I grew up in Laredo, Texas, which was the poorest city in the United States based on per capita income. The poverty in Laredo was so extensive that people in some parts of town actually lived in shacks. Yet, there was never a homelessness problem in Laredo. Yes, people lived in dilapidated housing, but at least they had a place to live.
Today, there is a gigantic homelessness problem in cities across America, but those cities have a much higher standard of living than Laredo had back in the 1950s and 1960s. How is it that Laredo had no homelessness, while many American cities today are besieged by homelessness?
The answer lies in government central planning and government economic intervention, specifically with respect to zoning laws and what also became known as urban renewal. Moreover, to a larger extent, the homelessness problem is rooted in the welfare-state way of life that America adopted in the twentieth century. Indeed, the homelessness problem is a testament to the failure of the “war on poverty” that underlies America’s welfare-state way of life.
After the adoption of the Constitution, Americans lived without zoning — and, for that matter, socialism — for more than 125 years. Consider, for example, the American way of life in, say, 1890–1910: no income tax, IRS, Social Security, Medicare, Medicaid, welfare, minimum-wage laws, (few) economic regulations, immigration controls, drug laws, zoning laws, public (i.e., government) schooling systems, Federal Reserve, paper money, Pentagon, CIA, NSA, foreign military bases, foreign wars, foreign aid, state-sponsored assassinations, torture, indefinite detention, and mass secret surveillance. Needless to say, it was quite a different way of life than that to which Americans are accustomed to today.
In the late 1800s and early 1900s, however, Americans began clamoring for a different way of life, one that would entail the opposite of all those things listed above. From 1913, when the federal income tax and the Federal Reserve were established, through the 1930s, when Social Security was
adopted, through the 1940s, when the federal government was converted to a national-security state, and through the 1960s, when Medicare and Medicaid were enacted, the United States experienced one of the most gigantic transformations in history — one in which the welfare-warfare state became the nation’s governing system.
The advent of zoning
Included in this transformation was the concept of zoning, a political scheme in which public officials centrally plan the development of cities and communities using the coercive powers of government. The first zoning laws in the United States came into existence in the early part of the twentieth century and gradually expanded across the country.
In 1926, the constitutionality of zoning reached the U.S. Supreme Court in the case of Village of Euclid v. Ambler Reality Co. In a 6-3 decision, the court upheld zoning, a decision that would ultimately have a tremendous impact on American cities. If only that decision had gone the other way, there is little doubt that American cities would not be experiencing a gigantic homelessness problem today.
With zoning, public officials used the coercive powers of government to centrally plan their communities, with the aim of preserving nice-looking (i.e., higher value) homes and businesses within the city limits. They figured that zoning provided a perfect means of eliminating poverty inside the community while, at the same time, preserving home values of the middle class and well-to-do.
For example, let’s assume that in 1950 a particular neighborhood was filled with very nice $100,000 homes. Without zoning, an entrepreneur could purchase several vacant lots in the neighborhood and install a mobile-home park, which would enable poorer people to move into the neighborhood.
The homeowners didn’t like that because the mobile-home park would lower the values of their homes. So, rather than purchase the vacant lots themselves with their own money, homeowners resorted to zoning laws. City officials would simply enact a zoning law that prohibited mobile-home parks from being built in that particular part of town or any part of town. Home values were preserved, but the poor were suddenly deprived of low-cost housing in that part of town or, very possibly, depending on the zoning law, anywhere else in town.
It is worth noting as well that zoning is based on the principle of central planning, which is one of the core principles of socialism. As the libertarian economist Ludwig von Mises pointed out, socialist central planning inevitably results in what he called “planned chaos.” Such chaos doesn’t occur in what Nobel Prize winning libertarian economist Friedrich Hayek called the “spontaneous order,” which comes about through the voluntary actions of people in a genuine free-market, private-property society.
Keep in mind that zoning is totally different from a privately developed subdivision, where a private landowner places restrictions on the types of houses that can be built within the subdivision. It’s his property, and therefore he has the right to develop it any way he wants. With zoning, the government imposes its central plan on property that is subject to being developed by anyone. In other words, when a person purchases a home inside a city, he knows that there is a risk that someone might build something not to his liking next door. To obviate that risk, he runs to the government for help in preserving his home value rather than simply moving to a more expensive, privately developed subdivision where he doesn’t run that risk.
When I returned to Laredo to practice law in 1975, one of my law firm’s clients was a man whose business was building and providing low-cost housing for people. He would go into Mexico and buy low-cost materials and supplies to build his apartments, which would enable him to charge low rental rates. He would rent his facilities on a daily, weekly, monthly, or annual basis. His apartments were always clean, orderly, and peaceful. He always had a very high occupancy rate. Our client was making a lot of money from his rentals, but at the same time he was providing an invaluable service to the poor. He was a perfect example of how the profit motive in a free market can end up serving others, in this case by providing housing for the poor.
Whenever one finds a homelessness problem today, I guarantee you that one will also find zoning in that particular city or community. When cities were adopting zoning, they figured that this would be an easy way to get rid of poverty. Poverty would simply be zoned out of existence. As with all other socialist or interventionist schemes, the zoning scheme failed to work and, in fact, produced the adverse consequence of homelessness.
If zoning were repealed, people would be free to move into low-cost housing, like mobile-home parks or large dwellings that could house many occupants. The poor would no longer be zoned out of the community.
The minimum wage and income tax
There is another factor to consider: minimum-wage laws. As with zoning, people began clamoring for this particular intervention in the late 1800s and early 1900s. Without a law requiring payment of a minimum wage, they said, employers would end up paying workers only a subsistence wage. It was a nonsensical notion, given that wage rates in a free market are determined by the laws of supply and demand. For example, if there is a scarcity of labor and a high demand for labor, wage rates will soar far higher than subsistence levels and oftentimes higher than the minimum wage imposed by the government.
Today, the minimum wage prices many homeless people out of the labor market. That’s because employers place a value on their labor that is less than the legally established minimum wage, which means they cannot get a job, and will therefore never have the money to move into low-cost housing. The result is that they are forced to go on welfare, sleep on the streets, or move into some government housing facility.
Let’s imagine we repeal the minimum wage and zoning laws. Now a homeless person can get a job at, say, $5 an hour and move into a very low-cost mobile home park. Sure, he will be operating at survival levels, but at least now, he has a sense of self-worth. Slowly, over time, he is able to work his way toward a higher economic level. Zoning and the minimum-wage law preclude that from happening.
Consider the much larger issue of income taxation, which Americans lived without for more than 125 years. For more than a century, everyone, including the poor, could keep everything they earned. Imagine if that were the case today. The poor could get a job at $5 an hour and more rapidly accumulate a nest egg that would enable them to climb the economic ladder. It is not a coincidence that in the late 1800s, millions of penniless immigrants were fleeing the European and Asian societies of government economic control and planning, and the high taxes that came with them, to come to America, where government played an almost non-existent role in economic planning.
Urban renewal and public works
There is another interventionist phenomenon that is worth mentioning — urban renewal, which conceptually was much like zoning. Beginning in the 1950s, this became an extremely popular means by which public officials removed “blight” or poverty from American cities. With urban renewal, public officials would condemn “blighted” areas with the power of eminent domain, force all the poor people out of that area, destroy it, and then construct things like public parks or public highways. The idea was to “beautify” the city by legislating poverty out of existence. Zoning would then be used to reinforce what urban renewal had accomplished — that is, no more housing for the poor in that part of town.
But that “blight” consisted of real homes and real neighborhoods for the poor. That was all they could afford. The homes and neighborhoods may have seemed “blighted” to public officials and to the well-to-do in the city, but they were everything to the people living there. In many instances, they chose to stay there and simply save their money, with the aim of having the money to later send their children to college. What some considered “blight” were vibrant neighborhoods containing grocery stores and other retail shops that the poor could access without having to drive a long distance.
It is impossible to measure the suffering that urban renewal inflicted on the poor in cities all across America, especially blacks. In fact, in many instances, urban renewal was a modern-day Jim Crow program, one in which public officials could easily rid neighborhoods of blacks. They just seized their homes with eminent domain, paid them a minimal amount of money, and forced them to move elsewhere. Of course, eminent domain didn’t cover moving expenses, which oftentimes were exorbitant if people were required to move to another community. Moreover, it is impossible to measure the emotional toll on people who lost the dynamics of the neighborhood in which they had often lived for most, if not all, of their lives.
Later, urban renewal meant taking people’s privately owned property to give it to wealthy developers, with the aim of replacing the poor areas with higher-valued residential or commercial establishments. This practice was upheld by the U.S. Supreme Court in the famous 2005 case of Kelo v. City of New London.
Another related interventionist program that came into existence was public works, such as highways, parks, and parkways. The Interstate Highway System, the biggest public-works project in American history, was a classic example. It was used to destroy poorer neighborhoods in many American cities, particularly neighborhoods populated by blacks. As with urban renewal, public officials would condemn the poorer parts of town through which the highway would usually be located, give the residents a bit of money, and tell them that they had to go elsewhere to find housing. It was a brutal system that inflicted untold suffering on the poor. For that matter, it did the same with many middle-class families whose livelihoods depended on businesses located on the old highways that traversed America before the interstate highways came along.
The welfare state and war on poverty
Clearly, modern-day Americans are so wedded to the welfare-state way of life that they are unwilling to abandon what is the root cause of homelessness and poverty in America. To solve the homelessness problem that their system has produced, they instead call for more interventionism to solve the problem, such as government-owned homeless shelters and welfare payments. Some communities, preferring not to have to incur the burden of such programs, are now making homelessness a criminal offense. They are hoping that by doing so, the homeless will simply move elsewhere and become homeless in another community. In one community, public officials decided to bus homeless people to other parts of the state and were surprised to learn that some of them simply returned. Apparently, the officials assumed that homeless people were like cattle. It they were moved elsewhere, they would stay elsewhere.
The issue of homelessness has now reached the U.S. Supreme Court in the case of Grants Pass v. Johnson. During oral arguments in the case held in April 2024, Supreme Court Justice Ketanji Brown Jackson observed, “So if you can’t sleep, you can’t live, and therefore by prohibiting sleeping, the city is basically saying you cannot live in Grants Pass.” Justice Sonia Sotomayor asked, “Where are they supposed to sleep? Are they supposed to kill themselves not sleeping?” Chief Justice John Roberts pointed to the standard welfare-state answer: “The solution, of course, is to build shelter to provide shelter for those who are otherwise harmless,” while also pointing out that “municipalities have competing priorities.”
Ultimately, the real solution is for Americans to do some serious soul-searching and finally acknowledge that welfare-statism and economic interventionism have proven to be a disaster, especially for the poor. Restoring the sound principles of economic liberty, free markets, and voluntary charity to our land is not only the key to ending homelessness but also to ending poverty in general.
This article was originally published in the July 2024 issue of Future of Freedom.
