 you know if you live somewhere like San Francisco if you live in New York if you live in Southern California Los Angeles but even if you live in Austin Texas last time was in Austin Texas under the all the highway overpasses there were ten cities of homeless people this people this this problem is is very visible you know I remember when I lived in the in the barrier this is in the 90s homelessness in San Francisco is awful back then they would harass you they were very aggressive homeless and it was just unpleasant it was unpleasant to go to San Francisco particularly my wife used to go alone and it was particularly unpleasant for her and you know so I thought it was bad back in the 70s and it's like ten times worse today I was in San Francisco a few years ago in the Tenderloin district which is you know just two blocks away from Union Square and God you couldn't walk in the street there were hundreds of them hundreds of homeless people just camped out in the street so homeless the homeless issue is we'll get to how big it is in a minute but but it's obviously very very big in a few key cities it's interesting that you could go through a number of different states and we'll talk about why this is but a number of different states in the Union have very little homeless problems the homeless problem is concentrated in California in New York in Texas in Florida and and and in in those places the homeless problem is almost always concentrated in big cities in and it tends to be concentrated in vibrant big cities like you know another place in the Northeast would be Boston and and you know a lot less in Chicago but a little bit in Chicago I think the weather there is just too damaging so the so a number of questions about homelessness why is there such a big homeless problem why did it kind of show up in the 1980s you know as as an issue as a problem and you know what are the origins of it so why wasn't the homelessness in significant numbers before that what are kind of the numbers and and and what's where is it dominant so it's interesting I looked up the numbers and they're about again official stats I don't know how they do this I don't know if this reflects reality you can get non official statistics there's significantly higher than this so I don't know I have no expertise in this area I don't know what to believe we're gonna use official stats here because that's the best I have and and I think there's a lot of also scam ongoing going on to try to beef up and make those stats look a lot worse but official stats are somewhere on 580,000 homeless people in the United States that is that is up over the last few years but down from 2007 where there were over 600,000 homeless people I saw one source that claimed there were like 2.5 million homeless people in 2008 I'm a little suspicious of that gap between 620 630 and 2. something million particularly when you think there's probably a political agenda driving some of those some of those numbers so what happened in the 1980s that created the homeless problem and what can we learn from the causes in order to prescribe the solutions and again while homeless numbers have probably not gone up that much certainly not over the last decade decade and a half I think what has gone up is their concentration in a few places like San Francisco and the tolerance of them that is the the willingness of cities to let them basically take over big swaths of the city particularly the downtowns so it's it's more the policy towards them and their concentration you don't find homeless people let's say in in Mississippi even though Mississippi is the poorest state in the Union they're not a lot of homeless people in Mississippi and we'll talk about why that is and in generally places like Mississippi Alabama states that have very high poverty rates don't have very high homeless rates and you partially this goes to the idea that homelessness is not fundamentally an issue of poverty poverty is necessary but is not sufficient in order to create homelessness so what does create homelessness and for this you know as always when we dig deep into this kind of topics it's complicated it's complicated and to really get a handle on it and to make I think this interesting and to really understand what's going on understand the complexity and understand what the solutions need to look like we have to do a little bit of history and we have to go back in history and and and look at what's going on and look the but let's start with a fundamental problem the fundamental problem is a mismatch of supply and demand in this case is supply and demand for cheap housing for low income housing for housing that poor people can't afford I was on a debate with econ boy yesterday and one of the claims that he made was if you look at the amount of income that poor people have after they get government transfers after they get food stamps and vouchers and all the stuff that they get there are very very very few people in the United States who are poor I think he said two and a half percent versus the official poverty number which is 15 percent but that is before transfer payments once you get transfer payments there's almost nobody poor in the US because they all get a significant amount of money from the government that puts them at above whatever the poverty level is so I don't get that wonderful and I don't I don't think that was true at all but anyway wonderful he was commenting on the debate yesterday I think the opposite is true so you know the the the if you look at poverty people should have enough money to be able to pay rent and yet we have a massive mismatch because we don't have housing for people who are poor and even poor people who do have housing today spend a disproportionate amount of their income on housing and this is not just poor people just generally I read somewhere that's over six million people in the United States spend over 50% of their income over 50% of their income on housing that is on rental I guess mortgage but primarily rent that's absurd and that lowers the standard of living the quality of their life the ability to consume other things their ability to save so we have in this country a significant mismatch of between people's income and housing that matches that income we have a supply demand problem and the primary issue is supply we just don't have supply of affordable housing of low-income housing of housing people can actually afford so you know in order to see that in order to try to understand the problems in the housing market we actually need to go back to the Great Depression and you know the first thing too that we realize when we go back to the Great Depression is that there is no free market in housing housing is heavily heavily heavily dominated by government policy we'll talk initially about federal government policy and then about state and local city government policy but there is no you know the market will adjust there is no free market in housing the left would love us to believe that that is the case the right doesn't want to really challenge it because they don't want to get rid of the real problems the real government intervention in housing to a large extent the right is supportive of much of the government policy with regard to housing but there is no free market in the 1930s the decisions was made to support the construction and ultimately the the purchase of housing by Americans and a number of institutions were set up in order to facilitate that you probably know of hard which guarantees mortgages which provides mortgage insurance and therefore lowers the cost of mortgages I'm sure you familiar with Fannie Mae and Fannie Fannie Mac Fannie Mae was established right after right during the you know I think 1940 and Fannie Mac was established in the 1960s in order to again support the mortgage market and to make financing a home easier and cheaper so that people could move into homes and indeed home ownership in the United States grew from somewhere in I think the early 40s around 40 something percent to over 60 percent and I think it peaked just before the financial crisis at 68 percent it has now gone back down to what it was before the financial quite before all the housing programs of Bill Clinton and George Bush to about 63 percent but but you know home ownership is is in the 60s which is a goal of government it's it's it's the purpose of all these programs you could add to that the fact that the only interest that individuals can deduct off of their taxes is interest on a mortgage so the government is telling you that the one debt that they will reward you for in a sense by allowing you to keep more of your money is a mortgage it's the only kind of debt that they value it used to be that you could deduct other kinds of debt other kind of interest on debt but since I think 1986 attacks a form bill you can only deduct your mortgage so the government is giving preferential treatment to taking out a mortgage you can deduct your rent from taxes but you can deduct the interest on the mortgage which is equivalent to a rent so the government has significantly provided preferential treatment for home purchases and of course who are the biggest beneficiaries of these home purchases and the biggest beneficiaries of the deduction of interest on a mortgage well the biggest beneficiaries are the middle class and the wealthy so many and we'll see that basically all housing policy that creates homelessness is driven by driven by policies that are there to enhance the well-being of the middle class and the wealthy you know all done disguised by the idea that we're trying to take care of the poor and we you know generally what the government does with a lot of these programs is it throws crumbs to the poor but the real big government programs are always there for the middle class they're not primarily there for the poor put on vote and the poor just are not top of mind of anybody so what you had as is all these government policies driving people to buy homes and and making it cheaper and cheaper for people to buy homes are more and more incentivized particularly particularly for again the middle class on top of that starting in the 1950s with the you know building of the highway system the United States interstate highway system there was a huge push to develop areas outside of the cities in other words develop suburbia and of course the highway system to a large extent the highway system made suburbia possible it's not clear that we would have suburbs in the in the in the way in which they developed if not for the interstate highway system so we had a highway system that basically made it easy to commute in and out of the cities allow people to work on the outskirts but also move jobs into the outskirts moved a lot of the middle class higher paying jobs out into the outskirts and left in the in the cities a primarily manufacturing jobs and the workers who worked in those manufacturing jobs and part of the idea here and part of the reason why you didn't have homelessness in the 50s 60s even in the 70s is because as middle class people wealthy people were leaving the inner city they were selling their properties in the inner city they were moving to the suburbs they were buying homes in the suburbs the prices of inner city properties dropped precipitously and poor people could afford to buy those places maybe they couldn't buy them they could rent them maybe landlords could buy them up and rent them to low-income maybe landlords could buy them up and turn them into you know these kind of rooms that poor people would rents that particularly single men would rent and and and pay daily which got them off the street and and provided them with a place to live so for a long period of time the inner cities while not very pleasant for many of us to go to not pleasant certainly for us to live in the inner cities were places in which people living on low wages could live they were filled with crime and again they weren't particularly pleasant but they provided a roof they provided community they provided a home for people and at all different levels there was some fairly nice fairly large homes that middle class and again upper income people had left and sold for very cheap to go to the suburbs that now could be turned into nice homes for families low-income families but then there were also these like kind of hotel flop houses whatever you want to call them where people could go and just rent a room for a while as they as they got themselves on their feet so you know there were a lot of different options and housing was cheap the government did build some low-income housing started in the 30s starting in the 30s there was such a thing as public housing and they did build if you remember in New York and Chicago and a lot of our cities they were these massive communist looking you know apartment buildings with tiny little apartments ugly massive huge buildings you can still see a little bit of that and kind of the east side of New York lower east side of Manhattan but a lot of those buildings we'll talk about it have gone but massive complexes of public housing were built and again were very affordable and people could live there so you had government-owned public housing but you had private housing that was cheap it was very cheap all over the inner cities and this was really the situation so even when you know people talk a lot about the reform to the mental health system that took a lot of mental health people out and they left institutions and into the into the streets well it turned out that those really started in 60s and 70s and yet there was very little homelessness in the 60s and 70s homelessness is really a phenomena of the 80s and the real question is what happened what happened you know one of the things that happened in the 50s and 40s 50s 60s particularly after the world war but all through the creation of the suburbs is that the United States produced more housing units more new housing units than new household formation so there was a boom in building there was massive quantities of houses being constructed supply matched demand and this trickle-down effect where the middle class and the and the wealthy moved out of the cities created large supplies of housing for lower income people in the heart of the cities so that's a situation going into the 1980s overall a situation where there's plenty of supply people are you know in the middle class and they and the wealthy in the suburbs the poor in the center cities but but they have homes so there is no real issue of you know homelessness but what happens in the late 1970s early 1980s people start middle class people start moving back into the cities you start getting a phenomena of the US economy shifting shifting towards service jobs service jobs that tend to be in the center cities a lot of cities decide to knock down their public housing complexes in order to build office buildings in order to build fancier condominium buildings partially because these massive public housing buildings are riddled with crime and drugs and all kinds of other problems and the easiest way is to just get rid of them rather solve problems just get rid of the houses and they knock down these buildings you know good riddance they were ugly and horrible but they create a problem where did these people go at the same time you know so you're knocking down these buildings you're building new skyscrapers inside the city centers you you know now people have an incentive particularly young people to move back into the center city so neighborhoods are being gentrified and the thing about gentrification is they're not being gentrified because as a market phenomena a lot of the gentrification is subsidized by government so people are getting and developers are getting all kinds of tax credits and all kinds of tax breaks and all kinds of subsidies to go into the cities and start buying up some of these falling apart buildings and and turn them into nice buildings that now raise the cost put people again kicked out where do they go and about the same time building codes start shifting so cities like New York cities like San Francisco will get to San Francisco is unique but it's even worse but building codes across the country starts shifting whereas it's in a sense illegal to build low-income housing houses have to have so many bathrooms per bedrooms they can't be smaller than a certain size of a you know certain size a certain square foot you know buildings have to be apartments have to be of high building quality you know again of high to adapt to accommodate a relatively high standard living quality of life not really suited for people for people who don't have a lot of money so what happens is that the cost of building goes up cost of building goes up not because materials have gone up not because contractors are making more money but because the code the building codes as written by the regulators as written by cities and counties now raise the cost of building the building so the cost of their apartments is now more expensive and all those people who were kicked out of the public housing all those people who are being gentrified out of their neighborhoods and and while the owners of those buildings might make money because as as the gentrification is coming house prices are going up and and some people are benefiting from that but those are the owners but the residents who are paying rent are not benefiting from it they're being kicked out there's no alternative housing for them because the cost of housing at the lowest end is higher than what it used to be much higher than what it used to be not because the market can supply low-income housing but because government won't allow people to build low-income housing again all the standards by which housing need to be built have been raised dramatically so housing becomes more and more and more expensive particularly in the cities particularly in cities that are gentrifying particularly in cities that have robust building codes New York San Francisco Los Angeles of course one of the reasons you don't get homelessness in Mississippi is because the cost of housing is low because they can still afford the homes there because you know even if the scent of the city might be gentrifying you can live outside of the city you can live in trailer parks you can live in all kinds of different places where the cost of housing is still really really really cheap but you can't do that in Boston which is you know demolishing whole neighborhoods and building skyscrapers primarily offices and destroying apartments and then really high price condos and there's just no building going on that is low income building it just doesn't exist and then of course you get a city like San Francisco that won't allow building high one of our tall buildings and won't literally won't align low income buildings for the reasons I said before and of course what does that do that raises the value of the homes are people in San Francisco it raises the value of the homes and people in LA it raises the value of the homes and people in New York it raises the value of the home of the people who are gentrifying and again it makes it it provides massive rewards to the middle class and to the wealthy who are benefiting from rising home prices they make sure to vote to make sure that the housing codes don't change that the housing codes are so stringent that only expensive houses can be built so that their house constantly goes up in value so you know this mechanism continues and continues and continues and some of what has happened is that you do get some low income housing at the periphery of the cities you see this in some parts of Chicago outside of downtown downtown's way too expensive for anybody anybody in poverty but even there housing is still expensive because of building codes and and everything else and there's not enough of it because one of the things that's happened over the last 40 years since 1980 is that we don't build enough we don't build enough by far there is a massive shortage of housing units in the United States and of course again some people benefit from that people already own their home because that's what drives prices up it shortages and the shortages there because land is not being freed up by zoning committees the shortage of there because of immigration constraints that don't allow bringing in enough construction workers we just have a shortage in construction workers in the US and particularly when you climb down on illegal immigration building homes becomes much more difficult you just don't have the labor and it's not even a price you can't find the labor I mean look at the labor shortage that exists in the United States today they what they're 10 million open positions 11 million opus positions that can be filled many of those in the construction industry and they could be filled if we allowed for immigration but we don't so Michael says I don't see many homeless people in big cities like Florida Miami and West Palm Beach that's right because some places are very good at exporting their homeless people elsewhere but it's just as true that the the if you look at the actual numbers Florida has a high level of homelessness for exactly the reasons I've described a Florida's become in many parts of it too expensive for people to live in and they export their homelessness out because they're tough on the homeless so yes you can adopt a tough on homeless strategy which I think you should clear out the pavements to clear out the incumbents to move them out and they just move somewhere else Florida in particular has done that effectively but Florida has a large number of homeless I haven't looked deeply into which parts of Florida where they camp out but they exist they're there you know California I think has the most homeless California York by far have the most but basically every but so does the Texas has and so does far you don't see homeless people in Dallas but you see them in Austin because they think Dallas exports them to Austin Dallas is tough on them Austin is not they all go to Austin but you still have significant numbers of homelessness in Texas you have them anywhere where you have a thriving gentrifying city Austin has particularly gentrified now I'm not against gentrification I'm against government subsidizing gentrification I'm against the building codes that make it impossible to build low-income housing I'm against the government subsidizing the housing for the middle class by providing them with insurance and their mortgage by providing with repackaged mortgages through FETI Mac and Fannie Mae and by providing an interest deduction on mortgages I'd like to see everybody's taxes cut and all deductions taken away Taysie mentions Giuliani I mean Giuliani basically what happened in New York but this is true in San Francisco this is true in LA this is certainly in LA this is true in Boston is the wall sections of New York which had poor people living in them not just Harlem but even part of what today is Midtown there were what I called flop houses there were these they short-term hotels there were very unpleasant areas in New York to Dubai and basically what these cities did is they made those things illegal they demolished them they destroyed them famously and I was really I read this in an article written in 1989 so this is not a this has nothing to do with Trump of as president but the Trump Tower the Trump Tower that was built I think on Madison Avenue used to be this kind of the whole block was was kind of CD and an area where you know poor people lived and a lot of kind of one bedroom or one room apartments and rented and they basically knocked it down and build a Trump Tower and Trump got a huge city from Giuliani a huge subsidy to build that tower as the developers all over the place see yes New York was cleaned up but is cleaned up by fascist methods it was cleaned up by making it illegal by by taking property away from people making it illegal for certain businesses and certain types of homes to be built by what's called abatement you know and by changing city zoning rules it started before Giuliani it started in the 19 in late 1970s and yeah New York is clean fascists do a very good job at cleaning up a city no question about that but what you get is homelessness what you get are people used to live in homes used to be able to afford to live in homes and now cannot and you know for a while I think New York did a good job pushing the homeless problem outside of the city in more recent time the homeless problem has come back into the city you know but it is New York that's created a huge part of the homeless problem huge part of the homeless problem you know government subsidies is not it's not a market you know I don't I don't support subsidies for business I don't support subsidies for builders I don't support subsidies for cleaning up a city I don't support subsidies for Trump I don't support subsidies for anybody and I don't support evicting people because the mayor doesn't like the business you in I don't support evicting people because he doesn't like the amount of money you make I don't support changing the rules because you want to clean it up it's fascism and yeah I get it that fascism works in narrow sense but there are prices to pay and yes it's true you all get to enjoy clean nice friendly New York and we don't care and we don't look at the evils that happen elsewhere all right so this is where homelessness came from thank you for listening or watching the Iran book show if you'd like to support the show we make it as easy as possible for you to trade with me you get value from listening you get value from watching show your 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