Bay Area homelessness crisis needs coordinated strategy, says McKinsey

Coordinated effort from governments, nonprofits, and private sector is needed to stem the growing homelessness issue in the San Francisco Bay Area, according to a recent report from management consultancy McKinsey & Company.

The Bay Area has the third-largest homeless population in the US, after New York City and Los Angeles, with two-thirds living on the street, in cars, or encampments, and the other third in the temporary shelter system and/or staying with friends/relatives.

A 2017 point-in-time study estimated 28,000 people were homeless in the Bay Area; preliminary PIT counts in 2019 show an increase of 17% in San Francisco, 31% in Santa Clara, and 43% in Alameda County since 2017. According to McKinsey, though, PIT counts can underestimate homelessness numbers by at least two to three times.

The crisis is placing an additional burden on healthcare, criminal justice, and behavioral health systems – a 2015 study out of Santa Clara County estimated indirect costs of homelessness on healthcare, criminal justice, and social services were $520 million annually in the county.

One glance at Bay Area housing prices and rents, and it’s fairly obvious what one root cause of the crisis is: housing affordability. From 1999 to 2014, the Bay Area permitted 61,000 fewer very-low-income-affordable housing units than recommended by the State of California. And for every two affordable housing units that were built, more than one was taken off the existing stock because of “market pressures.” All the high-paid tech workers flowing into the city had to live somewhere, and the municipal area didn’t build nearly enough affordable housing to replace the now hyper-gentrified housing stock.

According to stats from the National Low Income Housing Coalition, there was a supply gap of more than 157,500 affordable and available units for extremely low-income households in the San Francisco–Oakland–Hayward and San Jose–Sunnyvale–Santa Clara metropolitan areas as of 2017.

Furthermore, two-thirds of extremely low-income households live in rental accommodations they struggle to afford, leaving them in a precarious position.

The Bay Area’s crisis-response system is also falling short of providing adequate coverage. The system currently shelters 30,000 homeless people, but more than 28,000 additional people need permanent housing, and 18,000 of those require immediate shelter, according to McKinsey’s report.

Aside from housing unaffordability and insufficient inventory, McKinsey highlights the lack of coordination as another element in the Bay Area homelessness crisis. Each county has its own strategic plan, collects its own homelessness data, and takes its own funding from the US Department of Housing and Urban Development. The Bay Area’s crisis-response system is highly fragmented, with limited communication and data sharing – an issue because of the high interregional mobility of the Bay Area’s homeless population.

Progress on the homelessness issue will require regionally coordinated efforts from governments and the private sector, according to the report.

Moving forward

At the core, the Bay Area has to greatly expand the low-income housing supply. Closing the gap in affordable housing, however, is probably impossible under the current conditions according to McKinsey. The current system is impacted by convoluted permitting, high construction costs, and long timelines slowed by administrative bottlenecks.

The report recommends a cohesive strategic approach that integrates funding, data collection, and advocacy efforts across regions. “Creation of a regional Bay Area Homeless Management Information System could help to build a more accurate map of inflows, exits, available services, gaps, and cost to serve,” the report notes. “Establishing a regional homelessness-management plan – like the regional emergency-management systems that have been set up in the wake of disasters – could enhance service delivery, reduce redundancies, [and] increase accountability.”

Private sector companies and philanthropists can also be enlisted into innovative public-private models that tie financing for interventions to the achievement of measurable outcomes (“pay for success”). The fast-growth companies that have helped to drive unaffordability in the Bay Area can also do their part to preserve some affordable housing – the recent Partnership for the Bay’s Future, supported by Facebook, Genentech, and Kaiser Permanente, is one example.