Bay Area Homelessness
This report is the Bay Area Council Economic Institute’s second look at homelessness in the San Francisco Bay Area. In our first report, Bay Area Homelessness: A Regional View of a Regional Crisis, released in 2019, we used interviews with local service providers and data from the U.S. Department of Housing and Urban Development to capture the true scale and regional nature of the Bay Area’s homeless crisis. In this report, we examine the potential for using shelter mandates, also known as right to shelter policies, government intervention, and state and local policy changes, to help solve the Bay Area’s homelessness crisis.
The Bay Area’s homeless population today is larger, less sheltered, and growing faster than ever before. Between 2017 and 2020, the Bay Area’s homeless population grew by 6,878 individuals to a total of 35,118—accounting for more than a quarter of the growth in the total U.S. homeless population. During that time, the share of the Bay Area’s homeless population without access to basic shelter increased from 67 percent to 73 percent, the highest rate in the U.S. Amidst a growing body of research showing the devastating health and safety consequences of homelessness, especially unsheltered homelessness, the COVID-19 pandemic and recession has added new urgency to stabilize and resolve the Bay Area’s homelessness crisis.
The Bay Area’s high rate of homelessness is inextricably tied to its housing shortage. Between 2011 and 2017, the Bay Area created 531,400 new jobs but approved only 123,801 new housing units, a ratio of 4.3 jobs for every unit of housing, far above the 1.5 ratio recommended by the U.S. Environmental Protection Agency (EPA) to avoid displacement and congestion. The resulting shortage has increased competition for available units and inflated the region’s housing market beyond the reach of an increasing share of total households. Between 2012 and 2017 the Bay Area’s stock of rental units affordable to households earning below 100 percent of area median income declined by 24 percent between 2012 and 2017, and the region lost 5,000 units of housing affordable for households earning below 30 percent of area median income.
Across the U.S., high rents strongly correlate with high rates of homelessness as high costs push larger numbers of households on the margins into the streets.
The housing shortage also contributes to homelessness by increasing land and construction costs, which make solutions to homelessness more expensive. In 2018, the average unit of new or rehabilitated affordable housing in the Bay Area cost over $529,000. In San Francisco, a single unit of subsidized affordable housing costs $730,000. High prices make traditional interventions extremely expensive and difficult to scale. Using traditional construction methods, a new or rehabilitated unit of permanent housing for every Bay Area homeless resident would cost nearly $17 billion. Meanwhile, most of the Bay Area has been defunding emergency shelters to increase permanent housing production (FIGURE 15). While this reprioritization is consistent with national trends and numerous studies on the long-term effectiveness of permanent housing, the high-cost Bay Area has been unable to scale permanent housing faster than the rate at which residents are becoming homeless. The result has been the de facto warehousing of increasing numbers of homeless residents on Bay Area streets, cars. and RVs along with the intraregional shifting of shelter burden to the City of San Francisco, which was the only Bay Area County to have increased its shelter inventory over the past decade despite already providing far more permanent housing and shelter per capita than other Bay Area Counties.
The Bay Area arrived at this point through more than a generation of housing and homelessness policy failures at all levels of government. The U.S. government provides approximately one-third the level of support for affordable housing as it did in the 1960s. The State of California doesn’t adequately prioritize affordable housing programs for the households at highest risk of becoming homeless, and it lacks coordination over the state’s 41 different anti-homelessness programs. Local governments still have far too many powers to block housing construction: Between 1999 and 2023, the Bay Area will have built 97,000 fewer units of affordable housing than recommended by the state (FIGURE 9), and communities routinely find ways to avoid providing homeless individuals with shelter and housing. Faced with over 100,000 unsheltered homeless residents, California cities in the Bay Area and beyond are grappling with a shifting and often contradictory legal environment for how to manage the de facto privatization of public spaces by homeless residents.
The growing homelessness crisis in the Bay Area and elsewhere in California has led to renewed interest in shelter mandate policies such as those in New York City, Massachusetts, and the District of Columbia. Creating a shelter mandate for the Bay Area would require state legislation to design a mandate, create an enforcement agency, craft a funding mechanism, and win approval from at least 2/3 of Bay Area voters. If the mandate proposal could survive the numerous veto-points along that path, including attacks that mandates come at the expense of permanent housing, the experience of other shelter mandate jurisdictions in the U.S. strongly suggest a regional mandate could dramatically reduce unsheltered homelessness in the Bay Area. We estimate a regional shelter mandate that used the cabin community model could be scaled for approximately $245 million in one-time capital expenditures and $481 million in annual spending on services and management.
However, under a shelter mandate the Bay Area’s shelter system would steadily increase in size and cost unless the region took additional measures to prevent homelessness from occurring in the first place, and to expand its inventory of permanent housing to create exits from the shelter system. While a New York City-style shelter mandate alone would improve conditions for the Bay Area’s homeless by providing access to basic sanitation services, the Bay Area has an opportunity, through its deficit of shelter and housing products of all types, to improve upon existing models in New York City and elsewhere. We estimate approximately $9 billion in one-time capital expenditures and $2.5 billion in annual spending on services and management will right-size the Bay Area’s inventory of shelter, housing, and prevention services for (FIGURE 22).
The Bay Area’s homelessness crisis was created by policy failures at all levels of government; interventions at all levels of government are needed to solve it. Rather than pursuing a shelter mandate, the Bay Area should use existing but unused tools at its disposal to raise $10 billion in new regional revenue to expand its inventory of emergency shelters and permanent housing. The region should pair this investment with new additional state and federal support for affordable housing and homelessness prevention, especially via proven programs like Project Homekey and Section 8. These investments should be paired with state policy reforms to boost housing production and reduce pressure on low-income renters, and to reduce local powers to halt shelter production. Although the Bay Area is a wealthy region, it cannot solve homelessness by itself.
$20 billion state investment to extend Project Homekey and help regions scale inventories of shelters, housing, and prevention programs.
In less than one year, California’s Project Homekey has produced the single largest expansion of homeless housing in California history. California should dedicate at least $20 billion of its record $76 billion FY 2021-2022 budget surplus to expand Project Homekey, make one-time investments in capitalized operating reserves for homeless services, and to help local-governments right-size inventories of emergency shelters, permanent housing, and prevention services.
$10 billion regional expansion of affordable housing and emergency shelters using the Bay Area Regional Housing Finance Authority (BAHFA).
A regional $10 billion BAHFA measure could address housing needs across the housing-insecurity spectrum by providing up to $200 million to expand regional shelters, and at least $5 billion for the production of extremely-low-income, very-low-income, and low-income housing.
State policy changes to boost supply and reduce pressure (and costs) on renters
High rates of homelessness strongly correlate with expensive rental markets across the U.S., and expensive rental markets are a symptom of market shortages. Additional funding for homeless shelters and housing must be paired with policy changes to allow vastly increased housing production across the Bay Area to reduce pressure in the rental market and lower costs. While state policy is calling on the Bay Area to build 441,176 new housing units over the next seven years through the Regional Housing Needs Allocation (RHNA), production is stymied by local anti-housing regulation. California should pass current legislative proposals to allow duplexes on single-family lots (SB 9, Atkins); eliminate barriers to building small apartments in areas where they’re currently zoned; allow cities to up-zone areas around transit and employment centers (SB 10, Wiener); guarantee loans to homeowners to install accessory dwelling units (AB 561, Ting); and make it easier for developers to convert empty strip malls and big box stores into affordable housing (SB 6, Caballero).
Reduce local barriers to building and expanding shelters
Recently passed state laws have allowed willing cities to expand shelter inventories more expeditiously. However, cities that do not want shelters within their jurisdictions are under no obligation to build them, and can furthermore thwart efforts by third parties, including non-profit organizations or the state, to open and manage shelters. California should declare that any city whose homeless population is over 10 percent unsheltered to be in a state of Shelter Crisis, and that shelters proposed by third parties within those cities be approved “by-right” provided they meet certain health and safety requirements.
Focus limited subsidies on the most housing-burdened populations
State and local housing policies should focus on making moderate-income housing affordable through increases in supply and reserve scarce public dollars for subsidies to deeply affordable housing products that are beyond the reach of market development. Eighty-eight percent of extremely-low-income Bay Area residents are severely rent burdened, meaning they spend over 50 percent of their income on housing. California should ensure at least 20 percent of tax credit financing for affordable housing is dedicated to producing units set aside for households earning below 30 percent of area median income, and 20 percent for households earning below 50 percent of area median income.
Fully Fund Section 8
Even with increased regional funding, the Bay Area will be unable to solve homelessness without additional federal support. Yet today, the U.S. government spends approximately one-third the level of support for affordable housing as it did in the 1960s. The biggest immediate-term way for the federal government to reduce homelessness in the Bay Area and nationally would be to fully fund Section 8 housing vouchers so that all Americans who qualify (households earning below 50 percent of area median income) can begin receiving them. Today, of the 16 million Americans who qualify for Section 8 housing vouchers, Congress has appropriated funding only for 5 million.
Innovative State and Local Approaches to Land Use Regulation & Enforcement
Existing law and planning codes did not anticipate the de facto privatization of public spaces by tens of thousands of individuals, for whom federal courts have recently upheld a Constitutional right to sleep and live somewhere when they lack any access to housing, shelter, or private space to call their own. While attempting to regulate and manage this burgeoning situation, California cities may be held liable for damages caused by unsafe conditions at homeless encampments, but also liable not only for damages for attempting to improve health and safety standards for homeless residents residing in encampments or enforce against encampments in high-impact locations. Consequently, the result is often paralysis. The State should consider expanding recently created provisions to the building code to expedite shelter construction (AB 932) to create and expand sanctioned campsites and safe sites for homeless individuals and families living in cars and RVs. Cities should be encouraged to experiment with innovative approaches to shelter and enforcement to help clarify existing legal ambiguity in the aftermath of Martin v. Boise.