Housing: Examining a Media Myth

Was this the early warning of a national problem? Around the time of the Tent City story, newspapers and newscasts carried reports claiming not only that homelessness was increasing at an ominous rate but also that it was reaching into the middle class. The Los Angeles Times, for example, warned that "the 'new homeless' are vastly different from those who have populated the nation's skid rows and tenderloins for the last half-century." The Boston Globe spoke of the "contemporary homeless," who embodied a "radical change" from the past.

The New York Times referred to the "new poor"; USA Today to a "new breed" of homeless people. A Washington Post headline declared, "Middle Class: New Victims of Homelessness." These and other stories seemed to suggest that uncountable numbers of once-prosperous people would soon be wandering the streets. The beginnings of the nation's economic recovery may explain why this has not happened, but there is evidence that it was never likely to, even in the early winter of 1983, one of the gloomiest periods of the recession.

Homelessness in this most affluent of countries is an undeniable reality. Estimates of the number of people left homeless range from half a million to 2 million nationwide; there are no exact figures, because those who lack mailing addresses cannot be accurately counted. In New York City, it is estimated that 50,000 people are homeless, and there are only 4,500 shelter beds available to serve them; in Chicago, the estimate is 20,000, and there are only 1,000 shelter beds; in Phoenix, it is 3,000, and the city has no shelter beds at all. The Salvation Army, which generally comes to mind as the institution most concerned about the homeless, has a total of 28,376 shelter beds nationwide--obviously a scant number in comparison with the country's need.

In the late fall of 1982 and the winter of 1983, the demand for these scarce facilities rose at a dramatic rate--in part, no one doubts, because of the economy. In Seattle, the emergency-housing department reported a 50 percent increase over 1981 in the demand for shelter, and was turning hundreds away; in Boston, at least 200 people a night were sleeping on the floor of the city's biggest shelter because all the beds were taken. Shelters across the country experienced similar overflows. Yet, although the majority of the news reports about homelessness mentioned these problems, it was the "new homeless" angle--the idea that middle-class families were being tossed onto the street--that captured the most attention. And it is in this emphasis that the reports turn out to be, by and large, mistaken.

The alarms about middle-class homelessness tended to be based chiefly on statistics compiled by the Mortgage Bankers Association of America, the national trade group of mortgage lenders. The MBA's statistics, considered superior to those of any government-compiled source, are drawn from a quarterly survey of banks that together hold some 8 million home loans, or roughly a third of the total 27 million such loans that are institutionally written. Mortgage holders are at the core of the middle class. They have mustered enough economic success to handle the payments on their houses, but not enough to buy the houses outright; many live at the edge of their loans.

Through 1982, the MBA's delinquency rate--the percentage of homeowners behind in their mortgage payments--rose. So, too, did a much more fearsome statistic: the "foreclosure inventory"--the percentage of home loans on which a formal foreclosure action has been taken. The foreclosure inventory in 1982 was the highest since the Depression.

Clearly, many people last year were having problems with their mortgages. But did the MBA's statistics necessarily portend a dramatic increase in homelessness? Though the delinquency rate did worsen, it rose by only a fraction of a percentage point, from 6.35 percent at the beginning of 1982 to 5.70 percent at the end. Moreover, inspection of the MBA's records shows that delinquency has risen frequently since 1960; for example, at the start of that year the rate was 2.22 percent, and at the end 2.66 percent. The population has grown by 26 percent since 1960, but over the same period homeownership expanded by 68 percent; it is not surprising that people who have trouble affording a mortgage should have been included in the growing population of buyers. Nevertheless, the actual foreclosure statistics are not particularly frightening. Although this rate was, in truth, higher at the end of 1982 than at any other time since the Depression, it was only 0.67 percent, or one in 150 houses. At the beginning of 1982, the rate was 0.53 percent. In other words, the perception of a trend toward a new class of homeless people was based on an overall shift of 0.14 percent. Foreclosure inventories, like delinquency rates, have been rising since the 1960s, and they have been high in several years that were not considered to be periods of economic emergency. In 1964, for example, the foreclosure inventory was 0.41 percent; in 1972, it was 0.52 percent.

Of course, if you torture statistics, they will confess to anything. Stated as "0.67 percent," or "one house in 150," last year's foreclosure rate does not appear to warrant much concern. But stated as 180,900 threatened households (0.67 percent of 27 million mortgages), the rate seems dangerous. To put these figures in perspective, it is necessary to know more.

Few news stories mentioned that the MBA's mortgage survey is slanted toward government-backed Federal Home Administration and Veterans' Administration loans. Because FHA loans can be obtained with a small down payment, and VA loans with no down payment at all, they traditionally suffer higher delinquency and foreclosure rates than bank-backed, conventional mortgages. The MBA's foreclosure inventory on these conventional loans, which make up the bulk of the country's mortgages, was 0.27 in the first quarter of 1982 and 0.39 in the last.

Then, too, few stories mentioned that there are more houses in the U.S. without formal mortgages than with them. The 27 million outstanding mortgages cover not quite half of the 60 million single-family houses counted by the Bureau of the Census in 1981. Millions of houses are owned outright; their residents are in no immediate danger of being displaced. Also, millions of houses are financed informally by sellers; according to housing experts, sellers are far less likely than banks to attempt to foreclose on loans.

Most important, few stories mentioned that foreclosures are not the same as evictions. The MBA speaks of a foreclosure "inventory" because houses whose mortgages are in foreclosure may remain in financial or legal snarls for years, during which time their owners continue in residence. Once the foreclosure starts, the owner might stall until his or her financial circumstances improve, re-finance the outstanding debt, or voluntarily sell the house to recover the investment. Unfortunately, there is no national statistic on the relationship between foreclosure and home loss, nor is there any national statistic on evictions. But Thomas Harter, the MBA's chief economist, says that his studies indicate that only between 30 and 50 percent of all foreclosures begun are ever seen through. When the real-estate market is slack, bankers are more likely to let the owners of houses in foreclosure remain where they are, in hopes that the bank will eventually receive some payment, than to throw them out and risk getting nothing because no buyer can be found.

Of course, someone who voluntarily sells a house to escape foreclosure is still losing it, and is surely suffering a loss in standard of living; the owner may even be starting on the downward spiral toward homelessness, but that fate is still some way off. Because the much-cited foreclosure inventory does not necessarily reflect home loss, some feel that a better measure of the condition of the middle class is the MBA statistic for foreclosures that are beginning. This figure, however, would not have served the "new homeless" analysis, because it hardly moved in 1982; it was 0.20 percent in the first quarter and 0.22 percent in the last. In fact, the rate of new foreclosures was higher during the recession of 1973 and 1974, when it hovered at between 0.24 percent and 0.25 percent, than it was in 1982. This year, the rate is averaging 0.20 percent.

Given the imprecision of the delinquency and foreclosure statistics, were there other ways to determine whether or not the "new breed" story was correct? Probably. One might have been the housing-vacancy rate. If middle-class people were, in fact, being driven to the streets in unusual numbers last year, apartments and houses should have been becoming vacant at a rapid rate. Vacancy statistics, however, do not show this. According to the housing division of the Bureau of the Census, home vacancy at the beginning of 1982 was 1.4 percent, and at the end it was 1.6 percent. Rental vacancies, likewise, changed little, beginning the year at 6.3 percent and increasing only to 6.5 percent by the last quarter. In many cities where homelessness was said to be a special problem, vacancy rates were even lower: less than one percent for all dwellings in New York City, and slightly under 2 percent in Baltimore (where the estimate of homeless people runs as high as 8,000) and in Salt Lake City (with an estimate of 1,000 people homeless).

Various surveys conducted by emergency-service agencies in the fall of 1982 provide no evidence of a surge in the numbers of middle-class homeless people. New York City's Human Resources Administration surveyed 681 new arrivals at city shelters. Of this group, only 11.7 percent came because they had been evicted by a landlord, and no one had been evicted as a result of foreclosure. The Greater Baltimore Shelter Network found that 3.6 percent of the city's homeless were arriving because of court-ordered eviction from a house or rental apartment. The District of Columbia's Department of Human Services found that only 10 percent of the people in shelters were neither drawing payments from the federal Aid to Families with Dependent Children program (the welfare source most closely associated with painful need) nor eligible for them.

A hearing held last December by the housing subcommittee of the House Banking Committee, which has jurisdiction over federal housing law helped to catalyze the profusion of "new homeless" stories. This was the first congressional hearing on homelessness since the Depression year of 1933; thus it served as an obvious (and legitimate) news hook. The subcommittee presented as witnesses six homeless people, all from middle-class or near-middle-class backgrounds. Their testimony, eloquent and desperate, would have touched the hardest hearts. It became the centerpiece of many of the stories that played up middle-class home loss.

Through the course of the hearing, the subcommittee also listened to forty-five expert witnesses--shelter operators, local housing officials, mayors, Salvation Army officers, community volunteers--all of them sympathetic to the plight of the homeless. Yet only one of these witnesses professed to believe that middle-class homelessness was a severe problem, and only a handful so much as mentioned the subject. Most spoke mainly of the expansion of homelessness among its traditional victims: the uneducated, the mentally ill, poor people who have never known wealth. The six homeless people who testified before the subcommittee about their plight were found and persuaded to appear by Mitch Snyder, a member of Washington's Community for Creative Non-Violence, a volunteer group that seeks to care for the dispossessed. Snyder says that he chose those six witnesses precisely because they were not typical of the homeless--because, owing to their backgrounds, they were willing and able to express themselves before Congress. But in the subsequent press reports, they were treated as typical. "The middle-class factor was the most attractive media angle, and everybody picked up on it," a congressional aide instrumental to the hearing says.

In late winter, as temperatures fell and concern for the homeless increased, Congress appropriated $100 million in emergency aid, and the White House announced a new program: it would offer vacant federal buildings as temporary shelters. This announcement was a page-one story nationwide. Soon the Pentagon listed 565 buildings, most of them Army Reserve facilities in downtown areas, that cities could have largely for the asking. Exactly three of the 565 buildings were put into use. The federal Department of Housing and Urban Development offered 900 structures, and only three of these were taken. "Most of the cities told us they either didn't have a problem or didn't want to deal with it," Gerald Kauvar, the director of the Pentagon shelter effort, says. Once the weather turned warm, and the economy seemed to improve, the reports about a homeless wave from the suburbs ceased.

Though the middle class may not be in special jeopardy regarding a place to live, and though available shelters may be sitting idle, neither fact ought to suggest that homelessness is not an intolerable problem. It is. But to help the homeless, it is necessary to understand who they are.

Many, of course, are victims of unemployment, though at the bottom of the job ladder, not on its middle rungs. Most studies show that the fastest-growing categories of new arrivals at city shelters are the young and women--groups that have the hardest time finding jobs in a contracting economy. For the young of all races and both sexes, the situation is particularly poignant. Many are going straight from childhood to street life, with no hope of a job, much less of a home to lose.

Other homeless people are victims of government neglect and social-service cutbacks (and some of the cutbacks, it turns out, are as likely to be sponsored by liberals as by conservatives). Over the past two decades, many believe, more needy people have been left to wander the streets as a result of the "deinstitutionalization" of patients in state mental hospitals than for any other single reason. In 1955, 569,000 patients were cared for in state-run mental hospitals nationwide. By 1979, the total had fallen to 146,000. Since 1963, the Veterans Administration has cut back on its housing of mental patients by 59 percent, to 24,000 patients as of 1980.

Needless to say, the conditions in most state mental hospitals have long been dismal. It was in reaction to their bleakness that liberal politicians and legal foundations began to demand, via legislation and lawsuits, that the "warehousing" of indigent mental patients end and that the nonviolent mentally ill be released. In this demand, liberals found conservative allies, who favored the emptying of state hospitals as a way of reducing government expenses. But while "freedom" has been won for the mentally ill, it is often only the freedom to shiver on the street.

"It is generally accepted that at least a third of the people now in city shelters have extensive histories of psychiatric hospitalization," Kim Hopper, a researcher for the National Coalition for the Homeless, told the congressional subcommittee. The chronically mentally ill have little hope of employment; many have slight awareness of what is going on around them, or even the capacity to take their medication, assuming some agency has managed to keep track of them to supply it.

Finally, many of the homeless are victims not of the recession but of prosperity. They are outcasts of the urban rebirths of the 1970s, the former residents of rooming houses, or, as they are called by social workers, "single-room-occupancy" (SRO) hotels. When cities began to seek ways to attract the booming travel and convention industries, they needed space for large new hotels and convention centers. The developers naturally looked for whatever low-value property was obtainable, and that was often an SRO. As a result, in the past decade San Francisco has lost 10,000 residential hotel units to urban renewal; New York has lost 31,000; the number of SRO hotels in Denver dropped from forty-five in 1976 to seventeen today. When SROs are demolished, their residents--who can barely afford to live in them as it is- have no place to go. As an economic proposition, urban redevelopment makes sense, but, like many sensible economic propositions, it exacts a social cost.

Community activists are finding themselves painted into a corner, obliged by their consciences to oppose job-enhancing developments and to favor the preservation of seedy flophouses. Groups in Portland, Oregon, for instance, have fought valiantly against development of the city's run-down Burnside district, a haven for alcoholics and panhandlers. The desire to PRESERVE a place like Burnside is nonsensical unless the interests of the potentially homeless are taken into account.

Several federal programs to improve SROs and similar poverty-line dwellings exist, but the renovations are extremely expensive, considering what they achieve. The Department of Housing and Urban Development funds projects, but also demands that all HUD-sponsored work be done to its specifications, which are generous in intent but restrictive in effect. HUD typically requires that rehabilitation be "substantial"--that each new unit have a separate kitchen and bathroom, and other features to bring it near to a middle-class standard. The regulations also specify that all federally sponsored work be done in accord with the Davis-Bacon Act, which generally stipulates that construction workers be paid at the top of union wage scales. As a result, HUD-sponsored rehabilitations cost between $50,000 and $100,000 per unit, while privately administered projects cost about one tenth as much. HUD recently underwrote the renovation of an SRO in San Francisco, the Padre Hotel, at a cost of $80,000 per unit. In the process of meeting HUD codes, the number of units in the building was reduced from a hundred to forty-one, diminishing the poverty level housing stock by fifty-nine in the act of preserving it. Another SRO hotel, the Aarti, in the same neighborhood of San Francisco, was improved without federal funds. The Aarti's renovation cost per unit is $8,000, and the total number of dwellings in the building will decline by only eight, from fifty to forty-two. The Aarti lacks some features of the Padre--for example, it has common kitchens while the Padre has one per unit--but it is in other respects the same. In Portland's Burnside district, one HUD-sponsored SRO renovation (the Butte Hotel) was granted a waiver from the usual standards--chiefly, the requirement that a bathroom be installed in each unit was dropped--and project costs fell from $40,000 to $9,350 per unit. Of course, it would be ideal if all public housing could be improved to achieve HUD's standards, but this would also be prohibitively expensive. A by-product of this expense is that nearly all cities report a shortage of public or low-income housing, and long waiting lists to enter what housing is available.

"If HUD would loosen the restrictions nationwide, we could save a vast amount of money and do more for the poor." Bradford Paul, the director of the North of Market Planning Coalition, a community group in San Francisco, says. The Reagan Administration came to office ideologically committed to the elimination of direct federal funding of public housing. Instead, the President has favored a system of housing vouchers (coupons that landlords would redeem as rent, and that, in theory, would give tenants the ability to choose their own housing, spurring market competition among landlords in the bargain.) "The last thing Reagan people want to do is create an efficient, government-subsidized construction program, because it would destroy their rationale for vouchers," Andrew Raubeson, the director of the Burnside Consortium, in Portland, says. For fiscal year 1984, the Administration is asking for only 15 percent of what the Ford Administration's last budget stipulated for housing, and is leaving HUD's rules, which are less cost-effective, in place.

The provision of public shelters is ultimately a local issue, and local objectives vary. Some cities try to meet the problem; others leave it to private charities, such as church groups and the Salvation Army; many simply try to shift the problem somewhere else. When the homeless appear on the streets of Prince George's County, Maryland, a suburb of Washington, D.C., that operates no shelters, they are given bus or cab fare and told to go downtown. Phoenix recently "responded" to its growing burden of homeless people (some of them laid-off midwestern workers who have risked everything to look for jobs in the Sun Belt) by closing its three shelters, making it a crime to lie down on city land, and outlawing the plucking of food from garbage--all moves calculated to force the homeless elsewhere. Repelling the homeless is an attractive strategy politically, for it enables local officials to praise their own thrift and firm administration of public order while condemning the big spending welfare bureaucracies of other cities. At the same time, local officials worry that humane treatment of the homeless could backfire. According to Ted Wilson, the mayor of Salt Lake City, communities fear that if they are the first to give the homeless decent care, they will quickly become a "blinking light," drawing in transients from around the nation and compounding existing problems. (New York is believed to have accomplished just that in the 1960s when it offered higher welfare benefits than other cities, and, whether or not the observation is true, it makes local officials jittery.) Without some uniform federal legislation to spell out a city's responsibility for the homeless, Wilson says, most communities will continue to avert their eyes.

Reporters may have had the purest motives in playing up the troubles of the middle class, but, at the same time, they helped to direct the government's efforts to the least urgent part of the problem. A bill is advancing through Congress to provide $760 million in federal loans to help middle class families who are faced with foreclosure to keep their houses. While this idea has clear humanitarian and political appeal, the amount involved towers over the $100 million that Congress gave for the current fiscal year (and has voted to give again next year) to those who are truly desperate for shelter. If Congress passes this bill, it will be following a trend in federal entitlements--acting in the name of the needy, but providing the largest share of benefits to those who are relatively well off.

Congress can find better ways to spend the money. Most cities have thousands of pieces of property, acquired through tax foreclosure, that sit rotting and unused. St. Louis, for example, has 9,000 empty tax-foreclosed dwelling units; nationwide, HUD owns some 170,000 abandoned dwellings. It is often said that while a new WPA-like agency might ease unemployment, there is no work for such an agency to do. Why not employ a federal work corps to renovate empty buildings for use as housing? The program would both create meaningful jobs and make decent again the communities where most of the unemployed live. Cities that rejected the Reagan Administration's offer of surplus federal buildings for use as temporary shelters--a palliative only--might feel very different about a permanent improvement in facilities for the poor.

This idea has come before Congress more than once. Republicans run from it, because of their dread of new federal initiatives; having established that many federal programs were foolish, they believe that any social-service task that Washington undertakes must be wrong. Democrats run from the idea too, because unions oppose it. Unions say that anything done by a new WPA would steal work from their members. But what work? At the moment, there is hardly any work to steal in providing housing for those who really need it.