Adult foster care for the homeless

On his visit to California on September 17-18, President Trump underscored the urgency of the homeless crisis. On the eve of his visit, the Council of Economic Advisers issued a special report, “The State of Homelessness in America.” It attributes the problem, correctly, “to decades of misguided and faulty policies” and evaluates policy solutions.

The simplest, fastest and cheapest way to end the U.S. homeless crisis is adult foster care. This will match the national objective to take the homeless off the streets with the incentives of publicly paid providers to house the homeless.

No new funding is necessary nor is any new publicly financed housing construction. Just re-channel the existing public funding from a panoply of programs, agencies and non-profits to private market caregivers. They will literally take the homeless off the streets and house them in the existing homes and newly acquired private residences, with government fees financing private mortgages. Adult foster care is a combination of boarding houses for five-six persons, singles or families, with one or another extent of nursing care. Caregivers receive basic training and earn state licenses. The foster care fees will be differential, negotiated on a case-by-case basis with the paying agencies, depending on how hard specific cases are and how good the housing and caregivers are. 

After decades of government efforts and tens of billion dollars spent, the homeless problem persists. This policy failure is due to the mismatch between the government objectives and the incentives of recipients.

First, the incentives for temporary housing keep the current homeless on the streets. Federal and state subsidies pay local government agencies and non-profits to pay the homeless to stay homeless. Shelters, short-term hotels, free food, cash allowances, emergency rooms, health care and the like provide temporary relief and perpetual homelessness.

Second, the incentives for permanent housing crowd out the homeless from subsidized housing in favor of the non-homeless. Federal rent support comes from an array of programs called Continuum of Care. It goes to the tenants, selected by local agencies and non-profits, who can pay 30 or 33 percent of the market rent in the homeless housing complexes, the balance covered by American taxpayer. 

Conveniently, local agencies and non-profits own and manage these apartment buildings on the federal dime. The selection bias is enormous. Only the upper tier of the homeless qualifies to pay the rent. Lo and behold, eligibility includes not just the actual homeless but also the applicants who agencies and non-profits assess to be at risk of becoming homeless without this program. Moreover, this assessment accepts self-certification.

These non-homeless can readily pay the tenant portion of the rent and the agencies and non-profits select them to be housed. The program intended for the homeless becomes another public housing for the non-homeless. Federal subsidies pay local agencies and non-profits to carry out this diversion of resources and keep the majority of the homeless on the streets.

Throwing more money at this policy failure is counter-productive. Already in California, the cost runs up to $40,000 a year per shelter bed.

One can rent an apartment in San Francisco or a house elsewhere for this price. Re-channeling resources to directly house the homeless in adult foster care would save public health and money. According to the U.S. Inter-Agency Council on Homelessness, the average cost of the homeless person to taxpayers runs in the range of $30,000-$50,000 a year in federal, state and local funding.

This is largely higher than the U.S. median wage earnings of $38,000 and the median income per adult person of about $33,000 in 2018.

To wit, half of the U.S. adult population lives on less than is spent on the average homeless. And this does not include the private costs of falling public sanitation and quality of life to businesses and residents.

The cost of adult foster care to taxpayers would amount to $25,000-$30,000 per person a year. This includes $7,000 for Medicaid, $3,000 for mental and substance abuse treatment, $3,000 for food, $5,000 for room (half of what the government contributes in rent support in single units) and $7,000-$12,000 in the caregiver fee depending on each case.

Not cheap, but much cheaper than the current public cost, and it should eradicate homelessness instead of perpetuating it. The fee of $7,000-$12,000 per person when housing six persons would provide the $42,000-$72,000 income to the caregiver, a healthy life to the tenants and a physical, fiscal, and moral relief to the public.

For the best results, there should be a tripartite contract among government agencies, private caregivers and the housed homeless who become clients. Living conditions, the degree of care, terms, mutual responsibilities, fees, penalties, etc., should be specified, including the rights to enforce and reject substance abuse rehabilitation and psychiatric treatment.

The tripartite contract will ensure the double control, by the payer government and by the clients. The bidding for contracts by foster caregivers will be competitive. Relatives who had erstwhile abandoned their hardcore kin to the streets could now join the ranks of compensated caregivers and compete for their precedence over professional strangers. Competitive bidding and the tripartite contracts will help find the best match between specialized caregivers and clients with specific needs. Differential fees case-by-case will remove the selection bias. The hardest clients will find homes, not just the easiest. Families who fell onto hard times would especially benefit, enter and exit.

Housing itself is part of the matching. The homeless who are employed, some 20 percent of the total, or who would find employment thanks to being housed, can choose to pay extra for better accommodations. Caregivers should receive a bonus for each client lifted towards self-reliance.

The role of government agencies is to ensure that public money is well spent and that there is minimal fraud and zero abuse. Later, an Airbnb-type coordinated network of caregivers might emerge and enhance the matching and accountability. Clients would apply from public library computers, caregivers with vacancies would respond, government agencies would administer the contract.

For now, market incentives will send foster caregivers to the streets to pick up clients, bring them to the local agency offices to sign a contract and take them off the streets to their new home, for the good all.

Michael S. Bernstam is a research fellow at the Hoover Institution at Stanford University.