Research Brief

The Welfare Effects of Eviction and Homelessness Policies

Boaz Abramson, Stanford University

Paper: http://stanford.edu/~boaza/evictions_abramson.pdf,

Across the U.S., approximately 2.2 million eviction cases are filed against renters every year, and 600,000 people suffer from homelessness every night. The magnitude of the housing insecurity problem has triggered a public debate over policies that address evictions and homelessness, such as “Right-to-Counsel” reforms, means-tested rental assistance programs, and more recently, moratoria on evictions. This paper studies how these policies affect rents, housing supply, evictions, homelessness, and welfare in San Diego County.

“Right-to-Counsel” Doesn’t Prevent Evictions but Increases Homelessness

Randomized-Control-Trials show that providing legal counsel in eviction cases (“Right-to-Counsel”) tends to extend the length of the eviction process but is unsuccessful in preventing evictions of tenants who default on rent. Since the shocks that drive tenants to miss rent payments, such as job-loss and divorce, are events that lead to a persistent drop in income, tenants in arrears are unlikely to be able to repay their debt and avoid eviction, even when lawyers provide them with more time to do so. Moreover, “Right-to-Counsel” policies can have unintended consequences on rental markets. Since “Right-to-Counsel” makes it harder for landlords to evict delinquent tenants, it ultimately leads to enhanced screening of risky tenants, higher rents, and reduced rental housing supply. In San Diego, this translates to a 15% increase in the homelessness rate following a citywide implementation of “Right-to-Counsel”.

Rental Assistance Prevents Evictions and Homelessness and is Cost-Effective

A monthly subsidy of $400 to households with less than $1,000 of cash can reduce homelessness by 45% and evictions by 75%. The main conceptual difference relative to “Right-to-Counsel” is that rental assistance lowers the likelihood that tenants default on rent in the first place, as opposed to making it harder to evict them once they have already missed rent payments. Rental assistance improves welfare, despite its costs to taxpayers. In fact, the policy is cost effective: the savings in terms of reduced expenses on homelessness services outweigh the cost of subsidizing rents.

Implications

  • Policies that address evictions can generally be classified into two categories: tenant protections that make it harder to evict renters who have already defaulted on their rent, such as “Right-to-Counsel”; and policies that prevent tenants from missing rent in the first place, such as rental assistance and affordable housing programs.
  • Tenant protections against evictions can have the unintended consequences of heightened screening and more homelessness. Landlords might be less willing to rent to risky tenants, in particular to young and poor households, if evictions become more burdensome.
  • While cash transfers are costly for local governments, they can also prevent homelessness and evictions. The monetary costs of homelessness to local governments are substantial, including the costs of shelter provision, policing, and health services. The savings in terms of reduced expenses on homelessness services might therefore outweigh the costs of subsidizing rents.
  • Other policies that can reduce rent burdens for low income households, and therefore the risk of eviction, should also be considered. These include subsidies for the development of low-income rental housing, as well as the easing of restrictive land use regulations.