Roberts: When your rent increases so does homelessness

When I sat in my high school economics class, years ago, I struggled with conflicting numbers, lofty principles, and difficult equations. How would macro or micro economics impact a teenager who was more worried about sports and weekend activities?

But one high school economics principle stuck with me to this day — the law of supply and demand. If the supply of a product is high and the consumer demand is low, the price goes down. The opposite is also true. If the supply is low, and demand is high, the price skyrockets.

In the past decade, this simple high school lesson has crash landed within the city borders of San Jose. Once a Spanish settlement, the city has become the epicenter of the world’s tech industry, and unfortunately, is also home to the least affordable housing community in America.

Home-buyers pay more than half of their income on mortgage payments, and renters pay more than a third of their wages.

If my high school economics teacher were around today, he would have slapped my desk and said, “It’s very simple. There are not enough homes (supply), and too many people need homes (demand). That’s why the price of housing here is so high!”

Housing experts are more sophisticated in their explanations. Job growth in the city has outpaced the building of new housing units. Jobs in Silicon Valley are often higher paying and that attracts job seekers from all over the country. But when they get here, they need a place to live in a region with a limited supply of homes and apartments.

I still put my high school thinking cap on to explain it this way – more people demanding a place to live, with not enough homes means out-of-control housing costs.

And, now we are told that the exorbitant cost of living in a home results in the increase of homelessness. Of course, it doesn’t take a valedictorian to understand that rising rents start pricing people with stagnant wages out of their homes.

Yes, the average renter in San Jose is paying more than a third of their wages toward rent, but people with very low income are paying an even higher percentage. If three-quarters of your income pays for housing, and the landlord increases your rent, you soon are unable to live in your apartment. No apartment means living on the streets.

Zillow states that when the cost of rent increases by five percent in the city of Los Angeles — another municipality struggling with high housing costs — 2,000 more people end up being homeless.

Our PATH San Jose street outreach teams are seeing this sad economic principle playing out within the borders of San Jose. Some people who previously had middle-class jobs and apartments have now ended up on the streets.

We used to think the stereotypical image of homelessness was a person with a behavior problem — alcohol and drugs. But with the devastating effects of the recession, and the current sky-high housing market, even typical people we never would have imagined before, have become homeless.

The city of San Jose counted 4,350 people who were homeless during its 2017 homeless count. During the past decade, this number has stayed steady. What that means is that even during the difficult recession the city has at least housed enough people for the homeless number not to skyrocket.

But if the supply of housing does not increase in the next few years, rents will increase. And, consequently, so will homelessness.

High schoolers today better stay awake during their economics classes. The principles taught are not lofty, out-of-reality ideas. The law of supply and demand could very well affect them today, and in the future.

San José Spotlight columnist Joel John Roberts is the CEO of PATH, a statewide homeless services and housing development agency that provides services and housing in San José. Joel is also a Board member of Silicon Valley’s Destination: Home. His columns appear every fourth Monday of the month.