The Region

Observations on Public Policy: The Case of Homelessness

Guest Editorial: Minneapolis Fed Vice President and Advisor Preston Miller reflects on homelessness and offers some important considerations and relevant facts about this significant issue.

Preston J. Miller - Former Vice President and Monetary Adviser

Published September 1, 2001  |  September 2001 issue

Editor's note: As readers of The Region know, the Minneapolis Fed places a premium on economic literacy, the benefits of which include a better understanding of policy issues and the choices that societies must make. This guest editorial presents questions relating to homelessness, and while the Minneapolis Fed has no particular stake in this issue, we believe this discussion presents a useful framework for thinking about this problem and, by extension, about other policy issues that are informed by economic reasoning.


It has always seemed unconscionable to me that in a society as prosperous as ours, people should go homeless. My impression from stories in the media was that there are hordes of people in the United States wandering in the bitter elements, the picture we see so often in Third World countries. That such a serious problem could persist on such a grand scale not only offended my personal sensibilities, but also seemed to constitute a major failing of our free-market economic system.

However, before proposing remedies for any problem, I have learned one must first understand its dimensions and the nature of the policy issues involved. It turns out that my initial impression about homelessness is wrong. Upon some reading and investigation, I find that being homeless in the United States does not mean being without shelter, that a relatively modest number of people are homeless at any point in time and, that while many of the homeless are in serious need of help, homelessness is not their root problem. My purpose here is neither to make light of the problem nor to argue that we can do a better job of addressing it; my purpose is merely to inform, so that others can make better decisions about the issue.

Doubts about my understanding of the homelessness problem arose during the winter of 1999-2000. I was living at that time in the Washington, D.C., metropolitan area. By some accounts, the district experiences the highest rate of homelessness in the United States. There were some very cold days that winter; yet, no one was dying from the elements. One day the newspapers did report that a man had died by freezing, and they assumed that the man was homeless. It would have been the first time since 1996 that a homeless person had died in the district from freezing. However, the police discovered that the man lived in a house within a few blocks of where he was found. Simple logic suggested that if it was possible to die from freezing, but the homeless were not dying in that way, then the homeless must have shelter.

That conclusion was reinforced by other observations. As my wife and I walked our dog along back streets into Old Town Alexandria, Va., we would pass a nice, fairly new public building that was in part a shelter. I later learned that people who stayed in such shelters, public or private, are counted officially as "homeless." According to informed estimates, a majority of the homeless live in such shelters. In Washington, D.C., it is estimated that less than 10 percent of the homeless are out on the streets. So, although society has addressed the problem of homelessness in part by provision of public and charity-financed shelters, the recipients of the assistance are still termed "homeless."

However, another observation suggests that many of the homeless do not wish to stay at shelters. It is commonly reported that the shelters become very crowded in extremely cold weather. One explanation for this observation is that a significant number of homeless would rather sleep in boxcars, abandoned buildings or other unheated places than in shelters. Then, when it gets very cold, they are forced to go to them for the heat.

To me, these conclusions, taken together, change the nature of one homelessness policy issue: It is no longer whether we need to make more shelter available; it is whether we need to improve the quality of the shelter that we are providing.

In addition to thinking about the nature of homelessness, I wondered about its extent. According to the 1990 census, there were well under 300,000 homeless on any given night. However, critics claimed the number was closer to 600,000. Based on an Urban Institute study, experts in the 1990s were taking the number of homeless on any given night to be in the range of 500,000 to 600,000. Prodded by criticism of the 1990 census survey methods, the Census Bureau made a concerted effort in 2000 to count as many of the homeless as it practically could. Nevertheless, the survey again tallied under 300,000 who could be considered homeless. So, if we take 300,000 to 600,000 as the likely range of homeless people on any given night, that is just 0.1 percent to 0. 2 percent of the civilian population. To put the number of homeless into perspective, in May 2001, a month with a historically low unemployment rate, there still were 10 to 20 times more people unemployed than homeless.

Even these relatively modest numbers overstate the homelessness problem for at least two reasons. One reason is that these numbers refer to individuals—not families. For example, a family of four could be housed in a single unit, yet the family would count as four homeless persons. Surely, since the homeless include children, there are fewer homeless families than homeless people. Thus, if society chose to house the homeless, it would not be necessary to provide as many homes as the number of homeless.

Another reason why the homelessness figures overstate the problem is that they do not distinguish between those who have short spells of homelessness from those who experience long spells, and it seems like the major social concern is with the latter group. An analogy with unemployment may be helpful. The unemployment rate is a snapshot of a constantly changing labor market. At any point in time, some individuals leave jobs and others take jobs. Unemployment in any month includes some people in transition from one job to the next. The main concern of society is with the people who have been without jobs for long spells. In May 2001, only 10 percent of the unemployed were without jobs for over half a year, which means the long-term unemployed were just 0.5 percent of the civilian labor force. Similarly, there is good reason to believe that many counted as homeless are without homes for short spells. They could be between jobs, placed in a shelter until authorities find them more permanent residence or out of a home due to some other temporary reason. For the temporary homeless, shelters may be an adequate form of assistance. For the longer-term homeless, more permanent shelter may be appropriate.

Of course, one can argue that one homeless person is one too many. So, a policy issue for local authorities is whether there are actions they could take to improve the functioning of housing markets that would make more low-cost housing available. Studies suggest that by reducing the cost of housing at the lower end, the number of homeless can also be reduced to some degree.

Although for the most part shelters are available for the homeless and relatively modest numbers are involved, the problem for a significant share of the long-term homeless is serious and difficult. But calling the problem "homelessness" is something of a misnomer. These new perspectives were driven home by the events in the winter of 2000-2001 in Washington, D.C. In that one winter five homeless people froze to death. All of the deceased shared some traits: They were all alcoholics, all had mental problems, all had been coaxed to get shelter and, although shelter was available, they chose not to take advantage of it. Two were Central American immigrants who were traumatized by war and were fearful of institutions. They both died within two to three blocks of a shelter that targeted homeless Latinos and had about 30 vacancies at the time. Two others had physical disabilities and were too embarrassed to enter a group facility. The fifth died in an unheated garage in one of the wealthiest sections of DC

These tragic cases illustrate how difficult the problem of homelessness is to remedy for some of the long-term homeless. The fifth case makes clear that the simple solution of more money is not adequate. The fifth of the deceased received $5,000 to $10,000 when his guardian died. He used the money to buy more liquor, and that led to his rapid decline. But if money is not the solution, what is? How do we treat, assist and shelter people who resist or refuse aid? When should the freedom of individuals to choose their style of life be abrogated and replaced with forced commitment in order to save their lives? These are tough issues.

The homelessness problems I identify are significant. Nevertheless, they should not be considered evidence of failure of our free-market system. They also are problems faced in every society, no matter what their economic systems.

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