In Portland, the homeless population has increased 50% since Covid due to rapidly increasing house prices. The same has happened in Denver, with the homeless population doubling from 20 to 21 while at the same time spending has increased to half a billion a year in metro Denver. What can Denver learn from Portland? What does this mean for commercial and residential real estate?
What is happening in Portland due to Homeless?
Portland’s homelessness problem now extends well beyond the downtown core, creating a crisis of conscience for this fiercely liberal city that for years has been among America’s most generous in investing in homeless support services. Tents and tarps increasingly crowd the sidewalks and parks of Portland’s leafy suburban neighborhoods. And the sewage and trash from unsanctioned RV encampments pollute the watersheds of the Willamette and Columbia rivers.
The RV encampments have emerged as havens of heroin and fentanyl use, a community of addiction from which it is difficult to break free, according to interviews with dozens of camp inhabitants. Even while reflecting on their ills, many of the squatters remarked on the surprising level of services available for people living homeless in Portland, including charity food deliveries, roving nurses, used-clothing drop-offs and portable bathrooms — even occasional free pump-outs for their RV restrooms, courtesy of the city. The LA times, did a great article on the state of homelessness in Portland.
What is happening in Portland sounds eerily like what Denver is now experiencing with increased resources to address homelessness, yet large issues continue
What is happening in Denver due to Homeless?
The number of people in metro Denver who reported experiencing first-time homelessness in 2021 nearly doubled over 2020, according to a new report.
The Metro Denver Homeless Initiative on Thursday released its second annual State of Homeless report. Going beyond the once annual point-in-time count of people living in emergency shelters or on the streets the organization leads, the report pulls together data from multiple sources to provide a more holistic view of homelessness, according to the officials.
Furthermore, the number of homeless people who are chronically homeless instead of going through a rough patch is at a new peak. In 2020 — the most recent HUD point-in-time count available — the metro area had 1,867 chronically homeless people living in shelters and on streets. This is more than double the number from any year before 2017.
Despite the issue growing, the city and advocates are spending more and more money on homelessness
Like Portland, the Denver metro area continues to spend increasingly large amounts of money on homelessness. The Common Sense Institute, a business-focused organization, partnered with the University of Colorado Denver’s Inworks program, the Downtown Denver Partnership and Together Denver to pin down spending and outcomes.
The report’s estimates group the spending from Denver Health, Denver Police Department, Denver Fire Department, Denver’s Homelessness Resolution Fund and charitable organizations.
The Denver metro spends just under a half-billion dollars a year: $481 million. Most of that is spent in Denver. Denver itself spends $435 million on homelessness. Denver spends at least double on each homeless person than it does for a k-12 student. Yet as spending has continued to increase, homelessness has increased even faster with no end in sight.
What does the increase in homelessness mean for Denver real estate?
Currently in the Denver metropolitan area homelessness is prioritized over real estate owners/tenants. There are countless examples of homeless encampments on private property, adjacent to residential homes, schools, etc… The police have not prioritized public health and safety by moving these groups immediately thereby having huge impacts on property owners. Furthermore the camps usually come back within a week or so and the problem is further exacerbated. This is impacting both commercial and residential property owners.
- Commercial: I have seen and talked with countless commercial property owners and property managers who are impacted by the increase in homelessness which has led to property crime, trespassing, garbage, etc… None of these items increase the desirability of a commercial property for a prospective tenant or owner/user. Here is an article on the Denver Channel about one small business who had generators stolen that were later located in one of the homeless camps
- Remember that commercial properties are valued based on their net operating income divided by the Capitalization rate. In higher crime areas/less desirable areas rents are pushed down and cap rates are push up. The homeless encampments are substantially driving down commercial property values in certain areas.
- Residential: Along with Commercial properties, residential properties are also feeling large impacts from the homelessness population increases. As encampments continue prices for residential properties go down as the area becomes less desirable due to crime and blight.
As homelessness continues to grow in the Denver metropolitan area, property owners will be faced with lower rents and in turn values on residential and commercial properties near the various encampments. Unfortunately this issue is growing larger by the day with more and more property owners impacted with no end in sight.
Summary
The number of homeless is increasing substantially at the same time resources/money is also increasing. If the programs were successful, then homelessness would be decreasing. This clearly shows that whatever is being done is not fully working. Denver should take some lessons from Portland and other cities that spending more money the same way is not effective in reducing the homelessness issues and is creating additional issues for other residents, tenants, and visitors.
The increasing amount of homelessness continues to have large impacts on property owners/tenants through increased crime, blight, lack of sanitation, etc… Unfortunately, currently the city is prioritizing the homeless over property owners/renters. This will ultimately backfire as increasing homelessness will decrease values and lead to less revenue in the future from property taxes and sales taxes. There will furthermore be a “flight” from these areas similar to what occurred in the 80s.
To resolve the homelessness issue, the city must balance the needs of property owners/tenants better as they currently are not being brought into the discussion. How this push/pull is resolved will ultimately determine the livability and success of Denver. Cities like Portland should serve as a stark warning for Denver that the current path will not work to resolve the homelessness issue.
Additional Reading/Resources
- https://www.latimes.com/world-nation/story/2022-06-21/portland-liberal-support-lags-homeless-services-drugs
- https://static1.squarespace.com/static/5fea50c73853910bc4679c13/t/61eaf51014758102851febc8/1642788119525/SoH-Final.pdf
- https://commonsenseinstituteco.org/the-economic-footprint-of-homelessness-in-metro-denver/
- https://www.denverpost.com/2022/01/21/denver-homeless-population-count-2021/
- https://www.9news.com/article/news/investigations/denver-homeless-camps-sweeps/73-37a6f2a2-cbdf-4e5c-badf-b1c5a0cb8cd9
- https://kdvr.com/news/problem-solvers/seeing-the-problem-homelessness-in-the-denver-metro/
- https://www.thedenverchannel.com/news/local-news/denver-businesses-are-dealing-with-an-increase-in-crime-blame-homeless-camps
- https://www.thedenverchannel.com/news/local-news/denver-businesses-are-dealing-with-an-increase-in-crime-blame-homeless-camps
- https://denver.cbslocal.com/2022/02/04/denver-polic-homeless-violent-curtis-street/
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