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Locked Out

Unemployment and Homelessness in the Covid Economy

January 11, 2021 / By Daniel Flaming, Anthony W. Orlando, Patrick Burns and Seth Pickens
Underwriter: Economic Roundtable
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COVID-driven loss of jobs and employment income will cause the number of homeless workers to increase each year through 2023. Without large-scale, government employment programs the Pandemic Recession is projected to cause twice as much homelessness as the 2008 Great Recession.

The Economic Roundtable used data from the 2008 Great Recession to estimate the linkage between job loss and homelessness and forecast the amount and type of pandemic-driven homelessness in Los Angeles, California and the United States.

Ten percent of recession-caused unemployment in Los Angeles from the 2008 Great Recession was linked to subsequent homelessness of some type among working-age adults. Those lacking shelter include: homeless on the streets, shelter residents and couch surfers. Homelessness lagged unemployment at the beginning of the 2008 recession but continued to grow rapidly for three years after the official end of the recession.

Disconnection from work is a degenerative dynamic – less work, less earnings, less stable living conditions, and further disconnection from work. It is not total job loss but rather loss at the margins of the labor market that is the primary cause of economically-driven homelessness.

The epicenter of job destruction and unemployment in the Pandemic Recession lies in restaurants, retail stores, restaurants and bars, personal services, social services, and education. These are the largest employers of low-wage workers, who often are precariously housed even in a growing economy.

Over the next four years the current Pandemic Recession is projected to cause chronic homelessness to increase 49 percent in the United States, 68 percent in California and 86 percent in Los Angeles County.

Homelessness among working-age adults caused by the current recession is projected to peak in 2023, adding 603,000 working-age adults to those already without a place of their own to sleep in the United States. California is projected to be home to 131,400 of those additional homeless adults, with 52,300 in Los Angeles County swelling current homeless numbers.

Most homelessness from the Pandemic Recession is projected to be in the form of couch surfing – 85 percent in the United States, 73 percent in California and 64 percent in Los Angeles County. These different rates result from different propensities to produce homelessness and different mixes in the types of homelessness in different parts of the United States.

People are likely to fend off homelessness as long as possible by foregoing other expenses, relinquishing assets and going into debt in order to remain housed. However, without money to pay for rent or the help of family and friends, it is likely that individuals will be evicted and lack a place of their own to sleep. Thus the total number of homeless will continue to grow even after the recession ends.

The one-fifth of American workers who face the highest risk of long-term unemployment and homelessness earn less than the poverty threshold. Most hold part-time, low-wage jobs, including some workers who are still working but homeless.

Workers with the greatest risk of long-term unemployment and homelessness include African Americans, Latinos, young adults 18 to 24 years of age, women, and those with less than a four-year college degree.

The odds of homelessness at any income level are twice as high for Latinos as they are for European Americans, and three times higher for African Americans. Because incomes skew lower for African Americans and Latinos than for European Americans, their risks are compounded. This reflects social hazards experienced by African Americans and Latinos including bias, discrimination and barriers in employment, housing, education, and the justice system.

Swift and massive government intervention is needed to create jobs and provide earned income for unemployed workers who face the possibility of homelessness. Universities, social services agencies and churches that are employing homeless workers but not lifting them out of poverty to provide higher wages and more hours of work.

The skills, energy and aspirations of at-risk workers can be employed for public benefit. Employment programs should prioritize helping workers who are at risk of losing their housing and those who have no place of their own to sleep. They should use workers’ existing skills and also support permanent economic progress by providing education and training to upgrade skills.

Housing prices and rents have grown faster than incomes, so housing costs consume an increasing portion of workers’ budgets. Unpaid rent could double by early 2021, straining landlord budgets and increasing pressure to evict delinquent tenants.

Housing is hard to afford for most families in poverty. Over half of U.S. families who are in poverty pay over half of their income for housing. In California almost three-quarters of poverty families are this cost-burdened for housing.

The most important determinant of pending eviction or foreclosure is recent household job loss. Half of Africans Americans and Latinos in the U.S. express no confidence or only slight confidence that they can pay for housing next month. One-third of African-American and Latino renters are behind on rent and expecting eviction.

Unpaid rent could double by early 2021, straining landlord budgets and increasing pressure to evict delinquent tenants. Most Americans want to meet their financial obligations. If public programs cover their income shortfall, they will continue to pay for housing. Policymakers should give financial incentives to landlords and lenders to defer rental and mortgage payments and forgive payments that were missed during the pandemic.

The risks that lead from unemployment to homelessness are not stand-alone threats. They include all of the social and economic ingredients of a worker’s life layered on top of each other, some as safeguards and others as vulnerabilities. Poverty employment, unemployment, ethnicity, isolation, personal crises, destitution, and homelessness are mutually reinforcing.

To increase the supply of affordable housing the federal government should fully fund rent subsidies for low-income families and increase subsidies for building affordable housing. State and local governments should establish affordable housing trust funds and use some of this money to buy empty commercial buildings and convert them to affordable housing.

The solution of employment costs less than the problem of homelessness. Individuals who become persistently homeless use more public services and have higher public costs than their peers who do not become homeless. These costs are ongoing and increase as individuals become older. Persistently homeless workers in Los Angeles typically have public costs of $13,700 a year for benefits and services received from local government.

One promising pilot effort, the Realization Project, demonstrates a new employment model for homeless workers. The project addresses chronic homelessness as a problem of racial injustice as well as of inadequate income. Participating community college students, who are likely to be persistently homeless, are provided comprehensive life skill services, college-level work-skill development and jobs.

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Area of Work: Economy, People
Tags: California, Earnings, Economic Impacts, Economic Ripple Effects, Economy, Employment, Homelessness, Housing, Income, Industries, Job Loss, Job Quality, Labor Market, Los Angeles, Los Angeles County, low wages, part-time work, Poverty, Prevention, Public Costs, Risk, Screening, Social Safety Net, Strategy, Training, Unemployment, Wages, Work