Cyclical Housing Markets and Homelessness

The fundamental explanation of homelessness has eluded governments that claim to operate with “evidence‐based policies.” The underlying cause of most homelessness is inherent in land markets, which are subject to wide swings of speculative manias followed by debilitating depressions. Rather than seeking to rectify the economic roots of homelessness by altering the tax treatment of real estate, governments focus on ameliorative strategies that are destined to fail. Cycles of boom and bust in land markets have persisted since the 19th century. They exacerbate homelessness by pricing low‐income renters out of the market during the upswing, as land prices rise, and by generating massive foreclosures and evictions during the downswing. The most important action government could take to remedy the problem of homelessness is to devise policies to dampen the swings in land prices.