Tuesday, January 23, 2018

(A bad) dynamic equilibrium: homelessness in Seattle


I saw this data in a Tweet from Erica Barnett (above) about the relationship between Seattle (King County) homelessness and rental prices. This data fits pretty well with a dynamic information equilibrium [1] (i.e. "matching" model per my recent paper):


There was a shock that reduced rental prices during the Great Recession (centered at 2008.9, lasting about 6 months). This temporarily halted the growth in rental prices, which was followed by a temporary halt to homelessness growth (a shock centered at 2011.2, lasting about 2 years). Since those shocks, rental prices and homelessness have returned to their previous trajectories. Absent some kind of intervention, it is forecast to continue.

...

Footnotes:

[1] Although I call this an equilibrium, it doesn't mean this equilibrium is "good" for social welfare. The fact that rental prices and homelessness are directly connected is more a failure of the market provision of housing than an endorsement.

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