Authored by Ryan McMaken via The Mises Institute,

Homelessness today is often blamed on both "gentrification" and "neoliberalism." When these terms are used in the context of urban housing, it is usually implied that too much market freedom makes housing unaffordable to large swaths of the population. Thus, we are told capitalism is the primary culprit we now find in many large citiesfrom Boston to Los Angeles.

But there is much more to the story.

Since the Progressive Era, government agencies — from the federal level on down — have been front and center in subsidizing, regulating, and planning city development in ways that have made housing in city centers more sparse and more expensive for households who aren't part of the hipster-millionaire demographic that so many urban planners and politicians are working hard to attract.

While rising demand for housing in a fixed number of square miles will indeed increase the price of land and housing, various types of government intervention makes housing more expensive than it would otherwise be. And sometimes, through zoning ordinances and other regulations, cities largely outlaw just the sorts of housing that are most needed by low-income residents.

To gain a better understanding of why homelessness is a recurring problem with apparently growing numbers, it is helpful to examine the origins of what is now standard operating procedure for cities: centralized urban planning. While very-low-income households and persons have long been part of the urban landscape in both the United States and Europe, city officials in the past often recognized that low-income neighborhoods were simply something that had to be tolerated. Although reformers often complained of the unclean and allegedly immoral nature of these places, a lack of government power — and resistance from private owners — prevented city officials from abolishing the areas of cities that provided housing. This housing — however sub-optimal it may have been — was preferable to homelessness.

The Progressives and the Idea of Urban Planning

Those low-income communities began to meet more organized opposition during the Progressive Era, although it's not difficult to see why the idea of urban planning as we now know it was first embraced by Progressives. By the late nineteenth century, the situation in many American cities filled many middle-class Progressives with dismay. Lower-income neighborhoods of cities often lacked proper sewage infrastructure. They were dirty. Homicide rates were probably higher than they are today in many urban areas.

Much of the problem was blamed on "congestion" or "overcrowding" which today we would sometimes just call "density."

According to Steven Conn in his book Americans Against the City,

For Progressives in every major city, crowding was the scourge that had to be eliminated. "It is the overcrowding that breeds crime and vice," exhorted one writer, who insisted that the residents of these areas were not inherently bad, but were made so by their surroundings.

In many places, however, the awfulness of these places were exaggerated by reformists. After all, many of these "slums" contained multi-generational families, and longtime residents who made real efforts to maintain some level of safety and stability in the community. Many of the slums were really neighborhoods of boarding houses. They were crowded and uncomfortable. But they weren't shantytowns either.

Common Progressive "solutions" to the asserted problems of the slums can be found in a 1911 report from a New York City commission on congestion. The recommendations include:

Regulating the height of tenement buildings.

Limiting lot occupancy.

Providing space for parks, playgrounds, and recreational center.

Regulating maximum occupancy for residential units [as part of an effort to abolish boardinghouses].

Locating factories in a more deliberate and rational way.

Most of these recommendations assumed a much larger role for the state in regulating, inspecting, and mandating changes to the current use of space. With this new sort of city planning, governments would need far more housing inspectors, zoning commissions, and a legal apparatus necessary to compel compliance.

Other cities followed suit, and "between 1907 and 1916 half of the nation's fifty largest cities did commission or publish comprehensive city plans to deal with overcrowding."

Conn concludes: "Thus did city planning arrive in the Progressive City." And with it came zoning and a host of other mandates which gradually eliminated existing low-income housing units, while preventing the construction of new units to replace them.

Inherent in the new ideals, not surprisingly, was the idea that private sector actors ought not be allowed to decide on their own what was built in the city, and where. In the Progressive mind, too much private sector freedom had produced the "congestion" which Progressives sought to abandon and reform. This market activity was to be replaced by the decisions of city planners.

The Rise of Post-War Urban Renewal

Progressive reformers, however, were limited in pursuing these goals by a lack of funding and by political opposition from both property owners and the residents of housing which was targeted for reform. After all, if housing was to be regulated with new occupancy rules and mandatory changes in density, this would lead to both rising prices and forced removals from existing housing.

Property owners likewise, opposed reforms because low-rent units are often only worth the trouble when a large number of paying customers are concentrated in a relatively small space.

To be sure, private owners were open to having their property purchased by government. And many cities were eager to tear down "blighted" neighborhoods. But government funding was often scarce. As noted by Colin Gordon, local governments

could not overcome the pervasive obstacles to redevelopment: private interests had no incentive to facilitate public policy, and public interests had no money to acquire or assemble private property.

Things changed, however, with the advent of the New Deal and the end of the Second World War.

What had a been a largely local move to reduce density and forcibly "clean up" lower-income neighborhoods in the Progressive Era became a national movement under the New Deal. The National Housing Act of 1937, for example, established a system of loans and grants-in-aid to local public housing authorities. Unfortunately, the thrust of these efforts was redevelopment and not the production of new units. In fact, use of the federal funds for redeveloping housing units "required the clearance of an equal number of 'blighted' properties."

Government subsidized redevelopment accelerated under the 1949 Federal Housing Act which

made federal funds available for the redevelopment of large areas rather than merely the removal of discrete slum conditions. Under the new law, local redevelopment corporations could buy and clear blighted areas with federal money, sell the land to private developers, and use the proceeds to cover the redevelopment costs.

There was opposition from "private interests threatened or displaced by urban redevelopment plans," but

state and federal courts persistently held that the broad public purpose of redevelopment over-rode the claims of individual property owners, and that resale of cleared properties to private developers amounted to an appropriate public use.

Over time, the new spirit of urban renewal, propelled forward by federal legislation and federal money, resulted in a war on "blighted neighborhoods," with the term "blight" proving to be quite flexible. Indeed, any neighborhood or city block that city planners regarded as producing too little tax revenue, or was simply unattractive, was targeting for a government funded-buyout, leveling, and redevelopment.

Through it all, government officials claimed they were increasing housing supply for American families. As noted by Walter Thompson:

Razing slums was key to reviving city centers, held the prevailing wisdom for many decades last century. In his 1949 State of the Union, President Harry Truman hailed "slum clearance" as a weapon to combat the nation's post-World War II housing shortage. As a 1945 San Francisco Chronicle op-ed stated, "bluntly, nothing can be done to improve housing conditions here until a lot of people clear out."

But urban renewal only improved conditions for some people. In his article "No Room at the Inn: Housing Policy and the Homeless," Todd Swanstrom notes "It is well documented that the urban renewal programs of the 1950s and 1960s tore down more housing than they replaced."

This is because, as Gordon describes it, federal policy was "committed to improving the housing stock without increasing it."

Yes, the bulldozed units in the slums were replaced with some units of higher quality. But they were rarely replaced with enough units to replace those that had been torn down.

City planners were happy to show off the shiny new projects they had used government money to redevelop. But unseen were the households who simply could not afford units in the new buildings.

After all, the poor that lived in the slums lived there precisely because it was cheap, low-rent housing. Reformers admitted there were no "pat answers" to explain what would become of the displaced families. But few reformers seemed much troubled by it. Then, as now, it may have been what really mattered to reformers was to be able to claim they were doing something. And besides, living in the slums was obviously a bad thing. But as Swanstrom very pragmatically suggests: "these accommodations [in the slums] may have been offensive by middle class standards, [but] they were nevertheless better than living on the streets."

But many reformers ignored this bit of wisdom and insisted on housing policy built around urban central planning, anti-slum mandates, and redevelopment which favored urban commercial development where residential development once had been.

Meanwhile, federal policies were introduced during the New Deal and in later iterations of expansionist federal social policy which encouraged more spending in the suburbs than in the cities. Federal programs designed to increase suburban single-family homes proliferated with new federal creations like Fannie Mae and new mortgage insurance programs. Federal grants also encouraged construction of new freeways out of the city, and building more suburban infrastructure. The dollars spent on subsidizing the suburbs thus greatly outnumbered those spent on subsidizing construction of new housing in city centers. Combined with anti-slum policies, federal policy and federal spending patterns acted to drain central cities — and their neighborhoods — of capital while demolishing the housing that remained.

Implications for Today

By the 1980s, as homelessness became a frequent topic of research, some scholars began to recognize how federal urban renewal policy had laid the groundwork for the rise in homelessness that occurred in that decade. It turned out that the federal government's grand plan of leveling flophouses and residential hotels in the name of "beautifying" cities, mostly just resulted in destroying the only housing the very-low-income population could afford. Deprived of their units in the slums, these people ended up living in tent cities and cardboard boxes instead.

Today, little has changed for those with the lowest incomes. The options once available to them in the pre-1950s world are gone, and were never replaced.

Thanks to the persistence of the Progressive mindset in cities, zoning, "redevelopment" and a centralized control of new construction remains the norm. "Density" is the new "congestion" and the attitude of city planners remains the same. They bemoan the lack of affordable housing while also blocking efforts to build more housing. Meanwhile, they tighten controls on modern-day boarding houses and other private-sector attempts to provide low-cost housing. Planners impose height restrictions and density controls. They create arbitrary minimum sizes for units. In many states and cities, the definition of "blight" remains flexible, empowering governments to further eliminate old housing units at the discretion of city planners.

Moreover, the old urban renewal methods persist in updated forms. Tax Increment Financing (TIF) legislation is geared not toward low-cost housing, but toward new commercial development. Often, that development is built where "unsightly" (but affordable) housing once existed. Its destruction is encouraged by government policy. Federal tax policy and mortgage policy continues to draw capital away from urban rental housing and into suburban single-family housing.

Yet, city centers remain the most practical place for very-low-income housing to be built and sustained. This is because the lowest-income households need to be close to the densest areas that sustain mass transit and access to employment. By destroying the urban ecosystem of very-low-income housing, though, governments have left many of these people few options other than living in cars, alleyways, and sidewalks. This, of course, is far more dangerous than living in a run-down residential hotel with a functioning toilet down the hall, and a locking door on the room.

But even if city governments were to begin allowing the private sector to freely build again, it would likely take decades to produce the housing infrastructure necessary to address the housing needs in city centers. We continue to live with the wreckage of failed urban renewal, and the evidence can be seen in the tent cities and makeshift latrines we now see in public spaces.