A Rising Tide Drowns Unstable Boats: How Inequality Creates Homelessness

Abstract

Is income inequality a driver of homelessness at the community level? We theorize that inequality affects homelessness both by crowding out low-income households from the rental market (what we call an “income channel”) and by causing home prices to rise (a “price channel”). We construct a dataset of information on inequality, homelessness, rent burden, and housing prices in 239 communities from 2007 to 2018 and use it to assess the income inequality–homelessness relationship. Our results suggest that income inequality is a significant driver of community homelessness and that the “income channel” is the more likely mechanism through which homelessness is created. We argue that broader policy efforts to reduce income inequality are likely to have the collateral effect of reducing homelessness, and we discuss the need for national and local policies to help low-income households afford housing.