Last week, I visited Venice, a neighborhood in LA that is full of wealthy tech entrepreneurs and homeless people. While strolling along one of the canals, I noticed a sign, “Stop the Monster”.  This led me to google the phrase in order to learn more about the issue. 

The monster is a proposed 140 housing project that would be built on a parking lot along Venice’s grand canal, just over a block from the beach in the very center of town.  Roughly half the units would go to the homeless, while the other half would be provided to low-income workers and artists.  The LA Times suggests that the project would cost $75 million, or just over $500,000 per unit, while critics suggest that the full cost could be as high as $1.4 million per unit.  I believe the critics are adding in the opportunity cost of using 3 acres of prime Venice real estate, and some other opportunity costs.

I was struck by that fact that critics often complained that the project was an example of YIMBYism, the advocacy of more housing construction as a way of addressing America’s housing crisis.  I consider myself a YIMBY, but have trouble understanding the logic behind this particular housing proposal.

While I’m not as wealthy as the residents who live along Venice’s canals, my economic situation is certainly much closer to the typical Venice homeowner than the typical Venice homeless person.  So my views may be biased by the fact that it’s easier for me to put myself in the shoes of those who oppose the “monster”.  But I don’t see why this project makes sense even if one prioritizes the interests of the homeless, as philosopher John Rawls would have encouraged us to do.  Venice has between 1000 and 2000 people living on the streets, and this project does nothing for the least fortunate of that group, i.e. those who would not be lucky enough to get one of the 68 units set aside for the homeless in the new project.  Indeed one would not even have to be a Venice resident to qualify.  (Venice is not a separate city like Santa Monica; it’s a neighborhood within Los Angeles.)

Let’s suppose there are 1500 homeless people in Venice.  Also assume that the opportunity cost of this proposed project is $150 million, when the land costs are included.  In that case, instead of housing 68 homeless people, why not house all 1500 at a cost of $100,000/person.  That’s roughly the cost of housing a typical American.  (I’m assuming a $300,000 home with three residents.) 

You might argue that my proposed policy would not solve Venice’s homeless problem, as the supply of homeless in California is somewhat elastic.  I agree!  Indeed, I was criticized for making this “elasticity” claim a while back, as commenters pushed back against my claim that California attracted homeless people from other areas.  In fairness, I should have been more specific and referred to “street people”, rather than “homeless.”  Consider this data from Reason magazine:

In San Francisco, 73 percent of the city’s homeless population is considered unsheltered. That’s not normal, even for a big city: In New York City, the figure is about 3 percent. 

The homeless live in many areas, but California is a relatively desirable spot for street people.  Obviously I don’t mean absolutely desirable, just that it’s preferable to live on the street in California rather than in New York.  Due to its high housing costs, New York has plenty of homeless people, but only 3% of them live on the streets.

If I’m wrong about street people, if incentives do not influence their behavior, then Venice really could solve its homeless problems at a relatively low cost.  I imagine there are some tech billionaires in Venice that are rich enough to write a check for $150 million, enough to buy ranch houses in the Midwest to house every single homeless person in Venice.  If they did so, however, another 1500 homeless people would quickly replace them on the streets of Venice.  That’s not “effective altruism”.

I’m not sure if progressives are willing to face the fact that the quantity of street people is to some extent a function of how attractive we make the solution to homelessness.  Venice will have more street people if their solution to homelessness is $1.4 million dollar units a block from the beach in the center of Venice, and it will have fewer street people if the solution involves buying a massive unused warehouse in a hot, polluted industrial area of East LA, and then installing hundreds of military style barracks inside.

Yes, my proposed solution is punitive.  The progressive solution is completely ineffective.  I don’t particularly like either solution.  Is there a third way? 

Here we need to return to the distinction between the homeless and street people.  The vast majority of homeless people in America do not live on the streets.  Many have jobs.  For that group, the best solution is building more market rate housing.  Lots more.  Most homeless people will not be able to afford that new construction.  They certainly wouldn’t be able to live in new construction in central Venice.  Nonetheless, building new houses, even mansions, helps the homeless by reducing the price of existing housing, just as building new cars helps lower income people by reducing the price of old used cars.  (Did you notice what happened to used car prices when a chip shortage limited production of new cars?)  In that sense, I’m a YIMBY.

For those who do live on the streets, I have no easy answers.  Many have drug, alcohol, and mental illness problems.  Some people claim that a “tough love” approach works best, encouraging the unfortunate to get treatment.  If so, my punitive “barracks” proposal might actually reduce the problem.  Or maybe not.  I don’t know enough about the problems faced by street people to have a firm opinion one way or another.  All I know is that the sort of solutions advocated by progressives in Venice won’t work.  So perhaps it’s time to at least try something else? 

There seems to be some confusion as to the meaning of “YIMBY”.  Critics of the Venice “monster” blame the YIMBYs.  So let me just say that I’m a fan of “Market priced housing in my backyard”.  Call me a MIMBY.

PS.  I’m simultaneously appalled and impressed that the US is willing to fund such projects.  Appalled that we try to solve homelessness with such an expensive and ineffective policy.  Impressed that we have enough compassion to spend lots of money housing homeless people in million-dollar housing units placed in desirable SoCal beach areas right next to the homes of the wealthy.  Most other countries would not be willing to do this.  Indeed I wonder if any other country would enact this sort of program.