Spring 2014

Research Briefs


Money Mismanagement Correlated With Homelessness Among Recent Veterans

Veterans make up 10 percent of the U.S. population, but it is estimated that they constitute between 16 and 32 percent of the nation’s homeless population, indicating that veterans are overrepresented among the homeless. What accounts for this? A recent study suggests that while factors such as mental illness and physical injuries sustained during active service contribute to the homelessness seen among veterans, another significant correlation can be found between management of personal finances and housing stability. To identify the role that money management plays in veteran homelessness, Eric Elbogen, Connor P. Sullivan, James Wolfe, Henry Ryan Wagner and Jean C. Beckham drew on data from two waves of surveys of veterans conducted by the U.S. Department of Veterans’ Affairs between 2009 and 2011.

The surveys prompted veterans to respond to questions about their personal and employment background and income, medical history, financial management practices, and housing situation. Most respondents were employed (75 percent) and had some education beyond high school (82 percent), but many also struggled with alcohol abuse (24 percent) or mental illness (28 percent). Yet the researchers noted that an even larger number–over 30 percent—of the veterans reported that they had mismanaged their money in some way between the first and second surveys. The authors observed that most veterans who faced financial problems had gone over their credit limit, had written bad checks, or were overdue on loan repayments. 

Overall, five percent of respondents said they had been homeless for at least one night during the survey interval—a figure which is likely an undercount given that survey was mailed to veterans and those who were homeless and without a mailing address at the time of the survey would not have received it. What is more notable is that the homelessness rate among respondents varied considerably by income level and whether or not a veteran mismanaged his or her money. While less than one percent of higher income veterans with no history of money mismanagement found themselves homeless, nearly 15 percent of those with lower incomes and poor money management were homeless during the survey interval. Additionally, more of the veterans with higher incomes but poor money management reported homelessness episodes than those with lower incomes who managed their money well. 

The authors suggest that veterans have limited opportunity during and after their military training and service to learn money management skills, which may explain in part the strong correlation between insufficient money management and instances of homelessness. They note that credit card debt is especially prominent among veterans with financial problems, and veterans are three times more likely to take out payday loans than the general public. 

To help reverse these trends and better prepare veterans for return to civilian life, the authors suggest including a more thorough financial education program within the Transitional Assistance Program that service members attend during discharge processing at the end of their service. They also suggest that Department of Veterans Affairs assistance programs for currently homeless veterans include financial skills training to help veterans learn better money management behaviors.

Eric Elbogen, Connor P. Sullivan, James Wolfe, Henry Ryan Wagner, and Jean C. Beckham, “Homelessness and Money Mismanagement in Iraq and Afghanistan Veterans,” American Journal of Public Health, Supplement 2, 2013, Volume 103, Number S2, pp. S248-S254.


Municipal Policies Preserve Affordable Housing Amidst Post-Recession Rent Pressures

Municipalities across the United States are grappling with a post-Recession housing paradox: just as demand is rising for rental homes affordable to low- and moderate-income renters, traditional funding sources for affordable housing construction and rehabilitation are running low. Cities and counties face the question of how best to build and preserve affordable units amongst rapidly rising rents and a boom in market- and above-market rate multifamily housing construction. A recent article by Edward J. Sullivan and Karin Power observes that given these realities and the shortage of funding, a growing number of municipalities are employing local policy tools as an alternative to help preserve and increase the availability of affordable units.

The authors note that there are many factors contributing to the need for construction of more affordable homes and preservation of existing affordable units. Among these reasons are reduced renter incomes, lower rental unit vacancy rates, and increased demand for rental units on the part of growing populations including seniors, minorities, and millennials. At the same time, the stock of existing affordable housing units is aging and many subsidized developments are reaching the end of their mandated affordability preservation periods. The authors explain that once the affordability clauses attached to many lower-rent subsidized developments expire, property owners may choose to convert the units to market rate, especially in light of parallel demand at the higher-priced end of the rental market, thus shrinking the existing affordable housing stock. Additionally, the majority of lower-priced rental units are not subsidized; without the restriction of affordability clauses owners of these properties can generally raise rents at will. 

Lower-income renters are unlikely to have better luck with newer rental units, the authors note, since most multifamily residential buildings constructed since the mid-1990s are offered at market- or above market-rate rents. The authors also point out that traditional affordable housing development and rehabilitation subsidy programs such as the HOME Investment Partnerships Program and Community Development Block Grants have been deeply slashed in recent federal budgets, diminishing the funding available to cities and counties to devote to affordable development projects and inhibiting the addition of needed affordable units.

Despite fewer financial resources, Sullivan and Power emphasize that municipalities play an important role in ensuring the provision and preservation of affordable units due to their power to introduce and enforce policy solutions. The authors highlight three ways in which cities and counties are using regulatory solutions for affordable housing purposes in the post-Recession housing landscape: “no net loss” policies, rights of first refusal, and municipal building codes. “No net loss” policies require a one-for-one replacement of any affordable housing units that are removed from existing stock due to property deterioration or market-rate conversions. Under rights of first refusal policies, owners of existing subsidized or other multifamily buildings must notify the city or county of their intent to sell the property, at which point municipalities can offer the building for purchase exclusively for a defined period to non-profit organizations or public agencies that intend to retain affordable housing or convert market-rate units in the property to affordable homes. Through municipal codes, municipalities can provide conditions specific to affordable properties, such as waived permit and land use fees, reduced parking requirements, or streamlined development review processes, all of which can help to lower development or rehabilitation costs for affordable housing developments. The authors suggest that municipalities consider employing such policies to help preserve their existing affordable housing stock and provide additional lower-rent units in light of the steep demand for such homes. 

Edward J. Sullivan and Karin Power, “Coming Affordable Housing Challenges for Municipalities After the Great Recession,” Journal of Affordable Housing and Community Development Law, 2013, Volume 21, Issue 3/4, p. 297-314.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or the Federal Reserve System. Material herein may be reprinted or abstracted provided Community Investments is credited. Please provide our Community Development Department with a copy of any publication in which material is reprinted.