Two years ago, consulting firm McKinsey & Company concluded in a controversial report that solving Seattle and King County’s homelessness crisis would require twice as much annual spending, not to mention building thousands more affordable-housing units.
McKinsey has now returned with more news: the problem is bigger than they thought. About $1 billion bigger.
In a new report released this week, McKinsey recommends from $450 million to $1.1 billion more in public spending every year for the next decade to meaningfully address homelessness. That’s on top of the $262 million the county and city are estimated to spend on homelessness this year (in addition to federal spending).
This latest McKinsey analysis, like the one released in May 2018, comes amid a revived debate over the role of businesses in helping government address the region’s homeless and affordable-housing crisis.
Although McKinsey does not advocate for specific policy changes, the report’s authors do spell out the role they believe business has played: “It is clear that business bears some of the responsibility for the homelessness crisis. With continued success comes renewed responsibility to employees and communities.”
So what explains the new, higher numbers?
In this study, McKinsey researchers looked at two aspects of the homelessness crisis: how to address current needs — people who are homeless now — and how to prevent more people from becoming homeless.
They estimated nearly 16,000 more affordable units would be needed to house everyone who was homeless in King County in 2018. An additional 37,000 new affordable-housing units would be needed to ensure thousands of extremely low-income people would not lose their housing.
Essentially, McKinsey is saying you can solve current homelessness but if you don’t address the people at risk for it, the problem will remain at crisis levels.
“If you don’t support the people who are extremely low income now … they will just be the next face in the door awaiting housing,” said Mark Ellerbrook, division director for housing and community development at King County.
McKinsey’s estimates are lower than the King County Regional Affordable Housing task force, which put the number at 73,000.
This new analysis focuses on extremely low-income households, whose incomes are 30% or below area median income (AMI) — about $33,200 a year or less for a family of four in King County last year. Most people who are homeless are living below 30% AMI, said Dilip Wagle, a McKinsey senior partner based in Seattle, who also co-authored the 2018 report.
McKinsey also argues that economic growth itself “is one of the leading causes of homelessness,” said Wagle, though not the only cause.
“We’ve set ourselves up for an environment where the economics just do not work for many, many households, especially those that are extremely low income,” said Marty Kooistra, of the Housing Development Consortium. The county is on a path to “not have any naturally occurring low-income housing available.”
The report does have one error: it says that 22,500 people experienced homelessness in 2018, based on King County Homeless Management Information System (HMIS) data. However, that figure is a count of episodes of homelessness; one household could experience multiple episodes of homelessness in a single year, and so there could be duplicates in that total.
King County community and human-services officials, who advised McKinsey researchers on the HMIS data, said there are likely very few duplicates in that total nor would they skew the analysis in any significant way.
The report comes a few weeks after the Seattle and King County councils voted to create a combined regional homeless authority, which McKinsey previously recommended. McKinsey’s analysis will be used as part of a blueprint for how the new regional entity will address homelessness.
McKinsey researchers said it produced the plan independently and without pay to contribute ” to the critical public dialogue in Seattle and King County about what we see as one of the true root causes of our homelessness crisis — the lack of affordable housing for thousands of area residents,” the company said in a statement.
McKinsey produced its 2018 report pro bono for the Seattle Metropolitan Chamber of Commerce, though chamber leadership said they didn’t actually commission the document. Outgoing chamber president and CEO Marilyn Strickland said, at the time, she agreed that the region needs more affordable housing but didn’t believe taxing big businesses was the right strategy to achieve such a goal.
Chamber officials declined to comment on the new analysis.