Housing Affordability and Homelessness: Evidence from Commuting Zones

This paper investigates the effect of rental housing affordability on homelessness across commuting zones within the United States. The authors’ estimates suggest the elasticity of the homelessness rate to median rents is positive and ranges between 0.55 and 4.5. To address concerns about endogeneity in the relationship between homelessness and rental housing affordability, the authors instrument for various measures of housing affordability using the Wharton Residential Land-Use Regulatory Index. The magnitude of the instrumental variables estimates are significantly increased relative to the ordinary least squares estimates, supporting the conclusion that declining housing affordability is a major driver of homelessness.