We are learning more about the growing homelessness problem in the U.S. A recent study by The Pew Charitable Trusts looked at the rise in homelessness compared to rent data in a wide variety of American cities. What they found was that “homelessness is high in urban areas where rents are high, and homelessness rises when rents rise.” In fact, they saw a bigger connection in rent prices to homelessness than other, seemingly more influential factors, like drug abuse and population growth.
While this might not be a shocking discovery, I think it is another piece of a growing body of evidence that we need to incentivize the development of new housing. And we need the help now more than ever. Construction lending has seen some of the largest pullback from lenders as interest rates have risen. But who knows if there is any help on the horizon. The historic $370 billion Inflation Reduction Act has very little in it to address the housing crisis. Some of the only incentives that the IRA provides is “a 10 to 20 percentage points of additional tax credits on top of the Investment Tax Credit (ITC) for solar and wind projects below 5MW that are either meeting environmental justice criteria at the community scale or meeting income criteria at the customer household scale.”
Despite the lack of new government subsidies to spur the development we need to solve our growing homelessness problem, there has been a lot of investment from the private sector. Affordable housing is now part of the growing ESG conversation. Citigroup rightfully touted its $6 billion investment in affordable projects in its annual ESG report. If the property industry is not able to fight through the high cost of capital and often fierce local opposition to building more housing, the consequences could be big. For as little as governments want to fund the development of new buildings, they are just as keen to regulate the already built ones. Around 200 jurisdictions in the U.S. already have some form of rent control, and new laws are proposed every legislative session. We know more about the connection between housing and homelessness; now, we just have to find ways to build it.