Crisis in Kitsap

Crisis in Kitsap – What are the real causes of homelessness in Kitsap County?

Written by Joel Adamson.
In order to find permanent solutions to any problem, the cause must be accurately diagnosed and understood.  There are various causes for homelessness, but according to most professionals in the field, the number one cause of homelessness is a lack of affordable housing. Kitsap County finds itself in a housing affordability crisis that appears to be getting worse each month, plunging more families and individuals into homelessness each week. But the homeless problem is more complex than just needing affordable housing – there is also a shortage of supportive housing for those with mental disabilities (i.e. serious mental illness, developmental disabilities, traumatic brain injury, etc.).  This article looks at all the issues.

No housing problem is as profound as homelessness.  Being homeless puts one at the mercy of the elements, charity, the kindness of family and friends, and the myriad of social welfare agencies. Without a home, it is extremely difficult to find a job or keep one.

Although a portion of the U.S. population has always been homeless, the character and size of the homeless population began to change by the early 1980s.  Until then, homelessness was chiefly associated with older, often alcoholic, single males who were living on “skid row.” But after 1980, the size of the homeless population swelled, and became more diverse, to include a larger number of women and families. Although many homeless, as before, struggle with alcoholism, drug addiction, or mental illness, many more homeless do not have these problems.

The problem of rising housing affordability forced many workers and working families into homelessness.  The shortage of affordable housing has created a severe impact on a large percentage of Americans; those struggling with alcoholism, drug addiction, or mental illness, as well as those who do not.  And for many elderly or disabled who previously, before 1980, could get by on their social security or disability income, now find no housing to be affordable, forcing them into homelessness.

Additionally, the deinstitutionalization of the severely mentally ill over the last 50 years, and still continuing today, has resulted in an increase in the number of those chronically homeless. Parts of the mental health industry, and many homeless advocacy groups, do not like to publicly discuss these aspects of the problem, out of fear that it will increase stigma against those with mental illness. But to honestly address all the issues, all the facts must be made public.

The homeless are at much greater risk of physical and mental illness, substance abuse, assault, and in the case of children, frequent and prolonged absences from school. The mere lack of a mailing address makes it immeasurably more difficult to apply for jobs or public assistance, or to enroll children in school.

The goal of this article is to explore the causes of homelessness, some of the misconceptions of homelessness, and the causes and history of the housing affordability crisis currently gripping the U.S. and specifically Kitsap County. This crisis in Kitsap County is a multi-faceted problem that is a result of several factors, both macro-economic (i.e.: causes that are national in scale, such as restrictions in favorable financing availability for multi-family housing construction and purchase) and micro-economic (i.e.: local factors,  such as tight housing supply in Seattle spilling over into Kitsap County), resulting in “the perfect storm” for affordable housing, especially  for those in the lowest income bracket.  As of the Spring of 2019, these unfavorable economic housing conditions for affordable housing continue to deteriorate, and there is no sign of improvement in the near future – it will get worse before it gets better.

This is the first of a three article analysis series from Kitsap Homes of Compassion. The second article will be entitled, “Crisis in Kitsap – Housing affordability is going to get worse before it gets better.” And the third article will be, “Crisis in Kitsap – There is Hope. Steps we can take to change the course of the housing affordability crisis in Kitsap County.” These articles will be posted on the KHOC website.

Housing affordability and homelessness

According to the “National Alliance to End Homelessness,” the nation is currently facing one of the most severe affordable housing crises in history. Not surprisingly, those living in poverty are the most significantly affected. In Kitsap County, in the 3 years between 2015 and 2018, average apartment rents have increased over 40%. Since the year 2000, rents have nearly doubled in the county.

Up until 1980, communities in the U.S. had plenty of affordable housing. That meant that when a family or individual experienced a crisis and lost housing, they could quickly find another place to live. But by the mid-1980s, a shrinking supply of low-cost housing continued, and the combination of rising rents and slow, stagnant wage growth for lower-income people continued and worsened.

Nearly one-third of all homeowners (31%) and half of all renters (50%) spent 30% or more of their income on housing in 2011. Nearly two-thirds of all renters (64%) and homeowners (63%) earning less than 30% of their area median family income (AMI) [i.e.low income households]  spend more than half their income on housing. These are record breaking statistics, as this was not the situation in decades past. (HUD 2013).

Today, 11 million extremely low-income households in the U.S. pay at least half of their income toward housing, putting them at risk of housing instability and homelessness.

In 2014, it was estimated that 50% of all renters in Kitsap County were paying over 1/3 of their income to housing costs (KCR, 2017 Community Action Needs Assessment). In 2015, the federal poverty level was defined as a household income of $24,250 for a family of four. In Kitsap County for 2015, an estimated 10% of residents were living in poverty, or 24,199 persons.

As the graph below shows, as rents increased in WA State, so also homelessness increased. This crisis situation of lack of affordable housing (and apartment rents rising faster than income) did not simply “happen on it own,” but was created as a result of several factors: policy decisions, funding decisions, and priorities put on the construction/funding of single family homes over that of multi-family housing, discussed in this article. Had other decisions been made, the current lack of affordable housing could have been avoided.


(Graph Source: WA State Dept of Commerce, “A Short Course on Affordable Housing,” presented March 14, 2019 at Kitsap County)

The pervasiveness of affordability problems among low-income renters is due primarily to the shortage of appropriately priced housing and the low and decreasing incomes of renters. While renters are becoming poorer, the supply of housing that is affordable and available is shrinking. One reason for the diminishing real incomes of renters is that many of the more affluent renters had purchased homes from the 1980s until the advent of the mortgage crisis in 2007, thus reducing the average income of renters. A more fundamental cause is the nation’s widening economic inequality, with the vast majority of the income growth flowing to the highest income households. (Tilly C. 2006 The economic environment of housing: Income inequality and insecurity).

If we look at 2011 U.S. HUD data as an example, of the 6.9 million rental units that were affordable (at 30% of income or less) to extremely low-income renters, 2.6 million were occupied by higher-income households, leaving only 4.2 million that were actually available. That calculates to only 35.9 units that were affordable and available for every 100 extremely low-income renters. Another way to look at this problem is to compare it with the game of “musical chairs” we all played as children. When the music stopped, everyone rushed to find a space to sit, but one person was left “homeless.” But in this game of “housing musical chairs,” there is not just one chair missing, but 64 chairs missing for every 100 households – left without an affordable place to call home.

The lack of housing affordable to the lowest income renters reflects above all the inability of the private housing market to produce and maintain low-cost housing without public subsidy. The rents collected from housing affordable to the lowest income households are often simply too low to cover the cost of maintenance, debt service, and taxes, to say nothing of profit for the investors.  As is discussed later in this article, over the last 40 years there has been massive government subsidy for single family home construction and home ownership/purchase, but there has been, comparatively, hardly any subsidy for the construction and operation of apartment buildings.  And with increases in construction costs and operation costs, and with little subsidy, there has been little incentive for private investors to invest funds into building more affordable housing. Thus, over the last 30 years, almost all new unsubsidized rental housing is built for upscale markets. The resulting affordability crisis was inevitable considering all the factors involved.


(Graph Source: WA State Dept of Commerce, “A Short Course on Affordable Housing,” presented March 14, 2019 at Kitsap County)

Has homelessness always been this way?

A hundred years ago, the average income and wealth of the American family or worker was much less than it is today, even after adjusting for inflation, yet there was not the homeless problem that we have today? How could that be true?

In the 1800s, boarding with families was commonplace for people of all ages. As many as half of urban Americans spent part of their lives either as boarders in others’ homes or as hosts of boarders in their own, as professor Paul Groth details in his encyclopedia book Living Downtown. As the 1800s turned to the 1900s and North America urbanized, other options proliferated. For the working class, an abundance of rooming houses opened. Some offered boarding (meals) as well, with a kitchen and dining hall in the basement or on the ground floor. For the poor, cheap lodging houses provided basic accommodations for low prices. Some had small private rooms. Others had grids of open-top cubicles. Still others offered bunk rooms or rows of hard-slab “flops.” In San Francisco a century ago, five-sixths of hotel dwellers were either working class or poor, and a passable room might cost 35 cents a night ($8 in today’s currency).

Many thousands of such quarters once formed the foundation of affordable housing in Northwest cities. Now, few people even know they existed.

Historian Peter W. Mackinlay, (in Old-Time New England collection SC001, 1973, p.84) records that in the 1700’s in the Colony of Connecticut, (and in other colonies) the colonists extended legislation to protect elderly and disabled slaves. The Act of 1702 (in the Colony of Connecticut) required the owners of slaves, and executors of estates, to provide food and housing for slaves “when aged and helpless.” The Connecticut legislation of 1703 and 1711 provided that, “upon the refusal of the former owners to make provisions for their slaves, the selectmen of the town would take care of them and sue the owners for the expenses incurred.” Slaves were treated with great inhumanity and the injustice of slavery, yet it was unacceptable to leave the elderly without shelter – even for a slave. How is it possible that in our modern U.S. society today, we treat our homeless disabled destitute seniors with less humanity than our ancestors of the New England Colonies were required by law to treat their elderly slaves? What does that tell us about our present society?

Ordinances, Codes, and Homelessness

A tightening net of ordinances and codes have helped squeeze rooming houses, and related affordable housing choices, nearly to extinction over the last 80 years.

In Bremerton, such living quarters have almost disappeared. A century of rising affluence is one reason. With higher incomes, we have bought more space and privacy. Young, upwardly mobile, enterprising residents moved out of hotels, depriving hotel districts of their best customers. Those left behind were harder to employ, poorer, on the wrong side of the law, or simply eccentric.

This trend accelerated in the 1960s and 1970s when authorities de-institutionalized many people with mental illnesses and began sheltering them in rooming houses and other cheap hotels, and many ended up homeless. In most cases, mental health authorities intended such arrangements to be temporary. Some planned to build and support constellations of small, neighborhood-based care facilities, for example, but NIMBY (Not In My Back Yard) politics intervened. The care facilities never got built, and some of society’s most vulnerable were stranded in rooming houses, which by then had come to be known as single-room occupancy hotels (SROs), or they became homeless.

Another part of the explanation of residential hotels’ disappearance is legal. Successive generations of laws made residential hotels more expensive to operate. Other rules simply made them illegal outside of historic downtowns: as cities expanded outwards, rooming houses could not spread to the new neighborhoods.

Zoning to keep the poor out of middle class neighborhoods

The rules were not accidents. For a century starting in the 1880s, real-estate owners eager to minimize risk and maximize property values worked to keep housing for poor people away from their investments. Sometimes, they worked hand in glove with well-meaning reformers who were intent on ensuring decent housing for all. Decent housing, in practice, meant not only physical safety and hygiene but also housing that approximated what middle-class families expected. This coalition of the self-interested and the well-meaning effectively boxed in and shut down rooming houses and cheap lodging houses, and it threw up barriers to in-home boarding, too. It acted through federal, state, and local rules in ways that sounded reasonable at the time: occupancy limits; and requirements for private bathrooms, kitchens, and parking spaces. The net effect, however, was to essentially ban affordable private-sector urban housing for those at the bottom of the pay scale.

In the 1920s came zoning, and a more aggressive phase of the assault on inexpensive housing began. Zoning gave city leaders a whole new weapon for separating the laboring class from the “better classes.” After a US Supreme Court ruling in 1926 recognized states’ power to authorize local zoning, city planners quickly trapped residential hotels in the oldest parts of town—the parts built before zoning separated shops, restaurants, and bars from dwellings. Sometimes, they banned rooming houses and other hotels outright in apartment districts; other times, they simply made them impractical by forbidding the dense mixture of retail establishments necessary to support living in them. And by setting aside vast areas of every city for single-family houses on private lots, they drastically curtailed the land available for all forms of less-expensive, multi-unit residences, whether apartments or residential hotels.

Over the next three decades, codes and federal lending programs increasingly discriminated against residential hotels by defining a housing unit as necessarily possessing both a private bath and a kitchen. They also hogtied hotel districts: often, racially discriminatory redlining prevented investment even where zoning didn’t prevent operation.

In Kitsap County, up until recent years, zoning for “single family residence” in low density zones (the majority of areas), required the occupants of the home to be related. Otherwise, if a landlord who did not live in the house, rented the house out by rooms to non-related people, it was defined as a boarding house. And until the last 10 years, boarding houses were only allowed in a few zoned areas – commercial, industrial, or high density residential areas. The areas allowing boarding homes were similar to the areas today that are allowed for sex offenders.

Mandatory off-street parking rules added insult to injury beginning in the middle of the 1900s. They made multi-unit housing radically more expensive to build and operate, because parking requirements typically demanded that for each unit, a residential building provide at least one parking space. Rooming house units are typically no larger than parking spaces, so a new rooming house might be required to provide as much floor space for cars as it did for residents, even though many rooming-house dwellers did not own cars.

In the 1960s, “urban renewal” was the watchword of North American policy on cities. On the ground, it commonly meant leveling residential hotels and the mixed districts that surrounded them, then constructing single-use neighborhoods of one- and two-bedroom apartments. It was housing, but it was too big and expensive for the rooming house-dwelling class.

Rooming houses in Seattle shuttered

Two deadly fires at SRO hotels in the early 1970s motivated the City of Seattle to tighten fire and housing rules for multi-story buildings, requiring expensive upgrades to stairways, doors, and walls, among other things. As Reuben McKnight writes in Preservation Seattle, federal funds were available to help apartment-building owners make the retrofits, but rooming houses did not qualify. Lacking private kitchens and baths, they did not fit the middle-class norm written into federal law. In a matter of months, owners shuttered more than 5,000 inexpensive units of housing in Seattle’s close-in neighborhoods.

The Closing if Inpatient Psychiatric Facilities

The magnitude of deinstitutionalization of the severely mentally ill qualifies it as one of the largest social experiments in American history. From 1970 to 2014, in the U.S., the total number of residents in psychiatric inpatient and other 24-hour residential treatment inpatient & residential care beds decreased by 77% due to the cutting of funding and various changes in policies (page 30, National Association of State Mental Health Program Directors, Assessment # 10, “TREND IN PSYCHIATRIC INPATIENT CAPACITY, UNITED STATES AND EACH STATE”, 1970 TO 2014). This has resulted in a public health crisis, as the number of individuals struggling with a range of psychiatric problems continues to rise. From their historic peak in 1955, the number of state hospital beds in the United States had plummeted almost 97% by 2016. Even when private hospitals are included, the number of psychiatric beds per 100,000 people in the United States ranks the nation 29th among the 34 countries in the Organization for Economic Cooperation and Development. ( Many of those needing supportive housing have ended up homeless, in jails and prisons, and in hospital emergency rooms. By 2014, 10 times more people with serious mental illness were in prisons and jails than in state mental hospitals, a circumstance widely attributed to the shortage of beds to provide timely treatment.


As a result of deinstitutionalization, 2.2 million of the severely mentally ill do not receive any psychiatric treatment at all. About 200,000 of those who suffer from schizophrenia or bipolar disorder are homeless. That’s one-third of the total homeless population. Ten percent are veterans who suffer from post-traumatic stress disorder or other war-related injuries. Multiple studies have reported that at least one-third of all homeless men and two-thirds of homeless women have serious psychiatric disorders. But if only chronic unsheltered homeless are considered, a HUD study in Miami found that almost 100% of that group were mentally ill. (Source: p.124, The Insanity Offense by E. Fuller Torrey).

More than 300,000 with serious mental illness are in jails and prisons. Sixteen percent of all inmates are severely mentally ill. There were about 100,000 psychiatric beds in both public and private hospitals. (PBS Special FRONTLINE report Out of the Shadows: Confronting America’s Mental Illness Crisis).   Jails and prisons where not created nor designed to be psychiatric hospitals, and their staff was not selected or trained to be psychiatric nurses. Yet, in the U.S., the vast majority of the “inpatient” seriously mentally ill are treated in incarceration facilities instead of hospitals or appropriate care facilities. And while incarceration, these mentally ill are victims of abuse and beatings, rape, suicide, and murder.

Deinstitutionalization was based on the principle that severe mental illness should be treated in the least restrictive setting. As further defined by President Jimmy Carter’s Commission on Mental Health, this ideology rested on “the objective of maintaining the greatest degree of freedom, self-determination, autonomy, dignity, and integrity of body, mind, and spirit for the individual while he or she participates in treatment or receives services.” This is a laudable goal and for many, perhaps for the majority of those who are deinstitutionalized, it has been at least partially realized.

For a substantial portion however, deinstitutionalization has been a psychiatric Titanic. Their lives are virtually devoid of “dignity” or “integrity of body, mind, and spirit.” “Self-determination” often means merely that the person has a choice of soup kitchens. The “least restrictive setting” frequently turns out to be a cardboard box, a jail cell, or a terror-filled existence plagued by both real and imaginary enemies. Most severely mentally ill people in jail are there because they have been charged with a misdemeanor. Sometimes “mercy bookings” are initiated by mentally ill persons themselves to get into jail for shelter or food.  Some homeless in Kitsap County have reported committing a crime at Walmat and turn themselves in to obtain shelter from the cold in jail. Jails and prisons have increasingly become surrogate mental hospitals for many people with severe mental illnesses.

U.S. jails and prisons are now being used to house hundreds of thousands of severely mentally ill because there is no other place to house and treat them. But the conditions of prison life exasperate their mental illness conditions – the solitary confinement, being placed with criminals, the negative environment, etc.  A prison in not the proper place for a seriously mentally ill or developmentally disabled person to receive treatment and care.  So it becomes a downward spiral, and when they are released back into society, they are in a worse off mental condition than when they entered.

Please watch this free 55 minute PBS FRONTLINE documentary film, “The New Asylums,” about how U.S. jails and prisons are now used to house the mentally ill, and are more inhuman for the seriously mentally ill than the old Asylums in the 1950’s; ==> click here    (Warning: Disturbing imagery, view discretion advised)

That documentary is produced in 2005, but the situation is still the same today in 2019. The documentary is disturbing, because it shows how our mental health system is broken. Funding for more psychiatric hospitals or in-patient housing for the mentally ill has not been restored.

And when housing is provided to those with severe mental illness, it needs to be the appropriate kind of housing/care.  FRONTLINES conducted a 2019 investigation into New York City’s housing program that was seeking to place the severely mentally ill who were formerly in in-patient care into their own private apartments with little supervision, and the result was a high percentage of deaths and neglect. You can watch the film “Right to Fail” ==> click here 

Just as practice of slavery in our society was cruel and inhumane – needing to be stopped, so is the practice of not providing housing to the mentally ill! It is cruel and inhumane to lock them up in our jails & prisons just to house them, or let them wander our streets, sleeping on benches or tents without the care, treatment, and medication they need. Both places are inappropriate – the streets or the prisons. How much longer must we allow this atrocity to continue? When will we public stand up and say “enough is enough”!

Today, a significant group of people who require structured inpatient care can’t get it, often because of funding issues. Psychiatric bed shortages affect everyone, and immediate action is needed to reverse this situation. We must take action, get involved, and create affordable housing by all means possible for our vulnerable adult population. In the 1800’s people turned a blind eye to the injustice of slavery – we cannot do that today. As it has been said, “To remain silent in the face of evil is itself evil. Not to speak is to speak. Not to act is to act.” (D. Bonhoeffer).

The graph below shows that as the number of mentally ill in hospital went down (hospitals closed), the number of incarcerated mentally ill went up. The years 1960 and 2014 are compared. (Source: p. 81, Insane Consequences by DJ Jaffe 2015) It also shown that as the seriously mentally ill hospitalized were closed, the numbers of homeless that are seriously mentally ill also has gone up.

Graph-p81-Number in mental hospital vs incarcerated-historyB

The graph below shows, in 1981, almost two-thirds of state mental health agency controlled expenditures for mental health were devoted to psychiatric hospitals that by definition serve the most seriously ill, and one-third of spending went to those in the community. By 2012, it as reversed. Impatient spending was only 23 percent of state-controlled spending, and community care represented 74 percent. Community programs largely refuse to serve the seriously ill individuals who are being discharged from hospitals.  “Some seriously mentally ill need hospitalization but can’t get it because the U.S. is short at least 95,000 beds. This is largely because the Institute for Mental Disease (IMD) Exclusion in Medicaid prevents states from receiving reimbursement for long-term hospital care of adults with serious mental illness.” (Source: p.147 & 149,  Insane Consequences by DJ Jaffe 2015)

Graph-p149-History of expenditures of State Hospitals VS ProgamsB

How zoning also restricts construction of new affordable housing

A hundred years ago in the U.S., when rental rates went up, the economic laws of supply and demand would motivate owners of larger homes to convert the home into many apartment units by adding a small kitchen and remodeling the home to have its own entrance.  That action of the homeowner would convert an expensive rental house into several apartments, which typically would have affordable rent. It would create more housing inventory – by dividing one unit into multi-unit housing. This would increase the inventory of affordable housing for that community.

With today’s high construction  and land costs for building new apartment buildings (average cost is over $300,000 per apartment unit), conversion of existing homes into multi-family housing would cost only a small fraction of building new apartments. Yet today in Kitsap County, like most of the U.S., making such a conversion from a single family home to apartments, is not allowed for the vast majority of homes, due to zoning regulations that segregate uses that are thought to be incompatible  (i.e. multi-family units in single-family home neighborhoods.)   Per Kitsap County’s Comprehensive Plan, most single family residences (SFR) are located in residential (rural residential and urban low residential) zoning categories that prohibit such a conversion.

There are many understandable reasons why homeowners and residents would not want their neighbor’s home to be converted from a single family residence into a mult-family residence. Yet, citizens of Kitsap County also need to be aware that restrictive zoning is not “free”, but creates a heavy “cost” or “collateral damage” to our community, and one of those costs is a severe shortage of affordable housing units, which means more individuals and families becoming homeless due to lack of rental housing within their means.  Maintaining the status quo, and the “character of of the neighborhood,” is also keeping the normal economic forces of supply and demand, that in previous centuries, would have eliminated the problem we have created for ourselves – a lack of affordable housing. Residential zoning does come at a price, and it is the disabled and indigent of our community who are paying that price so that those in more expensive neighborhoods can maintain the existing character of their neighborhoods.

Since 1900, and especially since World War II, more and more suburbs and communities in the U.S. decided they wanted all housing in one area to be of the same type (single use zoning) to maintain low densities, and not mix single family homes with multi-family (apartment) buildings.  Residents determined that they could maintain and improve their property values by creating zoning to “protect” their neighborhood (and housing investment) from industrial nuisances as well as “undesirable” residents. Zoning was used as a form of discrimination, to protect home values. Citizens applied political pressure on their local governments to maintain their segregated life.

In 1908, Los Angeles adopted the nation’s first citywide “use” zoning ordinance to protect its expanding residential areas. Social reformers believed that zoning offered a way not only to exclude incompatible uses from residential areas but also to slow the spread of slums into better neighborhoods.  What began as a means of improving the polluted physical environment in which people lived due to industrial development, became a mechanism for protecting property values and “excluding the undesirables.” The two interest groups that were regarded as the undesirables were immigrants and African Americans.

By the 1930’s, the use of zoning regulations to discriminate neighborhoods racially had come to an end, due to several lawsuits that went to the Supreme Court and found it unconstitutional.  Yet discriminatory practices continued through various means, including the use of real estate CC&Rs (Covenants, Conditions & Restrictions) and through the federal government’s lending and mortgage policies.

The U.S. federal government used discriminatory practices to “protect” the value of the homes of the mortgages they insured. To stop the flood of foreclosures during the great depression, create liquidity in the banking market for mortgages and stimulate housing construction, Roosevelt and Congress created the Federal Housing Administration (FHA) in 1934.  Through the FHA, the federal government insured mortgages issued to qualified lenders. With FHA insurance, mortgage lenders were protected from default. The program helped make home ownership affordable through the availability of mortgages that previously were much more expensive (due to shorter term of the mortgage and higher rates). But, the FHA required the mortgage, the property, the borrower, and the neighborhood meet certain requirements to receive the insurance.

The FHA’s strict standards towards the kind of properties they would insure included standards based on the racial and ethnic composition of the community in which properties were located.  The FHA deemed properties located in predominately African American or immigrant neighborhoods too risky to warrant mortgage insurance.  For example, of the eight criteria specified for measuring residential quality, the second-most important criterion (per their guidelines) concerned “protection from adverse influences.” In its 1935 Underwriting Handbook, the FHA listed among these: “the infiltration of inharmonious racial or nationality groups.” The handbook also emphasized the “kind and social status of its inhabitants” as key determinants of a neighborhood’s appeal (quoted in Housing Policy in the United States, Alex F. Schwartz, 3rd Ed, 2015; p. 73).  This is part of the dark history of housing discrimination in the U.S.

Restrictions in the financing of multi-family housing and affordable housing

The history of construction of all housing in the United States is directly correlated to the availability of funding for the purchase of housing (financing) and/or the availability of funding for construction of housing.  Because housing (of any type) is so expensive, its development and acquisition almost always depends on borrowed money.  Housing construction, acquisition of existing rental buildings, and the purchase of single-family homes all rely on debt.

The housing finance system in the U.S. has been structured by the federal government, often in response to crisis. Many of the longest lasting institutions and elements, including fixed-rate self amortizing mortgages, mortgage insurance, and the secondary mortgage market, come from the Roosevelt administration’s interventions in response to the Great Depression. Before the Great Depression in 1929, financing for the purchase of owner occupied housing was in short supply and expensive.  Primarily due to the lack of financing options and high cost, most households in the U.S. were renters. Because of reforms that came during the Great Depression and targeted housing policy to help people become homeowners, only one-third of all households today are renters.

Again, the key to any housing construction or housing purchase (be in single family home or apartment building) is getting financing at acceptable terms. The U.S. housing policy has always made helping single family home owners their main focus. Providing funding to the construction of apartment buildings (which is the backbone of affordable housing), has not always been a priority.  Specifically, from the 1940s to the 1980s, the main financing vehicle for construction of homes and apartment buildings was the savings and loan associations and the mutual savings banks – collectively known as “thrifts.” For most of that time they were highly regulated to ensure they were financially secure. In the 1970s, with high inflation rates, the thrifts were under pressure and so in 1980 the government degregulated them hoping that would solve their problems. That allowed them to take on much greater risk, which they did, leading to the savings and loan collapse and government bailout in 1989.

The bail-out legislation, the Financial Institutions, Reform, Recovery, and Enforcement Acot of 1989 (FIRREA) resulted in in the federal government spending $157 billion, excluding interest, to clean up the mess. In 1980 there were 4,319 thrifts, but by 2010 only 1,129 remained – a decline of 73%.  This dramatically impacted the construction of new apartment buildings (and affordable housing) because before FIRREA, the thrifts were responsible for funding most of the multi-family construction. After FIRREA, the new rules caused thrifts to drastically cut back their loan portfolios and lending activities, contributing to a severe reduction in the availability of mortgage funds for multifamily housing.  This was partly due to the risk based standards imposed by the bail-out legislation (FIRREA) which put multifamily housing at a decided disadvantage to capital as compared to single-family housing.  The FHA and VA programs continued to have their programs (and new programs) to fund households purchases and construction of single family homes, but there was no new funding for investors to buy or build apartments, thus cutting of the life blood to affordable housing.

In 1984, there were over 600,000 multifamily units built, but by 1991, the annual construction of multifamily units had dropped to less than 200,000 – a drop of over 70%. And without the funding, the annual construction of multifamily units has not recovered to this day, with annual construction of apartments today still only a fraction of what is was in the early 1980s. And added to this, almost all those that have been built in the last 30 years have been high-end units, not affordable housing. As a comparison for the same period (1984 to 1991) for single family homes, the drop in construction was only 27%, and it recovered back up to 1984 levels within only 2 years (1993), and then continued to grow to over 50% more (150%) of 1984 levels by 2005. (Data from U.S. Census Bureau 2013, Annual housing starts by building type). Controlling for inflation, thrift multifamily mortgage holdings fell by 87% from 1990 to 1995, and by 24% from 1995 to 2009.

An additional cause for the decline of multifamily housing after the 1980s was the Tax Reform Act of 1986, which greatly diminished the tax benefits for investing in rental housing.

The impact of these two major changes (removing rental property as a tax shelter and restrictions in financing due to the thrift collapse) cannot be overstated. “Multifamily housing starts decreased EVERY YEAR from 1985 to 1993. As a share of total housing starts, the multifamily sector fell from 33% in 1985 to 15% in 1991 and 11% in 1993. It was not until the second half of the 1990s that multifamily starts began to recover, but they have yet to climb back to volumes of the 1980s or late 1970s.” (Alex F. Schwartz, Housing Policy in the United States, 2015, p.131)

The secondary mortgage market is the market for the sale of securities or bonds collateralized by the value of mortgage loans. Like single-family mortgages, the secondary market has become an increasingly important source of financing for multifamily mortgages. In total, the secondary mortgage market currently accounts for more than half of all multifamily mortgages, followed by depository institutions with almost 30%.  The growth of the secondary mortgage market and the decline of the thrift involvement in multifamily lending pose troubling implications for the financing of low cost developments and rental housing located in low-income or minority neighborhoods.  The secondary mortgage market for multifamily housing was much more limited and restricted than that for the secondary mortgage market for single-family mortgages – in short, at a great disadvantage.


The graph above shows annual housing starts in the U.S. by building type, 1975-2013. (Source Housing Policy in the United States, Alex F. Schwartz.) Notice the drastic drop in annual construction of mult-family housing at 1986, never to recover to those levels since, while single-family home construction more than doubled between 1982 and 2006. Should we be surprised at our current shortage of apartment units and rapid increase in rental rates, when for the last 30 years we have not been building multifamily housing units like we did in the 1970s and 1980s? We have been creating the current crisis over the last 30 years by not financially encouraging the construction of apartment buildings.

Additionally, the Joint Center for Housing Studies has found that financing for mid-sized rental properties with 5 to 49 units (which accounts for 20% of the rental market), is less readily available or less closely integrated with global capital markets than is the case for smaller or larger properties. They do not have availability to favorable loan terms such as fixed-rate mortgages with term that extend longer than 10 years (no such thing as a “15 year mortgage” or “30 year mortgage” for mid-sized rental properties).

The major Tax Reform Act of 1986 included the establishment of the Low-Income Housing Tax Credit (LIHTC) program, which will be discussed below in detail in its own section. It accounted for about 30% of all multifamily rental housing constructed from 1987 to 2006 – the year of the program’s peak. But with the the financial crisis of 2008, most investors didn’t need tax credits and the program went into decline. Over the last 25 years, this program has been the single most important source of equity for low-income rental housing in the United States, yet it has not been sufficiently large in scope to meet the demand, and most of the rental housing it created was still too expensive for extremely low income households to afford.

The mathematical reality and law of supply and demand always rule. If a society or a country drastically reduces the construction (and supply) of multi-family housing (apartments) units, then a shortage will result and increased rental prices will result. The birth of the affordable housing crisis in the 1980s had begun. Without the life blood (liquidity) of mortgage financing to the multi-family housing markets, fewer and fewer apartments were being built. This is the core explanation of the affordable housing problem we face today. It took over 30 years to create this problem, and it certainly will take time to change it, even if drastic changes were made immediately to start building affordable housing at the needed levels.

Since the mid 1980s, the U.S. housing policies and subsidies for financing the purchase and construction of real estate has had the vast majority to help going to the individual purchase and finance of single family homes, as opposed to giving the same financing opportunities (rates and terms) to assist investors build or purchase rental properties, especially rental properties with over 5 units.

Congress had made attempts to help stimulate affordable housing, but it was mainly not through the creation (or financing of) affordable rental properties, but rather trying to help low income families become home owners.  The FIRREA Act required that federal Home Loan Banks dedicate 10% of their annual net income to a new Affordable Housing Program (AHP). The AHP could be used for a wide range of purposes involving rental and homeowner housing for low and moderate income households, but very low income households would not qualify for any mortgage and need affordable rental housing.  Some have argued that in seeking to increase lending to lower income borrowers in the early 2000’s, they encouraged people to take on mortgages they could not afford, (subprime mortgages), many of which ended in foreclosure during the mortgage crisis of 2008-10.

While it is true that rental rates are controlled mainly by the market forces of supply and demand, the construction of new apartments (i.e.: creation of more affordable housing units and  housing inventory) does not happen as a simple result of supply and demand forces, due to the fact that housing construction (of any type) is so expensive and requires massive amounts of borrowed money. Regardless to how much demand there is for multifamily housing, without financing, it is almost impossible to build, buy, or sell.

Isn’t most U.S. Housing Policy and funds directed to help the poor?

This is one of the greatest misunderstanding of the public: most people think housing policy in the United States is to provide public housing, vouchers, and other subsidies for the poor. The fact is, the federal government provides a MUCH larger housing subsidy for the affluent in the form of tax benefits for home ownership. Whereas about 7 million low-income renters benefited from federal housing subsidies in 2012, more than 34 million homeowners took mortgage-interest deductions on their federal income taxes. A tax deduction is a federal subsidy – it results in less taxes that an individual is required to pay. All those 34 million homeowners who claimed their deduction, and paid less tax, were in essence having their mortgage payments partly subsidized by the federal government, equivalent to a cash gift from the government. (Most Americans are not aware that most governments/countries around the world do not give this subsidy to homeowners in other countries, as it is in reality, a gift/subsidy to a more wealthy segment of the population, not the most needy).

Specifically by the numbers, federal expenditures for direct housing assistance totaled $47.9 billion in 2012 (to the poor/disabled);  however, mortgage-interest deductions and homeowner tax benefits exceeded $220 billion! (This $220 billion goes mostly towards the mortgage tax deduction, but includes deductibility of property tax payments, low-interest mortgages for first-time home buyers financed by tax-exempt bonds).  Moreover, over 50% of these tax benefits go to households with incomes above $100,000.  (Housing Policy in the United States, Alex F. Schwartz, 3rd Ed, 2015; p. 7 and 131).

Are homeowners in greater financial need than those poor enough to qualify for direct housing assistance (renters who qualify for assistance)? (Direct housing assistance is basically given in three ways: 1. supporting the construction and operation of specific housing developments; 2. helping renters pay for privately owned housing through the voucher program; 3. providing state and localities with funds to develop their own housing programs – the block grant programs). Why is it that 18% of all government housing subsidy is going to help the poor with housing while 82% is going to subsidize the middle and upper class? (Using 2012 data, which is typical).  It is because most of U.S. policy is designed around helping Americans obtain the “American dream” of becoming a homeowner.

With so much more financial government assistance going to homeowners as compared to renters, is it because homeowners are in greater financial need than renters? The statistics tell a different story; in the U.S. homeowner’s median household income (i.e. $62,500 in 2011) is nearly double that of renters income. The differences are starker with regard to wealth. In 2011, the median net wealth of renters in the U.S.  is $5,100, amounting to just 2.9% of the median for homeowners wealth ($174,500). In other words, the median homeowner in 2011 was 34 times wealthier than the median renter! And that was after the housing crisis of 2008 (with their drop in net worth).

Maybe this would explain why the U.S. is one of the few countries in the world that give an interest tax deduction to (the relatively much richer) homeowners.  To an outsider it would seem odd that a country like the U.S. would give 4.5 times more federal tax subsidy to a population category that is 34 times wealthier and with almost double the annual household income than the indigent population that only receives a smaller piece of the financial subsidy pie (18%), but that speaks to the American culture and value we place on making a reward for those who are fortunate enough to attain home ownership. The U.S. government promises to reward those who attain home ownership by paying part of their home mortgage interest for them, no matter the cost to the U.S. treasury.  (And in addition to this tax subsidy for homeowners, there is the deduction of property taxes on owner-occupied residences, exclusion of capital gains on sales of principal residences, etc.). One reason for the relatively low profile of the nation’s tax incentives for housing is that, unlike direct assistance, they are not subject to Congressional appropriation and do not count as governmental expenditures. Another reason for the unquestioned acceptance of tax expenditures may be the fact that the beneficiaries consist mostly of well-to-do homeowners.  Politically, it is far less risky to protest against public housing than to question the wisdom of providing more than $100 million annually in tax breaks to homeowners.

The more conspicuous direct housing assistance (public housing, rental vouchers, and other programs to help low-income households) are targeted for reduction nearly every year going forward into the future – even though they are a small percentage of the total picture of  direct expenditures plus “tax expenditures”.

Kitsap’s regulatory steps in the right direction

In recent years, regulators are beginning to realize how overly stringent laws and codes have contributed to the lack of affordable housing. In 2017, Kitsap County made permanent the new  ordinance that allows the development of homeless camps on property owned by religious and nonprofit groups – and part of this new ordinance now allows boarding houses to be operated in neighborhoods that are zoned “single family residence” which previously prohibited boarding houses. Progress is being made.

Also, new codes in Seattle reducing the minimum square footage of an apartment have allowed for the construction of affordable “micro-apartments” which previously would have been illegal to build because of their compact size.

These promising efforts show that housing forms of the past hold potential. They appear to be one of the biggest chances cities have to advance sustainability, housing affordability, and community economic vitality. Updated to current technology, rooming houses are a promising solution for the era we are entering. They can offer clean, safe, functional, and efficient quarters for a price in reach of many.

Seniors and homelessness

Although adults ages 55 and older account for less than six percent of the overall U.S. population, they represent more than 11 percent of chronically homeless individuals nationally.  With the rising cost of housing, including the rising cost of housing construction, seniors living on a fixed budget have been squeezed. Those living on only social security have especially been hit hard.  But if you look at the even more vulnerable category, seniors that have disabilities – either physical or mental – which keeps them from being able to work, the situation can be dire. This has resulted with seniors, who do not have family, being forced to sleep in their cars, in homeless shelters, or outside in a tent.  This is an unacceptable solution.  New answers (and old ones) need to be found so that every person can have the dignity of a warm place they call home.

Mental illness and homelessness

One of the biggest issues some people with mental illness face is the availability of housing. For many people, having a mental health condition has no impact on their housing. Most people can live independently in apartments or in their own homes. For others, the cascading effects of mental illness might leave them in a precarious housing situation, or even cause them to lose their homes. Additionally, one of the symptoms of untreated mental illness is the inability to manage their finances – which can leave an individual homeless. Having a safe and secure place to live is an important part of recovery, along with access to services that enable those with mental health conditions to live as independently as possible. Group homes and other types of supportive housing combine housing and services in an enclosed and supportive setting. Supportive housing has been a practice that has been used all over the U.S. for decades.


Part of the homeless equation is related to poverty. America is one of the richest nations in the world (ranking #11 out of 180 nations reported by US Today Nov. 18, 2018, using a country’s economic output measured by its gross national income). Yet, of top 25 richest nations in the world, America has the highest poverty rate at 16.8%. Thus, the US is one of the most unequal countries on the planet in terms of wealth distribution.  The demand for housing from the wealthier part of the population helps drive up prices, but the large population segment with low income cannot afford the higher prices, resulting in homelessness.


Our current homeless crisis did not come about on its own, but was created over many years, partly due to regulatory decisions which limited the creation of affordable housing, and in other cases caused the destruction of existing affordable housing. Yet, as our state, county, and city governments unwind some of the old rules and ordinances that contributed to this crisis, we will continue to see the re-emergence of inexpensive choices including rooming houses and other old residential forms. This revival of the old forms can meet an urgent need for young people, some seniors, and for poor and working class people of all ages: the need for homes they can afford that are still, in UC professor Paul Groth’s phrase, “more luxuriant than those lived in by a third to a half of the population of the earth.”

        Today, we are ashamed and embarrassed at how our ancestors and American society 200 years ago inhumanely treated African-Americans and Native Americans.   Abraham Lincoln stated, “Fellow-citizens, we cannot escape history. We of this Congress and this administration, will be remembered in spite of ourselves. No personal significance, or insignificance, can spare one or another of us. The fiery trial through which we pass, will light us down, in honor or dishonor, to the latest generation.”

Today, we have millions of physically and mentally disabled Americans abandoned to fend for themselves, sleeping on our streets, in our forests and in their cars. In another 200 years, how will our descendants judge our actions towards these vulnerable seniors? We cannot escape history – “it will light us down in honor or dishonor”.

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