The Welfare Effects of Eviction and Homelessness Policies

This paper studies the implications of rental market policies that address evictions and homelessness. Policies that make it harder to evict delinquent tenants, for example by providing tax-funded legal counsel in eviction cases ("Right-to-Counsel") or by instating eviction moratoria, protect renters from eviction in bad times. However, higher default costs to landlords lead to higher equilibrium rents and lower housing supply, implying homelessness might increase. I quantify these tradeoffs in a model of rental markets in a city, matched to micro data on rents and evictions as well as shocks to income and family structure. I find that "Right-to-Counsel" drives up rents so much that homelessness increases by 15% and welfare is dampened. Since defaults on rent are driven by persistent income shocks, making it harder to evict tends to extend the eviction process but doesn't prevent evictions. In contrast, rental assistance lowers tenants' default risk and as a result reduces homelessness by 45% and evictions by 75%. It increases welfare despite its costs to taxpayers. Eviction moratoria following an unexpected economic downturn can also prevent evictions and homelessness, if used as a temporary measure