Why New York City gets gouged on homeless shelters

(CRAINS) John MacIntosh, October 8, 2019

The recent brouhahas over siting homeless shelters across the city demonstrate how little people really understand about the economics of it.

Since the early 1980s New York has recognized a constitutional right to shelter. If you demonstrate that you have no place to live, the city must provide you with a place to stay that night. And despite the fights over where shelters go, we should all be thankful that they go somewhere: The more than 21,000 children sleeping in our city’s shelters need somewhere safe to stay.

Not only is providing shelter morally right, but it has helped New York avoid the quality-of-life issues plaguing high-cost cities where homeless people have no choice but to live on the street. For example, Los Angeles and New York City both have about 60,000 homeless people, but in L.A. 75% sleep on the street, compared with only 6% here.

The cost of shelter has two components: real estate and social services. The latter are provided under contracts by nonprofits that are required to document and justify every nickel they spend, every person they hire (and staffers’ pay and title), and every change they make. The social-service component includes no profit margin, so “less cost” just means “less service”—less security, less case management, less child care and less support to find permanent housing. Reducing costs by skimping on social services is a false economy that is worse for homeless families and worse for the neighbors too.

The real estate cost of a shelter depends upon its location, size, age and the date it was leased. But it also depends upon the type of landlord.

If the city owns the shelter, the rent is zero and/or irrelevant. This is largely the way the system was originally envisioned—owned by the city, operated by nonprofits. But the number of homeless New Yorkers long ago passed the point where city-owned shelters were sufficient.