedness has now washed up on their doorstep, too (though the citizens of Reston, unlike many places, are responding as humanely as possible). In fact, the suburban homeless in Fairfax County are merely one more vivid example of a much larger housing crisis that has spread to nearly every section of America. Rich or poor, there’s no hiding from it.

As apartment rents and the prices of new houses soar, it is not only poor people who get squeezed out but also middle-income men and women, some of whom perform essential services for the community. They can no longer afford to live where they work. Some double up in overcrowded housing. In Fairfax County, authorities recently discovered a two-bedroom apartment where sixteen people were living. Others simply have to move away and become reverse commuters — while Fairfax County becomes increasingly an enclave for the most affluent.

“Our policemen, our firemen, our schoolteachers, are forced to live an hour out of town,” says Dwight Shar, a local home builder. “That changes the character of the community.”

Shar is chairman of NVRyan, a company that builds about 9000 homes a year nationwide, and he is heartsick about what’s happened to housing in Fairfax. “It’s a simple case of supply and demand,” he says. “You have a limited supply, and that drives up the price.”

As a builder, Shar believes not only that decent housing and homeownership are integral to the American dream but also that they ultimately influence the character of the nation. “For all of us, whatever we are born into fashions our self-confidence and allows us to go out in the world and achieve things,” he says. “When people are in hopeless circumstances — sixteen people living in two rooms, the homeless — they can’t ever be the same.”

The housing crisis is a perfect mirror of the twisted values that have dominated the Reagan era in the 1980s — abundance, even fabulous extravagance, at the top while shortages and desperation accumulate down below. Even relatively prosperous middle-class families feel the pressure when their sons and daughters graduate from college and move back in with Mom and Dad because they can’t find an affordable apartment. A few years later, when these young people try to buy their first home, they will confront the squeeze again.

In fact, the stunning development of this decade is that for the first time since the Great Depression, homeownership is declining, especially among the young. Since 1981, the proportion of Americans who are able to afford their own homes — traditionally the central element of the middle-class American dream — has been shrinking. Among householders twenty-five to thirty-nine years old, the decline is more than seven percent, but homeownership has even decreased among the middle-aged (up to fifty-five years of age).

Simultaneously, there has been an explosion of homelessness. Virtually every city in America — and now many suburbs and towns, too — has become a stage for grim scenes out of a Dickens novel: benighted human forms huddled in doorways, ragged outcasts who live out in the streets without shelter while glittering prosperity walks past them on the sidewalk. Nobody knows the exact number, but there are now perhaps 2.5 million Americans with no place to live.

Originally, the homeless were mostly former patients of mental hospitals or hopeless alcoholics and drug addicts. It was easy for average citizens — and the Reagan administration — to dismiss them as aberrational. Now these tragic people have been joined on the streets and in shelters by a new group of homeless Americans that is harder to rationalize away: families with children, even men and women who are working at regular jobs. Typically, these are people already living on the edge — low-wage laborers or welfare families. When something happens to interrupt their meager incomes, even briefly, they wind up on the street.

What needs to be understood is that these victims — whether young middle-class families or the dispossessed poor — have been caught up by the same economic forces. In the simplest terms, America has not constructed enough new housing in this decade. Not enough new houses have been built to serve the large bulge of middle-class baby-boom families entering the market, and when scarcity develops above, people on the bottom eventually get pushed out onto the street. To compound the shortages, the Reagan administration stopped building federally subsidized housing for low-income families.

The housing market has always functioned as a classic “trickle down” economy: when young people buy a new house, they typically vacate a rental apartment, which gets filled by someone else moving up from a less expensive rental. Thus the vacancies created by building new middle-class houses move downward tier by tier to the bottom of the housing market — the cheapest rentals in the least desirable neighborhoods, where the poor must dwell. If young working couples can’t afford to move up to what builders call “starter homes,” then rental vacancies grow scarce all the way down the line. And scarce supply drives up rents, even for the shoddiest buildings in the worst parts of town.

This squeeze has been under way since 1981 for many reasons, but the single most important cause is high interest rates combined with stagnant or declining wages. As a result, millions of young families have simply been priced out of the market for new houses. Even today the real cost of financing a home — the nominal mortgage-interest rate minus the rate of inflation — is many times higher than it was in the late 1970s, when homeownership was still expanding. Meanwhile, as everyone knows by now, incomes at the top have been increasing outrageously — but for blue-collar and clerical workers and millions of young people just starting out, wages have been flat or falling in real terms.

Home builders are gregarious, optimistic characters who love to build houses regardless of size and price — but they are not fools. As the economic consequences of the Reagan era took hold, home builders naturally turned to the high end of the market, where the money was. They cut back on building moderately priced starter homes for the young and concentrated on pricey condos and suburban minimansions and even second-home vacation properties for those who could afford them. Kent Colton, executive vice-president of the National Association of Home Builders (NAHB), estimates that two-thirds of the new houses now built are for the upscale market of people “buying up,” while production of starter homes has shrunk by nearly half.

At the bottom of the housing market, the consequences have been quite vicious. First, as poverty has increased in the 1980s, the pool of people competing for the cheapest housing has grown much larger. Second, the supply of low-income housing has been shrinking, as old buildings have become uninhabitable or as they have become gentrified, converted to housing for the upper middle class. Meanwhile, the federal government has decided that subsidizing low-income housing intrudes on what the Gipper calls “the magic of the marketplace.” But what’s happening to low-wage working people has nothing to do with magic — it is the logical consequence of Reagan’s policies.

In a recent report on housing trends, the Harvard Joint Center for Housing Studies said it was understandable that “rents are increasing fastest at the low end of the market.” The number of households with real incomes of less than $5000 increased by fifty-five percent from 1974 to 1986 while the number of low-rent units decreased by more than 1 million. Landlords can keep raising rents while wages stagnate. Not surprisingly, these poorest working families must therefore spend a larger share of their income on rent — as high as fifty-six percent — according to another study by the Urban Institute.

But there is one more cruel element in this paradox of poverty and plenty: America is also awash in surplus housing, millions of unsold homes and vacant apartments. According to the Harvard study, rental vacancies have increased from 1.5 million to 2.7 million units in the 1980s. But, of course, there is a catch: this is housing for the affluent, not the middle class and certainly not the poor. The Harvard study estimates that ninety percent of these new vacancies are at the high end of the market.

Furthermore, economic collapses in the Midwest and Southwest have left tens of thousands of houses vacant in cities like Houston, where mortgages were foreclosed on a massive scale. These are comfortable and sometimes luxurious suburban homes that now sit empty — many owned by the federal government, which guaranteed the original mortgages.

Of course, it is not possible to transport houses from depressed Houston to booming Fairfax County, where housing is so scarce. But if the federal government cared, it could knock down the price and sell its bloated stock of housing to people who desperately need it. Houston, after all, had its homeless problem long before Reston.

For several reasons, the housing crisis is likely to get worse in the next few years. For one thing, with the Federal Reserve raising interest rates again, housing construction is already in a slump — down to 1.4 million new starts this year. The Urban Institute estimates that the nation should be building at least 1.9 million new housing units this year to keep up with the need. So that’s another 500,000 would-be home buyers competing for an inadequate supply and driving rents up further.

In addition, since the 1986 tax reforms eliminated tax incentives for developers, construction of new apartment buildings has fallen by at least half. As a result, NAHB officials estimate that rents will climb twenty-five percent in the next few years while vacancy rates remain at a record high.

The solution to the housing crisis is obvious — America has to devote more energy and capital to building housing. The prescriptions have been laid out in many recent reports: renew federal spending for low-income housing; reform local zoning laws to spur housing for people of modest means; lower interest rates; introduce new tax incentives for low-income housing and tax breaks for low-income families.

Ultimately, the solution will require a significant change in public values from the “me first” ethic of the Reagan era. The housing crisis will truly not be solved until Americans become sickened by the spectacle of homelessness and by the disintegration of the American dream of homeownership. There is no magic needed to build enough decent housing for everyone. Builders know how to do it. Now angry and embarrassed citizens will have to demand it.

In This Article: Coverwall, homeless


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